Romanian companies to receive inexpensive funds

Small and medium-sized enterprises (SME), the industry, and the infrastructure sectors will be the main beneficiaries of funds from the European Investment Bank (EIB).

The interest rate will be computed based on the Euro Interbank Offered Rate (Euribor, the interest rate on euro loans applied by major European lenders) plus some 0.4 percentage points, according to a statement on Monday by the financial institution's Vice President for Romania, Matthias Kollatz Ahnen. At present, the three-month Euribor rate is 1.5 percent while that for six months is 1.7 percent. This means total interest of some 2-2.2 percent, less even than the 3.5 percent interest on the funds Romania borrowed from the International Monetary Fund (IMF).

However, not all lenders on the domestic market will borrow funds from EIB at the same interest, as different factors are included in the calculation of the interest rate, such as the degree of risk of a certain bank, the value of the loan and its maturity. "We are analyzing conditions and if we meet the requirements, we will take out a loan from EIB because it is less expensive than financing attracted from foreign markets. The interest rate is attractive and we will use the money to offer loans to SMEs and individuals. We do not need the funds yet, but are analyzing this possibility," Robert Rekkers, General Manager of Banca Transilvania, told Business Standard. Banca Transilvania has already taken out a €100 million loan from the European Bank for Reconstruction and Development (EBRD), to support SMEs.

The funds from EIB will ensure 50 percent of the loans for SMEs, while the remainder will be provided by the Romanian intermediary bank. EIB's Vice President has already announced that the institution is negotiating with 8-9 Romanian lenders and could sign contracts with six of these by May. EBRD, the World Bank, and EIB will invest €24.5 billion in SMEs through lenders operating in Eastern Europe, as part of the Common Action Plan of international financial institutions. EBRD will raise its investment in Romania by a further €500 million, to €1 bln in the coming two years, within the €20 billion international financial package. About half of this amount will be directed towards the financial sector, with the remainder to be invested in the economy, including in the corporate, energy, and infrastructure sectors

Business Standard