European Bank for Reconstruction and Development (EBRD)
EBRD is an international finance institution which was formed in 1991. Sir Suma Chakabarti is the President of EBRD. It is a multilateral developmental investment bank. Incredibly, United States of America is the biggest shareholder in EBRD. Member countries belong to all 5 continents. The bank is headquartered in London, England. It is owned by 65 countries and two European Union institutions. Initially, the main focus of the bank was on the former eastern Bloc but soon it extended its support to countries in central Europe and Central Asia. The EBRD assists only those countries who are committed to and apply the principle of Multi-Party democracy and Pluralism. The EBRD made an astonishing Euro 9.4 Billion worth of investments in 2015 alone. It does not finance “defense-related activities, the tobacco industry, selected alcoholic products, substances banned by international law and stand-alone gambling facilities”.
EBRD was formed during the dissolution of the Soviet Union. The bank was built to help in forging a new and prosperous post- Cold War era Europe. The collapse of Communism in it Eastern Europe ushered a new era and the need for an institution which fostered development of the continent was felt. The bank was opened for business in London in April 1991. It was formed to help develop the private sector of the countries of Eastern Bloc.
Achievements: EBRD has been praised by many for its achievements so far.
- The ability to adapt to watershed events such as the end of Soviet Union and Arab springs has become EBRD’s trademark
- EBRD’s confidence in its endeavor to support private sector as the main driver of change in Central and Eastern Europe has been fruitful. EBRD has cemented its reputation as an expert on transition to open markets
- It was involved in banking system reforms, creation of proper legal framework for property rights, the liberalization of prices and privatization
- The EBRD is committed to furthering progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative
- The EBRD website states it has helped finance over 1 million smaller projects by supporting local commercial banks, micro-business banks, equity funds and leasing facilities.
Offerings of EBRD – EBRD has a minimum requirement which a client has to exceed in order to be eligible for consideration for the involvement of EBRD in the project. To be eligible for funding by EBRD is “a project must be located in an EBRD country of operations, have strong commercial prospects, involve significant equity contributions in-cash or in-kind from the project sponsor, benefit the local economy and help develop the private sector and satisfy banking and environmental standards.”
$5 million to $250 million is usually the amount of investment EBRD does for private sector projects. The average investment is $25 million. Smaller projects may be financed through financial intermediaries or through special programmes for smaller direct investments in the less advanced countries. Small and medium sized enterprises are also supported through financial intermediaries. Other than finance, EBRD also provides advisory services to small and medium sized enterprises so that they can grow and succeed. In this way EBRD acts as a catalyst in development of the region to which the enterprise belongs. Direct finance is offered in various forms –
- Equity Investments Financing Countries
- Guarantee to promote trade Recipients
EBRD in 2006 decided to cease its spending in the Baltic and central European nations by 2010 and that it would shift its focus to Russia, Ukraine, Uzbekistan et cetera by 2010. However, due to the Great Recession that hit the world in 2008, this process was postponed until 2015. As on 2014 Russia was the biggest recipient of funds from EBRD. But, due to the Russia-Ukraine unrest, EBRD announced that it will suspend new project investments in Russia.