Supply Side
More European SMEs To Benefit from New Finance Programmes

SMEs in Eastern Europe and Turkey are set to receive a boost in investment and access to finance thanks to various European Commission programmes.

In Bulgaria, a new operational programme called “SME Initiative” will allow SMEs to access €102 million from the European Regional Development Fund (ERDF). According to an article in Sofia News Agency, the programme aims to boost competitiveness amongst small and medium sized companies, and wants to ensure 55 percent of Bulgarian SMEs receive funding via bank loans by 2023. Improved access to finance is expected to increase SME productivity to 19.3 percentage points compared to 16.8 percentage points in 2012, the base year.

The programme was launched after an EC report indicated that the 2009 economic crisis had forced many Bulgarian SMEs to cut staff, salaries and postpone investment plans. Between 2010 and 2011, nearly half of SMEs had problems accessing external funding, while 80 percent of these companies complained of insufficient resources. However, with the new programme providing uncapped portfolio guarantees, the Bulgarian government aims to improve external access to enhance productivity, innovation and competitiveness, as well as job creation.

This month, the European Commission also adopted a programme that will invest over €78 million in EU Regional funds in the border region of Austria and Hungary. With national “co-financing” included, the cross-border cooperation programme will be worth more than €95 million, according to an article in Portfolio. The programme will primarily aim to address remaining border issues and promote better cooperation in the area. Most of the funding will be allocated to protecting the environment and promoting resource efficiency, as well as promoting sustainable transport and improving public transport links.

SMEs will also benefit from the programme, with 9 percent of the EU-funding allocation going to fostering SME competitiveness in the region. The targets include strengthening entrepreneurship, performance of start-ups and innovation of SMEs. In particular, the programme will focus on the development of internationally competitive products.

The EC said last month that it had approved Latvia’s project to develop a financial institution to improve funding access for SMEs. From 2015 to 2022, Latvia plans to invest over €512 million into the Latvian Single Development Institute (SDI), according to a Reuters article. The institute will offer financing to SMEs, start-ups, mid-caps and individual agricultural companies, as well as acting as the financial intermediary for programmes co-financed by institutions such as the European Investment bank.

Small and medium sized businesses in Turkey are also set to receive a financial boost after the European Bank for Reconstruction and Development (EBRD) agreed to a loan worth €60 million with Turkish Odeabank. In a country where SMEs account for 80 percent of employment and 60 percent of exports, the loan will be used to create jobs and increase productivity in the economy. According to an article in BGN News, EBRD said that the loan would pave the way for future cooperation with Odeabank, particularly in areas of strategic importance to the EBRD such as energy efficiency and women-run enterprises.

As well as this direct support in terms of funding and loans, there is of course also continued emphasis on using public procurement across the EU to support smaller firms. Munir Podumljak, Executive Director of the Partnership for Social Development (PSD) in Croatia (here is their Integrity Observers website), is a noted campaigner against corruption and for transparency in public procurement. For interest you may wish to read his counter argument on helping SMEs  – Why Supporting SMEs May Be Bad for Europe. He is taking in that article about procurement in particular however, and the dangers of making the playing field less level to favour smaller firms. We don’t know how he feels about more direct financial support to SMEs. We should ask him!