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.
