MICROCAPITAL STORY: The European Bank for Reconstruction and Development (EBRD) Provides $3.8m Loan to Inicjatywa Mikro with Technical Assistance Funded by the European Commission (EC) to Support the Development of Micro and Small Enterprises in Poland

The European Bank for Reconstruction and Development (EBRD) is providing the microfinance institution Inicjatywa Mikro with a 3.8 million USD loan to aid the development of micro and small enterprises in Poland. The loan is supported by technical assistance funded by the European Commission, the executive branch of the European Union. The financing comes under the EU/EBRD Preparatory Action Framework, which supports micro and small enterprises in the new EU member states, and aims to generally provide medium and long-term financing from the EBRD combined with technical assistance funded by the European Commission.

According to the EBRD, there remains a large demand for microfinance in Poland, with only 3 percent of registered micro and small enterprises financed by the formal financial sector. Inicjatywa Mikro is focusing on this vital portion of the economy to help bridge the gap. In particular, Inicjatywa Mikro plays a major role in the microenterprise sector of Southern Poland, a region still suffering from the decline of the large state-owned mining and steel sector. For many former employees in these industries starting up their own business is the only way forward, but access to finance has become even more difficult given the current global financial crisis.

Lucyna Stanczak, EBRD Country Director for Poland, said, “the loan to Inicjatywa Mikro will lead to increased availability of finance for a crucial sector of the economy.” “The difficult market environment makes this more important and timely than ever. We are confident that the loans will help Poland’s entrepreneurial spirit blossom.” Meanwhile, Lan Townsend, CEO of Inicjatywa Mikro, added, “This loan will enable us to reach out to the microfinance sector from our seven offices in the south of Poland.” “The funds will ensure that finance is available to assist small businesses develop especially in the current financial climate.” “All of us at Inicjatywa Mikro are pleased to be working with the EBRD and the EU to develop the economy of cities, towns, and rural areas in which we operate.”

According to the MIX, the microfinance information clearinghouse, Inicjatywa Mikro is a microfinance organization established in 1996 with the help of Opportunity International (a network of microfinance institutions active in the EBRD regions of Macedonia, Montenegro, Poland, Romania, Russia, and Serbia) to support enterprise development and job creation in Southern Poland. To realize this goal, Inicjatywa Mikro enables access to capital for very small companies which do not qualify for a bank credit. As of the end of 2007, the organization reported a debt to equity ratio of 117.28 percent, a return on assets of 0.83 percent, and a return on equity of 1.73 percent.

The EBRD was established in 1991 on the heels of the Communist collapse across Central and Eastern Europe, on the assumption that ex-Soviet countries needed support to develop competitive private sectors. Today, the EBRD uses the tools of investment to help build market economies in 27 countries from Central Europe to Central Asia. Indeed, the EBRD is the largest single investor in the region and mobilizes significant foreign direct investment beyond its own financing. Headquartered in London, it is owned by 61 countries and two intergovernmental institutions. Despite its public sector shareholders, the EBRD invests mainly in private enterprises, usually together with commercial partners. It provides project financing for banks, industries, and businesses, both new ventures and old. It also works with publicly owned companies to support privatization and restructuring of state-owned firms, as well as the improvement of municipal services.

In January 19, 2009, MicroCapital reported that the EBRD signed agreements on two syndicated loans which would be used for Micro and Small Entrepreneurship (MSE) development with the AccessBank (formerly Microfinance Bank of Azerbaijan, MFBA). According to another report from MicroCapital in October 2008, the EBRD held a conference in Azerbaijan focusing on the progress of its six years of microfinance initiatives within the country.

By Yanni Hao, Research Assistant

Additional Resources:

European Bank for Reconstruction and Development: “Home” “Supporting micro businesses in Poland”

European Union: “Home” “European Commission”

MICROCAPITAL STORY: January 19, 2009, “NEWS WIRE: EBRD signed one of the two syndicated loans with Access Bank”

MICROCAPITAL STORY: October 7, 2008, “MICROCAPITAL STORY: The European Bank for Reconstruction & Development (EBRD) Reflects on Six years of Microfinance in Azerbaijan“