Georgia faces broadly the same challenges in terms of small to medium-sized enterprises (SMEs) development as many developing countries. Notwithstanding the fact that SMEs constitute the largest share of operating enterprises, their contribution to GDP is still very low and their performance remains weak.
Now, the European Investment Bank (EIB) has pledged to loan €30 million to the largest bank in Georgia, TBC Bank, in order to broaden the access to finance of Georgian SMEs, which represent more than 90% of companies active in the country.
This is the fourth EIB Group operation with TBC Bank and builds upon the fruitful cooperation of the EU bank with this Georgian institution. Since 2011, TBC Bank has on-lent EIB funds for SMEs totalling €85 million.
“Our fourth loan with TBC Bank is expected to support the development of approximately 600 small and medium size companies, by giving them better access to finance,” said EIB Vice-President Vazil Hudák, in a statement.
“We hope this will promote job creation and foster the general development of Georgia’s economy,” he added.
The Government of Georgia (GoG) recognizes the importance and role of SMEs in economic development and is committed to the further improvement of the business environment in order to enable SMEs to develop and grow through the Georgia 2020 program.
The main priorities of Georgia’s economic policy until 2020 are set out in “Georgia 2020,” which was adopted by GoG in June 2014. The economic policy vision of GoG is built on the following principles: rapid and effective economic growth based on a competitive private sector; economic policy oriented at inclusive growth; and rational use of natural resources.
However, the new EIB funds will be provided within the framework of a different entity, the European Union’s EU4Business initiative, which is designed to support SMEs in the six Eastern Partnership countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine). Around 600 Georgian SMEs are expected to benefit from the loan.
SMEs play a significant role in Georgia’s economy, accounting for over 40% of employment, but are still struggling to scale up their operations.
EU4Business supports the government’s ambitious plan to reform and improve the business environment. Its programmes boost SME growth by improving their access to finance and new markets as well as targeting women entrepreneurs and projects in green energy. SMEs looking to make the most of Georgia’s Free Trade Agreement with the EU can also get financial and technical help to adapt to EU standards and to move into foreign markets.
The EU bank has also signed with the Georgian Ministry of Regional Development and the Georgian water utility company, the United Water Supply Company of Georgia, an Eastern Partnership Technical Assistance Trust Fund (EPTATF) Grant Agreement for an amount of €3.25 million.
These funds will be used for the financing of specialised professional services to support the utility in the implementation of the EIB Kutaisi Waste Water project.
“Today we have signed a grant agreement with the EIB for the financing of the Kutaisi Wastewater Project,” said Maya Tskitishvili, Georgia’s Minister of Regional Development and Infrastructure.
“Kutaisi is the country’s second largest city and this project will enable us to provide better living conditions for the local population. We are currently completing the final phase of preparatory works for the project and the actual construction will commence in 2019,” she added.
Launched in 1958, the EIB is the largest borrowing and lending space in the world and also the key investment institution of the European Union. It has since supported and represented the interests of all EU member states as well as invested in organisations around the rest of the globe.
The institution’s primary goals are to contribute to the growth, innovation and employability around Europe and does so through a provision of loans, unlocking financing from places such as the EU budget and supporting administrative management that benefits investment.