ACCESS TO FINANCE FOR COMPANIES IN MACEDONIA

INTRODUCTION

Access to financial resources is one of the key factors cited by companies in Macedonia as an obstacle to expanding economic activities and their growth and development. Access to finance is crucial for obtaining working or long-term capital for companies to:

⮞  maintain production processes and achieve growth and development,
⮞  invest, innovate, create jobs, and apply advanced techniques and technologies.

SOURCES OF FINANCING FOR COMPANIES

⮞  Private funds and/or loans from family/friends
⮞  Financing from domestic banks in Macedonia
⮞  Financing from international financial institutions

OVERVIEW OF ACTIVE PROGRAMS FOR THE PRIVATE SECTOR THROUGH THE WESTERN BALKANS INVESTMENT FRAMEWORK AND LINES OF CREDIT FROM OTHER INTERNATIONAL FINANCIAL INSTITUTIONS

⮞  European Union – combined funds and guarantees
⮞  EBRD
⮞  EIB
⮞  Other financial institutions

EUROPEAN UNION – COMBINED FUNDS AND GUARANTEES FOR MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES THROUGH THE WESTERN BALKANS FINANCING FRAMEWORK

The European Commission's Economic and Investment Plan (EIP) for the Western Balkans (2020-2023) is a framework that defines funding priorities to achieve the region's long-term economic recovery and strengthen regional economic integration.

The EIP outlines 10 investment priorities for financial support of the green and digital transition of Western Balkan countries, bringing the region closer to the European Union's single market.

To foster the development of the private sector, EU financial support focuses on assisting micro, small, and medium-sized enterprises in aligning with EU norms and standards in areas such as energy, transportation, digital connectivity, sustainable agriculture, biodiversity, forestry, water, sustainable cities, human development, etc. Enterprises and banks need to be sufficiently committed to fully utilize the resources made available through the Growth Plan via the Western Balkans Investment Framework.

The EIP emphasizes the importance of the private sector, including startups, micro, small, and medium-sized businesses, to the economy. Significant investments are allocated for innovations and green development.

Currently, Macedonian companies have access to the following lines of credit, totaling approximately 170 million euros:

⮞  GREEN FOR GROWTH FUND (GGF)

• Total line of credit: 10 million dollars.
• EIP Priority: Green Transition. GGF is dedicated to combating climate change while promoting economic growth and a sustainable future.
• In implementation phase.
• Intended for small and medium-sized enterprises across all economic sectors and households. GGF provides resources for local financial institutions or direct investments in eligible projects for companies and households. In addition to financing, GGF offers technical assistance for the exchange of know-how and technical expertise to ensure successful investments.
• The interest rate for end-users is in accordance with the bank's pricing policy.
• GGF was established in 2009 by the European Investment Bank (EIB) and Germany's KfW, with support from the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Commission (EC).
• More information at: www.ggf.lu.

⮞  REGIONAL ENERGY EFFICIENCY PROGRAMME (REEP)

• EIP Priority: Green Transition.
• In implementation phase, carried out in cooperation with the Energy Community Secretariat.
• REEP finances transformative projects in both the public and private sectors.
• REEP provides direct loans for energy efficiency and renewable energy projects.
• Funds are allocated to small energy efficiency and sustainable energy projects, with support from EU-funded advisory services and CO2 emissions-based refunds.
• The fund offers debt financing for small and medium-sized enterprises through local commercial banks.
• REEP was created in 2012 by EBRD, KfW, and the EU.
• More information at: www.wbif.eu/reepebrdgeff.com; www.kfw.de/kfw.de-2.html

⮞  GREEN FINANCING FOR INCLUSIVENESS (GFI)

• EIP Priority: Green Transition.
• Start: December 2022; in preparation phase.
• Support and focus on empowering micro, small, and medium-sized enterprises (MSMEs) led by women and youth in social entrepreneurship, sustainable agriculture, circular economy, and ecotourism sectors.
• Eligible MSMEs can access loans under favorable conditions, including:
  - Reduced interest rates.
  - Lower collateral requirements.
  - Extended maturity.
  - Combination of any/all the above.
• More information at: www.cdp.it

⮞  EDIF GUARANTEE FOR SME RESILIENCE

• EIP Priority: Financial Inclusion.
• Start: June 2022; in preparation phase.
• The EDIF guarantee strengthens MSMEs by improving access to finance. By sharing risks with local commercial banks, the guarantee aims to support MSMEs, with at least 25% of funds allocated to enterprises.
• Eligible MSMEs can access loans under favorable conditions, including:
  - Reduced interest rates.
  - Lower collateral requirements.
  - Extended maturity.
  - Combination of any/all the above.
• Launched in June 2022, following the COVID-19 pandemic and amid the ongoing energy crisis, this initiative helps MSMEs build resilience while progressing toward a more sustainable economy with low carbon dioxide emissions.
• More information at: www.eif.org/what_we_do/resources/wbedif/index.htm

⮞  EFSE – EUROPEAN FUND FOR SOUTHEAST EUROPE

• EIP Priority: Financial Inclusion.
• Total amount: 5 million euros.
• In implementation phase.
• Intended for micro, small, and medium-sized enterprises across all economic sectors, farmers, and households.
• Financing is provided through local commercial banks, microfinance institutions, and non-bank financial institutions.
• The interest rate for end-users is in accordance with the bank's pricing policy.
• More information at: www.efse.lu

⮞  ENTERPRISE EXPANSION FUND (ENEF 2)

• EIP Priority: Diversified Finance and Funding.
• In implementation phase; operational since the beginning of 2021.
• ENEF is an equity fund that catalyzes the expansion of local small and medium-sized enterprises (SMEs) and high-potential mid-cap enterprises in the Western Balkans.
• Focused on providing capital, quasi-capital, and debt financing, ENEF II offers financial incentives for the growth and expansion of small enterprises. Established in December 2021 and supported by the European Commission, EBRD, and other development finance institutions, the fund is expected to offer up to 75 million euros.
• ENEF II offers more than financing by providing extensive support before and after investments. Success is not just in numbers, so the Fund offers support in identifying and addressing risks related to environmental, social, and governance (ESG) issues and opportunities for enterprises.
• The journey began in 2014 with the establishment of the Enterprise Expansion Fund (ENEF) within the Western Balkans Enterprise Development and Innovation Facility (WB EDIF), supported by initial capital of 48.5 million euros.
• Managed by the European Bank for Reconstruction and Development (EBRD), ENEF I successfully invested in 16 companies by July 2020.
• More information at: www.ebrd.com/work-with-us/projects/psd/52255.html

⮞  REGIONAL COMPETITIVENESS PROGRAM

• EIP Priority: Innovation in Trade and Value Chains.
• In implementation phase; operational since April 2019.
• Enhancing the competitive advantages of small and medium-sized enterprises (SMEs) with the SME Competitiveness Support Program. This initiative offers enterprises the opportunity to stand out in the EU market by meeting standards for environmental protection, occupational health and safety, product quality, and safety.
• EBRD provides debt financing for eligible investments through local business banks. Such lines of credit are reinforced with EU-funded advisory services, preparing enterprises to meet stringent standards.
• Upon successful completion and verification of investments, SMEs can receive an incentive with a refund of up to 15%.
• More information at: web-sme-csp.com

⮞  ADVICE FOR SMALL BUSINESSES

• EIP Priority: Multifaceted.
• In implementation phase; operational since 2012.
• Strengthening small and medium-sized enterprises (SMEs).
• The initiative offers comprehensive advisory services covering strategy and operations, quality management, financial reporting, energy efficiency, and more.
• The program operates through a network of local consultants and international experts, providing access to state-of-the-art best practices. The goal is to equip enterprises with tools to improve their business performance and sharpen their competitive advantages.
• EBRD implements the program through the Enterprise Development and Innovation Facility (EDIF).
• More information at: www.ebrd.com/small-business-support/advice-for-small-businesses.html

⮞  GREEN ENERGY INVESTMENT LINE OF CREDIT (GFF MACEDONIA) FROM THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD) – GREEN FINANCE FACILITY

• Total amount: 30 million euros.
• Implemented through Sparkasse Bank, Sparkasse Leasing, and ProCredit (to date, Sparkasse has withdrawn 7 million euros).
• Intended for financing small and medium-sized companies for investments in renewable energy sources and energy efficiency.
• The interest rate for end-users is in accordance with the bank's pricing policy.
• More information at: www.ebrd.com/small-business-support/advice-for-small-businesses.html

⮞  LINE OF CREDIT FROM THE EUROPEAN INVESTMENT BANK (EIB 7) THROUGH MBDP

• Total amount: 100 million euros.
• Implemented through Komercijalna Banka, Stopanska Banka Skopje, NLB, Sparkasse, and ProCredit, but agreements are also being signed with other domestic banks.
• Intended for small and medium-sized enterprises (SMEs).
• The interest rate for end-users is 3.5%.

⮞  LINE OF CREDIT FOR SMALL AND MEDIUM-SIZED ENTERPRISES FROM EBRD

• Total amount: 23 million euros.
• Implemented through Sparkasse Bank AD Skopje.
• Intended for financing micro, small, and medium-sized enterprises, with at least 30% of the loans to be for funding transition toward green economy projects.
• The interest rate for end-users is in accordance with the bank's pricing policy.

⮞  LINE OF CREDIT FOR THE WESTERN BALKANS GEFF II FROM EBRD

• The total amount of the line of credit is 1 million euros for each bank (ProCredit and Sparkasse).
• It is intended for lending to individuals, homeowner associations, producers of green technologies, and service providers, for investments that support the transition to a green economy.
• The interest rate for end-users is in accordance with the bank's pricing policy.