Businesses in the region to benefit from European Bank investment


Small- and medium-sized enterprises in the Western Balkans will get a new chance for development with an investment from the European Bank for Reconstruction and Development.

By Igor Jovanovic for Southeast European Times in Belgrade -- 19/06/14


Small businesses in Serbia's agriculture sector are of particular interest, the European Bank for Reconstruction and Development said of the investment. [AFP]

Small- and medium-sized enterprises (SMEs) in the Western Balkans, which according to economists are the pillar of the economy, will get a new chance for development with an investment from the European Bank for Reconstruction and Development.

A 77-million euro tranche will come from the bank's Enterprise Expansion Fund and will finance SMEs in Serbia, Kosovo, Macedonia, Bosnia and Herzegovina (BiH) and Montenegro.

"The fund has been created for investing in companies with high growth potential in all areas. In Serbia, firms from the agricultural sector are particularly of interest, as are those from the production and IT sectors," said Matteo Patrone, the bank's director for Serbia.

By investing money, the fund will become the owner of 25-30 percent of shares in the SMEs, will partake in making of strategic decisions, and will then sell its stake in three to seven years.

Access to finance is seen as a significant obstacle to growth and development for small and medium-sized businesses in the Western Balkans, and the problem has been further accentuated by the global financial crisis.

"In general, local companies only have access to debt financing from local commercial banks. Others sources of financing, notably private equity, are extremely scarce. Yet in many cases, such sources are exactly what are required by companies experiencing or having the potential to achieve fast growth, but having a limited asset base against which to borrow. The fund will tackle this issue by providing equity and quasi-equity financing to local companies with significant growth potential contributing to their long-term strengthening and performance," Viktoria Melohina, from the fund, told SETimes.

Top experts will advise in the selection of companies to be sponsored by the fund.

"The fund is advised by a team of experienced professionals from the bank, who will be carrying out an intense business development activity in the region to scout potential projects to finance. Additional information of eligibility to financing can be sought at the bank's regional office in each of the countries," Melohina said.

Mika Grubanov, a farmer from Vojvodina, told SETimes that he would like his company to get assistance from fund.

"Banks in Serbia have high interest and it's difficult to repay such loans. Today it's very difficult to get the money for further investment. No business can be developed without investment, and stagnation is sometimes the same as going backwards," said Grubanov.

According to official data, the average small business in Serbia has up to 10 employees and generally operates in hospitality and trade. The same data shows that half of the companies shut down after three years in business.

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"Companies lack the investment capital to start or expand a business, or to deal with competition. Banks mostly support more stable and larger companies, hence a portion of the smaller ones have nowhere to draw funds from and expand their operations," Dragoljub Rajic, the head of the Serbian Association of Employers, told SETimes.

Former Serbia Economy Minister Sasa Radulovic said that although the state was helping big companies with economic measures it is forgetting about the small and medium businesses that employ 900,000 workers.

"There are no measures for micro, small and medium enterprises," Radulovic said.

What other sectors in the region could benefit from European investment? Tell us your thoughts.

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