MICROCAPITAL BRIEF: EFSE Launches “Power of Local Currency” Campaign in Eastern Europe with Investments in TBC Bank, BasisBank of Georgia; Belarusky Narodny Bank of Belarus; Araratbank of Armenia

The European Fund for Southeast Europe (EFSE), a microfinance investment vehicle domiciled in Luxembourg, recently launched a campaign promoting local-currency funding in Eastern Europe, with the financial support of the EU’s “EU4Business” initiative. Among the first borrowers under this “Power of Local Currency” campaign was TBC Bank of Georgia, which borrowed the equivalent of USD 26.5 million to support micro- and small enterprises, as well as private households. Partnering with EFSE for the first time, BasisBank borrowed the equivalent of USD 11.1 million to on-lend to households in Georgia. Also, Belarusky Narodny Bank (BNB) borrowed the equivalent of USD 5.6 million for lending to micro- and small enterprises in Belarus.

EFSE issued a more complex disbursement to Araratbank of Armenia, which took out a multi-currency senior loan equivalent to USD 10 million to invest in micro- and small enterprises. The portion of this loan that is denominated in local currency has not been released.

As part of the Power of Local Currency, EFSE will also invest in other lending institutions in the region, in addition to “hosting business roundtables, disseminating informational videos and podcasts, conducting interviews and implementing other measures” to raise awareness about the importance of local-currency funding.

Christoph Tiskens, EFSE Board Chairman, said: “EFSE and EU4Business both have a keen interest in…not only supporting the local financial sector in making much-needed resources available to entrepreneurs and households, but also ensuring that loans can be provided in the same currency in which these borrowers are making their income. Local-currency financing allows people to invest in their future free from the risk of [fluctuating] foreign exchange rates. Our ‘Power of Local Currency’ campaign thus aims to promote the practice of local-currency financing among investors, investees, banks, regulators, and all players in the financial system to help safeguard sustainable development in the long term.”

Created in 2009, EU4Business provides advisory services, financing and training to small and medium-sized enterprises (SMEs) in Armenia, Azerbaijan, Belarus, Georgia, Moldova and the Ukraine. As of 2018, the initiative has 43 active projects and a portfolio of EUR 320 million (USD 353 million). Since the inception of the program, its partner banks have lent approximately EUR 1.96 billion (USD 2.2 billion) to approximately 66,000 SMEs.

German development bank Kreditanstalt fur Wiederaufbau (KfW) founded EFSE in 2005 with assistance from the European Commission and the German Federal Ministry for Economic Cooperation and Development, which often referred to by its German acronym BMZ. As of January 2019, the fund has EUR 867 million (USD 973 million) outstanding to retail lenders, which have on-lent those funds to 134,000 end-borrowers in the following countries: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Romania, Serbia, Turkey and the Ukraine. As of 2019, EFSE holds a microfinance label from the Luxembourg Fund Labeling Agency (LuxFLAG), an NGO that certifies that social investment vehicles actually invest as advertised.

By Anna Gravois, Research Associate

Sources and Additional Resources

EFSE press release
https://www.efse.lu/news-events/news/detail/efse-launches-power-of-local-currency-campaign-in-european-eastern-neighbourhood-region/

EFSE homepage
https://www.efse.lu

EU4Business homepage
http://www.eu4business.eu

BNB homepage
https://www.bnb.by

TBC homepage
https://www.tbcbank.ge

BasisBank homepage
http://basisbank.ge

Araratbank homepage
https://www.araratbank.am

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