This initiative is designed to unlock €30 million of new financing for the Moldovan business sector, particularly focusing on micro, small, and medium enterprises (MSMEs), which are crucial to the country's economic landscape.
Overview of the Facility
The newly established risk-sharing facility will provide OTP Bank Moldova with a guarantee covering up to 50% of its credit risk. This innovative financial product aims to stimulate lending to MSMEs, which constitute 98% of all businesses in Moldova and employ approximately 60% of the workforce. The formal launch of this facility is set to take place in Chisinau next week.
Significance for Moldovan Businesses
This initiative comes at a critical time as many Moldovan businesses face challenges due to regional instability and economic pressures exacerbated by the ongoing conflict in Ukraine. By facilitating access to finance, the EBRD aims to enhance the resilience of local financial institutions and stimulate economic growth.
Key Features of the Facility
- The facility will enable OTP Bank to extend up to €30 million in new loans specifically targeted at MSMEs.
- It includes first-loss risk coverage provided by the European Union through the European Fund for Sustainable Development Plus (EFSD+).
- The product is designed to reduce risks for partner financial institutions while addressing financing gaps faced by MSMEs.
Comments from EBRD Officials
Catarina Bjorlin Hansen, EBRD Head of Office for Moldova, emphasized that this product offers an effective solution aimed at de-risking partner financial institutions and enhancing access to finance for the private sector. "In recent years, regional and local risks have reduced the market's ability to provide accessible finance," she stated during the signing ceremony.
Bogdan Spuza, CEO of OTP Bank, highlighted the potential impact of this facility: "With EBRD’s PRS innovative facility, we will be able to unlock additional liquidity to bridge that gap – to fuel the engine of Moldova’s economy."
Broader Implications for Economic Growth
The EBRD's involvement in Moldova is not new; it has invested nearly €2.5 billion across 177 projects since its inception in the country. This latest initiative aligns with the bank's strategic priorities to promote sustainable investments and enhance competitiveness among local businesses.
Focus on Agriculture and Trade
The portfolio risk-sharing facility is particularly focused on sectors such as agriculture and trade—areas vital for Moldova's economy. With agriculture being a significant contributor to GDP and employment, enhancing access to finance can lead to improved productivity and sustainability within this sector.
Future Prospects
This pilot implementation marks a pivotal moment for both OTP Bank and the Moldovan economy as it seeks innovative solutions to overcome financial barriers. As the EBRD continues to explore similar risk-sharing frameworks in other Eastern European countries like Ukraine and Bosnia and Herzegovina, its commitment to fostering economic resilience remains steadfast.
Conclusion
The launch of the first EBRD portfolio risk-sharing facility in Moldova represents a crucial investment in the future of Moldovan businesses. By unlocking new financing avenues for MSMEs, this initiative not only supports immediate economic needs but also lays a foundation for long-term sustainable growth.
