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Projects

Summary of proposed guarantee

Summaries of proposed guarantees are provided prior to Board consideration and before final contract signing, and they are therefore subject to change. Project briefs are disclosed after Board consideration and contract signing and reflect the terms of the project at the time of contract signature. Environmental and Social Review Summaries are provided for projects assigned an Environmental Assessment Category of A or B.

 

Project name
Erste Bank a.d. Novi Sad
Project ID
11593
Fiscal year
2013
Status
Active
Guarantee holder
Erste Group Bank AG
Investor country
Austria
Host country
Serbia
Environmental category
FI
Sector
Banking
Date SPG disclosed
April 30, 2013
Project Board date
May 30, 2013
Gross exposure
 $74.1 million
Project type
Non-SIP

Project description

This summary covers loan guarantees by Erste Group Bank AG of Austria (Erste) issued in support of funding raised by its Serbian subsidiary Erste Bank a.d. Novi Sad (Erste Serbia). Erste has applied for MIGA guarantees of €57 million ($74.1 million equivalent) for a period of up to 15 years against the risks of transfer restriction, expropriation, and war and civil disturbance.

The project involves the expansion of lending by Erste Serbia, targeting primarily micro, small, and medium enterprises (MSMEs) and other priority segments in the Serbian market.  The project is financed by a €60 million funding package, consisting of two loans: €50 million from the European Investment Bank and €10 million from Kreditanstalt für Wiederaufbau. These loans are supported by two loan guarantees from Erste, which will be covered by MIGA.

Environmental Categorization

The project is a category FI under MIGA’s Policy on Social and Environmental Sustainability.

Development Impact

The package is expected to improve access to finance at favorable conditions for projects undertaken by MSMEs and for projects in several priority areas in the Serbian economy, contributing to economic growth and job creation.

Erste Serbia will earmark a minimum of €40 million for projects promoted by MSMEs as well as mid-cap enterprises. In addition, up to €20 million will be slated for investments in areas that are key for the country’s economic and social development and fundamental to strengthen its competitiveness as Serbia prepares for European Union accession. These areas are knowledge economy/innovation capacity; environmental protection and sustainability; energy efficiency and renewable energy; health; and education.

The financial conditions applied to most on-lending will reflect the financial advantage of this funding package, making the loans more affordable. Supporting productive businesses through the extension of affordable credit will stimulate growth, generate employment, and reduce poverty in the country. In addition, the proposed project demonstrates Erste Serbia’s ability to find alternate sources of funding in a credit-constrained environment.

MIGA’s proposed coverage to Erste is consistent with the goals of the second Joint IFI Action Plan for Europe and Central Asia, though which MIGA seeks to support banks active in the region.  The project also contributes to the World Bank Group’s strategy of encouraging private sector development in the country.

 
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