After years of robust growth earlier this decade and integration into the global economy, in late 2008 the economies in Southeast Europe found themselves in the midst of a global financial crisis: external demand from the main export markets dropped sharply, the volume of remittances fell, and access to finance became much more difficult and expensive.
In March 2009, in Istanbul, the largest multilateral investors and lenders in Central and Eastern Europe - the EBRD, the EIB Group, and the World Bank Group, including IFC - pledged to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis.
IFC’s crisis response initiatives in Southeast Europe focused on the financial sector, including trade finance, and the provision of access to finance for private sector companies generating exports and employment in the region.
IFC also focused on portfolio. We have directed additional resources toward supervision and portfolio management to help ensure that existing clients received guidance and enhanced supervision during the crisis.
Supporting Systemic Banks, Preserving Stability
The IFC Capitalization Fund, founded by IFC and the Japan Bank for International Cooperation, EBRD, Germany’s DEG and Sweden’s Swedfund, invested €120 million in Serbia’s Komercijalna Banka in December 2009. This was the fund’s first investment in Europe.
This transaction, part of the development finance institutions’ crisis response, strengthened a systemic bank in the country, equipping Komercijalna Banka with a capital buffer during the economic downturn.
Ivica Smolić, President of Komercijalna Banka’s Executive Board, said: “The capital increase reinforced our position as one of the leading banks in the Serbian market and created new potential for our further development.’’
IFC also took an active part in the Vienna Initiative, under which key Western European banks agreed to maintain their exposure in the region. As a result there were no bank failures and there was no run on deposits in Southeast Europe.
In Bosnia and Herzegovina, IFC helped establish the Debt Advice Center in a bid to help banks and microfinance institutions in the country deal with the rising number of non-performing loans.
Helping Smaller Companies Access Finance, Boosting Trade Finance
In addition, dozens of banks in Southeast Europe joined the IFC Global Trade Finance Program. The program extends the capacity of banks to deliver trade finance services and supports trade into and between emerging markets.
In April 2010, IFC provided a €25 million loan that enabled NLB Tutunska Banka to extend loans to small and medium enterprises in FYR Macedonia. IFC’s investment helped address the limited access to finance for smaller businesses, a problem exacerbated by the global financial crisis.
“With IFC’s loan and trade finance guarantee facility, we can increase our support to small and medium enterprises, confirming our traditional commitment to them and further expanding our role in trade financing in Macedonia.” said Gjorgi Jancevski, Chief Executive Officer of NLB Tutunska Banka.
IFC extended similar loans in support of smaller businesses in Montenegro through NLB Montenegro Banka, through Agroindbank in Moldova, and through ProCredit Bank in Romania and Serbia.
Helping Regional Players Preserve Jobs and Reach New Markets
In June 2010, IFC invested €25 million in equity in Slovenia’s Gorenje, the largest household appliance manufacturer in Southeast Europe, and provided a €50 million loan to the company. IFC also mobilized an additional €51 million through syndications.
The company’s main factories are located in Velenje in Slovenia, Valjevo and Stara Pazova in Serbia, and Mariánské Údolí in the Czech Republic. Gorenje is the main employer in these areas, and preserving jobs during the financial crisis is of paramount importance for local communities.
“Gorenje’s expansion in the region will allow the transfer of first-class production methods and manufacturing practices through linkages with networks of local suppliers,” said Dimitris Tsitsiragos, IFC Director for Middle East, North Africa, and Southern Europe. “IFC also brings global knowledge and we hope to connect Gorenje with new markets around the world.”
Supporting Existing Clients
IFC continued to support one of the key regional agribusiness companies, Croatia’s Agrokor Group, by providing a much needed working capital loan in the amount of €40 million in the wake of the liquidity crisis in 2008.
As a direct response to the credit crunch in the region, when access to finance became much more difficult and expensive, IFC supported Agrokor in 2009 by providing a €40 million working capital loan for its Serbian subsidiary Frikom.
IFC’s loan enabled Frikom to increase its productivity and efficiency, develop a fresh fruit and vegetables supply chain and off-take logistics in rural regions, and safe-guard employment of farmers in Serbia and the wider region of Southeast Europe.
“IFC’s long-term financing demonstrates the confidence of one of the world's leading financial institutions in Agrokor, understanding our vision and strategy and supporting our rationale for investing,” said Ivica Todoric, President of Agrokor.