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. Last Updated: 07/27/2016

EBRD Earmarks Extra $30M for Loans

The European Bank for Reconstruction and Development said Tuesday it has handed another $30 million to its local branch to give loans to small and medium businesses, bringing its loan portfolio to $60 million.

The cash is being disbursed by KMB-Bank, 53 percent owned by the EBRD and the rest by U.S. financier George Soros’ economic development fund.

By the end of the year, KMB-Bank will have allocated more than $58 million worth of loans to more than 4,000 clients throughout the country, Elizabeth Wallace, director of the financial institutions team with the EBRD, said Tuesday at a news conference.

"Without this bank our business could not have gotten started," said Lev Okhotin, director of St. Petersburg haircare firm Yunikosmetik.

In the past two years, Yunikosmetik has taken two loans of $50,000 and $20,000 from KMB-Bank to finish building its factory and buy equipment.

"Now we are repaying $1,300 a month as interest and principal, but, because we have bought really good equipment, our profits are about $2,000 — the loan is easily paying for itself," Okhotin said by telephone from St. Petersburg.

Other loan recipients include a former geologist who is exporting cedar nuts from Siberia and a group of scientists that is working on new ways of disposing of nuclear waste.

Alexander Ioffe, president of the Russian Association for Small Business Development, said the EBRD’s support for small business was much greater than that provided by the government.

Ioffe said federal coffers hadn’t provided a single kopek to support small businesses in the past three years, while in the 2001 budget only 90 million rubles ($3.23 million) have been allocated.

He added that small businesses have been estimated to need at least $1 billion in investment — and that is just for Moscow and only for buying equipment.

Wallace said that while before the August 1998 crisis her bank had been disbursing loans through 12 local banks, now only two banks — state savings bank Sberbank and KMB-Bank — operate as EBRD partners nationwide.

Some $55 million in EBRD money got stuck in the crisis in a few local banks, including Rossiisky Kredit, Mosbiznesbank, SBS-Agro and Inkombank, and only part has been returned, she said.

She added that if SBS-Agro, which still owes the EBRD more than $30 million, does not repay its loan, the bank’s expansion will be smaller than planned.

This year, KMB-Bank is poised to open branches in Nizhny Novgorod, St. Petersburg, Novosibirsk and Omsk in addition to its 11 existing offices — but that will still cover only a handful of the nation’s most prosperous regions.

"We have so few regions where small businesses operate on a decent scale," Ioffe said. "About half of the people employed by small businesses are concentrated in only about 10 percent of the regions, or rather regional centers.

"We still have only about 8 million people employed in small businesses, or about 16 percent of the national work force. We have a long way to go to catch up with other countries where more than half the work force is employed by small businesses."

KMB-Bank gets loans from the EBRD with interest of 9.5 percent and disburses its own loans with 14 percent to 18 percent interest on hard-currency loans or 30 percent to 35 percent on ruble loans. All the profits are reinvested in the program, Wallace said, adding that 99 percent of loans are paid back.

The loans vary from $100 to $125,000 and must be repaid in 12 to 36 months.

Since the EBRD was established in 1991 to aid the transitional economies of Central and Eastern Europe and the former Soviet Union, the bank has disbursed $465 million in loans to more than 40,000 companies throughout the nation, Wallace said.