Projects financed by the EDB
Projects in member states’ financial sectors
The banking sector is the “beating heart” of the market economy. In any country financial resources flow through the banks to the economy and are fed into individual sectors, projects and businesses generally.
Therefore, the sustainable development of all states that have opted for a market economy will be dependent on the stability, viability and growth of the banking system.
In recognising that the banking system is an infrastructural and institutional foundation of the market economy, international financial organisations traditionally work with the banks of their member states in applying various investment and financial instruments. In so doing they endeavour to ensure that the banking system develops and improves and that the banking services available to businesses and the population at large are sufficiently diverse. International financial organisations also try to reach businesses and organisations by cooperating with them in different ways. In this context priority is given to the largest sector of the economy, i.e., small- and medium-size enterprises (SMEs).
Clearly, businesses such as these are vital for stable and dynamic economic growth. The entrepreneurial activities of small companies and individuals dictate to a significant extent how an economy develops internally and how individual sectors ensure that their growth is sustainable. This has been particularly evident in East European states.
The CIS states face a huge task in promoting of SMEs and their trading operations. The role of such businesses is vital, however, which is born out by the statistics: small businesses account for 70% of GDP in the US and 12% in Russia.
Around one million small businesses and more than two and a half million individual entrepreneurs are registered in Russia. This is less than in other leading economies, however, it indicates the social significance of SMEs as the most important source of employment.
Entrepreneurs starting up or expanding their businesses or hoping successfully to penetrate new markets need financial as well as administrative support.
The Concept of the Bank’s Participation in Further Development of its Member States’ Financial Sectors is one of the first founding documents the EDB adopted following its establishment in 2006.
In the same year the Bank began working on projects to encourage cooperation on financial markets between its member states and local financial institutions. Every year this cooperation becomes more extensive. The EDB now works in cooperation with commercial banks in all of its five member states (Russia, Kazakhstan, Belarus, Armenia and Tajikistan). The EDB has more than 30 projects (at various stages of implementation) with a total value of US $ 595 m.
Such collaboration is mainly focused on four special financing programmes for EDB member-state financial institutions.
The Small and Medium-size Enterprises (SME) Support Programme aims to establish favourable conditions in which SMEs can operate, and to enhance the competitive environment and SME competitiveness on domestic and foreign markets.
Provided that certain requirements established by EDB are met, the Bank furnishes financial institutions with the resources to allow them to finance the projects of their SME clients. These banks and financial institutions select borrowers at their own discretion although these may only be eligible SME as defined by the criteria established by EDB. Commercial banks may make loans for the following purposes:
- The acquisition and upgrading of fixed assets;
- Expansion and diversification of the business;
- Introduction of new technologies;
- Production to substitute imports;
- Production of competitive high-value-added goods in non-resource sectors;
- Expansion of mutual trade and investment between businesses in the Bank’s member-states in the export of goods, supply of equipment, raw materials, spare parts, other goods and services;
- Financing working capital.
The Microfinance Support Programme is aimed at creating the conditions favourable to the development of microbusiness in the Bank’s member states. Its goals are is to ensure the establishment, expansion, modernisation and diversification of the microbusiness production base, maintaining existing employment opportunities and creating new jobs, maintaining an adequately skilled working population, and developing trade opportunities for small-scale producers.
The basis for the Microfinance Support Programme is similar to that of the SME programme. Financial institutions in the Bank’s member states loan to microbusinesses which are, primarily, producers and trading companies with no more than 15 employees.
The Programme for the Development of Trade Finance Instruments and Expansion of Mutual Trade between the Bank’s member states is aimed at expanding the sources of financing in EDB member states. Its goal is to boost the financing of real-sector companies participating in international trade, facilitating importers’ and exporters’ access to new markets to sell their goods and services. This programme will expand mutual trade and enhance integration between EDB member-states.
Under this programme the EDB extends credit facilities to financial institutions to lend on to corporate clients, exporters and importers.
It allows the EDB to promote its work with national financial institutions and to establish favourable conditions for the development of businesses involved in international trade in EDB member states.
The Programme to promote energy efficiency in EDB’s member states by providing dedicated credit lines to financial institutions is intended to help commercial banks in EDB member states to finance their clients’ energy-saving projects. According to EDB’s Strategy to 2013, a priority of its investment operations is the financing of programmes which increase energy efficiency in the Bank’s member-state economies.