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A new window for rural development
EU and EBRD expand programme in accession countries
To bridge a gap in finance in rural areas of the EU accession countries, the
EU and the EBRD are setting up a €60 million programme under their joint small
and medium-sized finance facility. The EBRD is providing €50 million for loans
to bank and leasing companies to finance SMEs in rural areas, while the
European Commission is contributing €10 million for training and institution
building.
The inability of many agricultural businesses and rural enterprises to obtain
adequate short- or long-term finance is a key barrier to economic development.
The new “Rural Sub-Window” should go some way towards addressing the problem.
It will extend loans to local banks, which will in turn make loans to
agricultural and other small enterprises that are based in rural areas. The
EBRD’s objective is to support the rural economy by financing agriculture as
well as alternative means of employment. Available finance will be short-term
working capital loans, medium-term investment loans and leases for equipment
finance.
Kurt Geiger, EBRD Director of Financial Institutions, said the rural
sub-window will enable the Bank to build on the successful experience of the
SME Facility in combining EBRD finance with institution building for local
intermediaries, supported by the EU. Hans Christian Jacobsen, EBRD Director of
Agribusiness, added that the new facility will provide incentives to local
participating banks and leasing companies to finance small and medium
enterprises in the rural sector where transition still lags behind and where
the agriculture sector plays an important role. Financing of rural areas will
create jobs and facilitate the transition from agriculture to industry and
services, Mr Jacobsen pointed out.
The EU/EBRD SME Finance Facility, established in 1999, is a major provider of
funds to SMEs in Bulgaria, Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Romania, Slovak Republic and Slovenia through commercial
banks and leasing companies. More than 26,500 subloans and leases amounting to
more than €610 million have been disbursed. Together with the “Rural
Sub-Window” the EBRD Board approved a fifth extension of the facility of up to
€150 million. The EC has committed €130 million in grant financing and for
technical assistance since the facility’s launch in 1999.
The EU’s contribution comes under the Phare programme, one of the instruments
financed by the European Commission to assist the candidate countries of
central and eastern Europe in their preparations for joining the European
Union. In 2000-2006, Phare is providing some €11 billion of co-financing for
projects in the EU accession countries. (For further information see: http://europa.eu.int/comm/enlargement/)
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