Supply Capacity - EBRD

The EBRD is the single biggest investor in the agribusiness sector in its countries of operations. Its work spans all the activities throughout the value chain, from farming, processing, and trading to food distribution, packaging and retailing. The Bank has also played a major role in developing this sector by supporting local and foreign corporate clients, as well as micro, small and medium-sized enterprises.

The EBRD’s countries of operations have many competitive advantages in the agribusiness sector. They account for more than 20 percent of the world’s potentially arable land, with top-quality soils and an abundance of skilled labour. The Bank facilitates trade between countries in its region of operations -- home to some of the world’s key grain exporters in the Black Sea region and some of the world’s main net importing countries in the southern and eastern Mediterranean. The region is also characterized by consumers with increasing average incomes driving an ever-growing demand for high-quality products and improvements in distribution and retailing.

The Bank recognizes that the agribusiness sector can have a profound effect on human health and the environment and that its sustainable development is a fundamental aspect of sound business management. It, therefore, pays particular attention to compliance with appropriate standards. It also ensures that its clients are committed to improving health, safety and environmental protection performance throughout the food value chains.

In addition to investments, the EBRD also supports advisory services for agribusiness companies with the aim of scaling up private sector participation and making food production more efficient and more sustainable. Underlining this approach to the promotion of sustainable investments, the EBRD’s advisory supports the upgrading of standards to support market expansion and value creation, as well as maximizing sustainability impacts along the value chain by supporting reductions in C02 emissions and resource-use (energy, land, water, etc.), through the EBRD’s Green Economy Transition approach.

In addition to providing financial and technical support for the entire food chain, the EBRD also makes a significant contribution to policy dialogue. Promoting food security has been at the forefront of the EBRD’s agenda since the global food crisis in 2008. The EBRD launched the Private Sector for Food Security Initiative in 2011 to enable the private sector’s full contribution to food security in the countries where the Bank invests.

For more information: http://www.ebrd.com/agribusiness.html

SME support under the EBRD’s Small Business Initiative (SBI)

Micro, small and medium-sized enterprises (MSMEs) form the backbone of a dynamic market economy, and the EBRD fosters entrepreneurship in its countries of operations, not only through capital funding but also by providing business expertise.

Within the Small Business Initiative (SBI), the EBRD’s business advice and international expertise are essential components of the EBRD transition toolkit, as well as of the donor programmes which support them. The EBRD’s Advice for Small Businesses (ASB) promotes good management in the small and medium- sized enterprise (SME) sector in the EBRD region, by providing direct support to individual enterprises, helping them to grow their businesses. This is delivered on a not-for-profit basis, partnering with donors so that it can share the project costs with the client.

The EBRD draws on the know-how of its network of international advisers and local consultants to help transform a wide range of businesses, looking at areas including strategy, marketing, operations, quality management, energy efficiency, financial management and beyond.

International expertise projects focus on substantial managerial and structural changes within companies by providing industry-specific management expertise through the advisory services of experienced international advisers. Business advice projects help private enterprises to adapt to the demands of a market economy through short-term projects with narrowly defined objectives engaging qualified local consultants.

The EBRD also carries out market development activities to facilitate the development of a sustainable infrastructure of local business advisory services in countries of operations. Since launching these activities over twenty years ago, the EBRD has assisted nearly 16,000 SMEs in 26 countries, committing over €300 million of donor funds.

Advice

The EBRD provides advice for SMEs through local consultants and international advisers on numerous topics, including business strategy, export promotion, financial management and reporting, marketing, brand development and quality management. Trade-related advice to support SMEs trade and export potential may focus on export strategy development, understanding and adapting products to foreign markets and international partner search.

In 2016, the Bank carried out over 2,200 projects connecting small and medium-sized firms to local consultants, and 177 projects linking medium-sized companies with foreign advisers. From 2014 to 2016, 74 percent of businesses surveyed saw increased turnover in the year following their engagement with EBRD advisory projects. Furthermore, 51 percent expanded their business, 25 percent accessed external finance, for a total of €1.12 million, and 24,512 jobs were created.

To develop local consultancy markets in the 26 countries where it provides advisory services, the EBRD organizes training for local experts, conferences, workshops and other activities. In total, the Bank ran 60 courses for over 750 consultants in 2016. A conference on competitive consulting, held in Tbilisi, Georgia, was one of the key events of the year.

Integrated products

The EBRD offers products that blend finance with business advisory support, investment incentives and training for small firms, as well as risk-sharing elements and technical assistance for partner financial institutions. Examples of this integrated approach include the Women in Business programmes; a programme of common activities with the EU in Georgia, Moldova and Ukraine; and the SME Finance Facility in Central Asia funded by the EU’s Investment Facility for Central Asia.

Also, during 2016 the Bank launched Trade Ready, which blends trade finance available under the Bank’s Trade Facilitation Programme (TFP) with trade-related advisory services for SMEs, training courses for local banks and policy dialogue that seeks to improve the institutional and regulatory environment for trade finance.

Policy dialogue

In 2016, the Bank provided support for legal and regulatory reforms that seek to improve access to In 2016, the Bank provided support for legal and regulatory reforms that seek to improve access to finance for SMEs. Examples included work on reforms linked to factoring and leasing in Mongolia, Montenegro, and Tunisia and on SME-specific capital market instruments in Croatia. The EBRD also contributed to the SME Policy Index for the Western Balkans and Turkey, which it developed with the OECD, the EU and others to identify obstacles to small business development in the policy frameworks of those regions.

For more information: http://www.ebrd.com/small-business-support.html

Economic integration through DCFTA-related financing facilities

In order to bolster economic integration, the EBRD and the EU are preparing firms in Georgia, Moldova and Ukraine to take full advantage of the Deep and Comprehensive Free Trade Area (DCFTA) established by the Association Agreements between each of these countries and the EU, the world’s largest market.

Joint EBRD-EU programmes of activities combine direct and indirect lending with EU-funded technical assistance, investment incentives and risk-sharing activities. An example of direct financing on a risk-sharing basis in 2016 was a joint EBRD-TBC Bank loan of US$ 14.3 million (€13.5million equivalent) to Rustavi Group in Georgia for the construction of a medium-sized hydropower plant. Among other benefits, the transaction will stimulate competition in the Georgian power-generation sector. The EBRD financing was extended through the Bank’s DCFTA SME Direct Finance Facility and supported by the EU through a risk-sharing facility.

With regard to indirect financing, in 2016 the EBRD signed its first deals under the EU4Business-EBRD credit line, part of the joint programmes of activities. These included a US$ 50 million (€47 million equivalent) facility with Bank of Georgia and a €10 million facility with Mobiasbanca - Groupe Société Générale in Moldova. SMEs in various sectors will use this financing to modernise their production and service standards in readiness for trade with EU clients. In addition, close to 70 enterprises across the three countries benefited in 2016 from EU-funded business advice to help them achieve this goal.

 

Loans

To facilitate its outreach, especially for low-income countries in the region, the Bank introduced forms of private financial tools to stimulate market activity, including a small-size equity financing ability. These tools rely on a streamlined approach to finance projects, where the Bank’s participation ranges from €0.5 million to €10 million. The EBRD’s lending programmes provide individual entrepreneurs and firms with access to otherwise scarce finance, including for projects that will promote cross-border activities or participation in global value chains. The Bank also provides complementary schemes that aim to help individual enterprises adapt to the demands of a market economy:

The Direct Financing Facility (DFF) finances expansion, modernisation and acquisition projects in the private sector and provides working capital. It provides the Bank with an instrument to meet the growing demand for medium-sized loans, with medium to long-term maturities, which cannot be met by the EBRD’s available intermediate programmes, i.e. SME credit lines, the Trade Facilitation Programme and the Medium-sized Co-financing Facility with local banks, or by the local banks directly. In addition, it is possible for the EBRD to provide financing in the form of equity and, under appropriate circumstances, quasi-equity to private sector businesses led by motivated and experienced entrepreneurs who are otherwise unable to find appropriate capital to support commercially promising activities in the Early Transition Countries (ETCs), and elsewhere in the EBRD’s countries of operations.

The Risk Sharing Facility (RSF), previously known as MCFF) provides co-financing alongside local banks for up to 50 per cent of the loans to selected enterprises. The RSF with local banks was established as a regional framework to be provided to leading commercial banks in the Early Transition Countries (ETCs) - Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Mongolia, Tajikistan and Uzbekistan. The RSF is designed to meet the financing needs of successful medium-sized private companies in the ETCs that have begun to outgrow the countries’ financial sector. The ability of local banks to support the growth of successful companies is often constrained by single-borrower exposure limits imposed by the countries’ central banks or by the local banks’ internal guidelines introduced to avoid the risk of loan portfolio concentration. Based on a positive track record, the Facility has recently been extended to other countries in the EBRD region. Here, risk-sharing arrangements can help banks meet capital requirements while continuing to extend lending, in particular to SMEs.

The EBRD’s SME Local Currency Loan Programme, launched in 2011 in Early Transition Countries (ETCs) helps borrowers reduce their exchange rate risk. In 2015, it was expanded to support SME financing in local currency in countries in south-eastern Europe and the southern and eastern Mediterranean. The objective is to better match the lending currency to revenues, in order to reduce default/insolvency risk at the micro level and to reduce increasing systemic risk of dollarization in the financial sector at the macro level. Between 2011 and 2015, the original Programme catalyzed around US$ 332 million of local currency loans in ETCs, with those loans extended to around 300,000 SMEs allowing them to borrow in the same currency as their revenues. At the policy level, the Programme aims to support the development of local money and capital markets. One of the first loans under the ETC Local Currency Loan Programme was signed in June 2011 in Tajikistan. The EBRD extended 13.6 million Tajik somoni (equivalent to US$ 3 million) to a micro-lending organization, Imon International, to provide more affordable credit to small businesses.