Enhancing access to credit and providing Enhancing access to credit and providing innovative services to the MSME sector. innovative services to the MSME sector. The role of the Donors’ EBRD TC Fund ProgrammeThe role of the Donors’ EBRD TC Fund Programme

Raffaele BOLDRACCHI

Principal manager - Official Co-financing Unit

CEI – SEF Sofia, November 20, 2007

ContentsContents

1.1. The EBRDThe EBRD

2. Mobilising donors’ co-financing 2. Mobilising donors’ co-financing

3. Supporting the MSME sector3. Supporting the MSME sector

3.1 The small business lending programme

3.2 The Sustainable Energy Financing Facilities

3.3 The “Local Enterprise Facility for W. Balkans”

3.4 The TAM/BAS Programmes

3.5 The “Trade Facilitation Programme”

ConclusionsConclusions

1. The EBRD1. The EBRD

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International financial institution, promotes transition to market economies in 29 countries from central Europe to central Asia

Owned by 61 countries and two inter-governmental institutions

Capital base of €20 billionCumulative commitments €34.9 billion

Unaudited June 2007

2.2. Mobilising donors’ grant co-financingMobilising donors’ grant co-financing

Donors TC Funds play a Donors TC Funds play a critical role in the EBRD’s critical role in the EBRD’s activitiesactivities..

Their funding Their funding helps prepare and/or implement Bank helps prepare and/or implement Bank projectsprojects. .

The TC funding is provided in a The TC funding is provided in a tied or untiedtied or untied way way

The Bank uses donor funds to The Bank uses donor funds to engage expertengage expert consultantsconsultants who who provide adviceprovide advice on a broad range of assignments. on a broad range of assignments.

Exhaustive set of Exhaustive set of success indicatorssuccess indicators formulated on ex- formulated on ex-ante basisante basis

3. EBRD’s support to the MSME sector3. EBRD’s support to the MSME sector

EBRDEBRD

Enhanced access to creditEnhanced access to creditand to equity investments and to equity investments

Enhanced access to creditEnhanced access to creditand to equity investments and to equity investments

Trade servicesTrade servicesTrade servicesTrade services

Advisory servicesAdvisory services(TAM/BAS)(TAM/BAS)

Advisory servicesAdvisory services(TAM/BAS)(TAM/BAS)

3.1. The small business lending programme3.1. The small business lending programme

To support banks and (non) financial institutions that have a clear institutional commitment to MSMEsclear institutional commitment to MSMEs.

Instruments: Loan finance, Leasing, Equity, etcLoan finance, Leasing, Equity, etc.

Since 1992, more than €11.4 billion€11.4 billion provided through the EBRD’s small business lending programmesEBRD’s small business lending programmes to support MSME.

By the end of 2006, donors contribution amounted to €336.1 million€336.1 million: € 172.5 million€ 172.5 million for TC and €163.5€163.5 million for investment co-financing.

Providing entrepreneurs and firms Providing entrepreneurs and firms with access to otherwise scarce finance.with access to otherwise scarce finance.

Small business

1. Loans to local banks1. Loans to local banks

3. On lending3. On lending

2. Advice / procedures 2. Advice / procedures

Criteria for mSME Lending FacilityCriteria for mSME Lending Facility

•Small loans up to €160,000 Small loans up to €160,000 for SME employing up to 100 peoplefor SME employing up to 100 people

• Micro loans up to €8,000 Micro loans up to €8,000 for enterprises employing up to 10 peoplefor enterprises employing up to 10 people

ExamplesExamples

– The EU/EBRD SME Facility

– The EU/EBRD Preparatory Action

– The EBRD W. Balkans SME Finance Facility

– The Russian Small Business Fund

– EBRD’s Azeri Multi-Bank Framework Facility

– The US/EBRD SME Financing Facility

– The Romanian micro-credit facility

A. The EU/EBRD SME Finance Facility

11 countries in central Europe11 countries in central Europe.. This is channelled through local banks, leasing companies and equity funds

€€1.35 billion of funding1.35 billion of funding also covering also covering ruralrural and and leasing windowsleasing windows. .

EC contributionEC contribution to the programme totals €197 million€197 million.

Key facts (end 2006):

– 110 credit lines110 credit lines totalling €1,076.5 million€1,076.5 million ….

– …. to 39 banks39 banks and 37 leasing37 leasing companies.

– Over 85,500 transactions85,500 transactions worth more than €1.75 billion€1.75 billion

– Average sub-loan size for each business is as low as €22,657€22,657, while leases average €19,016€19,016.

B. The Romanian micro-credit facility

It provides loans to local banks and non-bank micro finance loans to local banks and non-bank micro finance institutionsinstitutions to on-lend to the smallest enterprises, sole entrepreneurs and farmers. It’s a joint initiative:

– €€40 million from the EBRD40 million from the EBRD

– €€13.6 million from the EU Phare Programme13.6 million from the EU Phare Programme

– €€4.42 from the Romanian government4.42 from the Romanian government.

It include a €2.5 million programme to support institution building€2.5 million programme to support institution building of the partner lending

A €3 million risk-sharing facility€3 million risk-sharing facility has been established to encourage partner lending institutions to finance start-up MSEsto finance start-up MSEs

(those less than 12 months old)

3.2. The “Local Enterprise Facility for W. Balkans”

In May 2006 EBRD and Italy agreed on the establishment of the “Western Balkans Local Enterprise FacilityWestern Balkans Local Enterprise Facility”

It’s a €32 million facility€32 million facility devoted to support EBRD 's equity driven investments with local enterprises in the region.

Italian contribution amounted to €12 million€12 million, out of which €2.0 million to provide technical support for the implementation of the LEF

The LEF provides equity, quasi-equity and debt financingequity, quasi-equity and debt financing to local enterprises in the Western Balkans countries.

3.3. The Sustainable Energy Finance Facility (SEFF)3.3. The Sustainable Energy Finance Facility (SEFF)

2006: the EBRD launch the Sustainable Energy InitiativeSustainable Energy Initiative

SEFFSEFF: : is one of the six SEI instruments. is one of the six SEI instruments.

– It’s active in It’s active in Bulgaria – Croatia – Romania – Slovak R. – Ukraine – Bulgaria – Croatia – Romania – Slovak R. – Ukraine – Georgia. Russia is in preparationGeorgia. Russia is in preparation and provides: and provides:

– Credit lines or guaranteesCredit lines or guarantees made available by the EBRD to local banks for on-lending to borrowers …

– … undertaking sustainable energy projectssustainable energy projects in the corporate, municipal and residential sectors.

A consolidated modus operandi

The EBRD has organised donor funding to provide incentive incentive paymentspayments to borrowers for sustainable energy projects, …

… and administration feesadministration fees for local banks on completion and full installation of project components

The ECEC has been a key donor having provided:– €€49 million49 million via the Kozloduy (BG) and Bohunice (SK)

decommissioning support funds, and

– up to €44 million€44 million for SEFFS in Romania, Ukraine (Moldova) and W. Balkans.

– Additional €40 million€40 million could be made available from the Ignalina Decommissioning support fund

Other relevant donors have been Austria and Sweden (Ukraine) and Canada – UK – ETC Fund (Georgia)

Bulgarian Energy Efficiency and Renewable Energy Credit Line (BEERECL)

US$50m credit line with Bulgarian banks for on-lending to private sector for energy efficiency and renewable energy projects

Loan complimented with US$10m from Kozloduy International Decommissioning Support Fund

14 projects already financed, including hydro, geothermal, biomass and equipment refurbishment

See http://www.beerecl.com

• Bulgarian participating banksBulgarian participating banks

• Bulgarian Postbank• DSK Bank• Raiffeisen Bank• UniCredit Bulbank• Unionbank • United Bulgarian Bank

3.4. Providing advisory services 3.4. Providing advisory services through the TAM / BAS Programmesthrough the TAM / BAS Programmes

Since 1993:Since 1993:1,360 enterprises restructuring projects1,360 enterprises restructuring projects

€ € 87 million of 87 million of donor fundingdonor funding

Since 1995:Since 1995:27 offices in 17 countries27 offices in 17 countries5,100 enterprises projects5,100 enterprises projects

€ € 58 million of 58 million of donor fundingdonor funding

EC & EAREC & EAR

KEYKEY

DONORSDONORS

EC & EAREC & EAR

KEYKEY

DONORSDONORS

BAS Bulgaria – (C/o Ms. Julieta Hubenova) 17, Moskovska Ulica

http://www.basprog.com/statistics_en.htm

At the end of December 2006, – 567 applications have been assessed and 478 companies visited.

– BAS Programme Bulgaria has undertaken 244 projects utilizing 2,563,621 EUR .

– A database of consultants has been set up listing some 175 consulting companies, of which 158 have been retained under a BAS funded project.

3.5. EBRD’s Trade Facilitation Programme (TFP)3.5. EBRD’s Trade Facilitation Programme (TFP)

The TFP is aimed at providing guarantee to trade transactionguarantee to trade transaction.

TFP guarantees may be used to secure paymentto secure payment of various instruments issued or guaranteed by participating banks.

Since the start of the TFP in 1999, the EBRD has guaranteed and financed more than 6,200 foreign trade transactions6,200 foreign trade transactions totalling over €3.4 billion€3.4 billion

Guarantees of up to 100%Guarantees of up to 100% of the face value of the underlying trade finance instruments;

At present over 100 issuing banks in 19 EBRD countries of 100 issuing banks in 19 EBRD countries of operationsoperations participate in the programme together with over 600 600 confirming banksconfirming banks and their subsidiaries throughout the world

TFP as a regional business development toolhttp://www.ebrd.com/tfphttp://www.ebrd.com/tfp

Active TFP:– South Eastern Europe initiative (SEEI) - EUR 13.9 million.South Eastern Europe initiative (SEEI) - EUR 13.9 million.

SEEI covers Western Balkans countries plus Bulgaria, Croatia and Romania. Donors include Austria, Germany, the Netherlands, Norway and Switzerland.

– Central Asia Risk Sharing Special Fund (CARSSF) - EUR Central Asia Risk Sharing Special Fund (CARSSF) - EUR 8.6 million8.6 million Covers the Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan  Donors include Germany and Switzerland.

– Financial Intermediary Investment Special Fund (TIISF) Financial Intermediary Investment Special Fund (TIISF) FIISF covers Moldova, Armenia and Georgia. Funded by the Netherlands EUR 9.5 millionEUR 9.5 million. 

4. Conclusions EfficientEfficient approachapproach to lending, building on additionality and sound banking

procedures

Effective technical and financial assistanceEffective technical and financial assistance with a relevant transition impact in supporting enterprises’ competitiveness and internationalisation via

– enhancement of access to credit and to equity finance, – better advisory services and – trade development.

Relevant role of public sectorRelevant role of public sector: banking regulatory framework, no market distortion, development of a local consultancy network, etc.

Donors role is crucialDonors role is crucial to successful implementation

New supportNew support expected under the multi-donors Bank’s initiatives and the one funded bilaterally by other donors.

EC Structural and Cohesion funds EC Structural and Cohesion funds will also offer fields of cooperation

Thanks for your attentionThanks for your attention

boldracr@ebrd.com