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Europe’s New Financial Plan For SMEs Running On Empty

Access to capital, or lack thereof, is the top concern of Europe’s small businesses. As one owner told EmergingMarkets.org, “You can have all the vision, all the business plans in the world, but if you don’t have money to go with it and support from financial institutions it’s not going to work. You have the car but you don’t have the gas.”

Europe’s small business sector is an unrealized “engine of growth,” according to Sir Suma Chakrabarti, president of the European Bank for Reconstruction and Development (EBRD). “Small businesses matter for economic development,” he said. “There is a strong entrepreneurial spirit across our region but much remains to be done to foster that spirit,” he said. The EBRD is working toward a solution with the recently-launched Small Business Impact Fund. The fund will promote small business financing through financial institutions, co-financing and policy. Backed by 64 governments, including the United States, the EBRD’s plan provides more than $1.7 billion in financial support to businesses each year.

Europe’s SMEs are still recovering from the long-lasting effects of the 2008 global financial crisis. Boosting small businesses’ access to funding is a goal for multiple European bodies, including the European Commission. Things are getting better. The European Central Bank’s annual report showed falling loan rates and fewer differences across national borders. The commission sees supporting cross-border financing as a key component of recovery, but defining a set of rules that can address the different political and economic landscapes throughout Europe is difficult. To that end, built into the Small Business Impact Fund, which is part of the larger Small Business Initiative, is the ability for each country to adapt activities to their particular needs.

The Small Business Impact Fund supports small business overall, but the EBRD is also growing specialized lending programs. Women in Business, the first program launched under the Small Business Initiative—a consolidation of all SME finance-focused works at the EBRD—expanded to its sixth country this week with the addition of Georgia. Since its launch, more than $57 million has been dedicated to women-led businesses. The program also provides training, business support and mentoring to female entrepreneurs.

Europe’s SMEs need more than monetary support to unlock their full potential. Business owners interviewed by EmergingMarkets.org also cite issues finding qualified staff and inconsistent policies as obstacles. Thierry Deau, founding partner and CEO of Meridiam, told the publication the biggest challenge facing his company and the small business sector in general was “the inability of the government to partner with us. The human capital is not developed consistently enough to have people engage and put together complex social infrastructure.”

Echoing concerns of American small business owners, who struggle to find talent to match their unfilled positions, European small business owners point to the lack of education to prepare workers to meet their needs. Chakrabarti believes the EBRD can help. He sees the role of the EBRD and its programs as an advocate for the business community. An advocate that brings the concern of the businesses they help to those who can effect change. Understanding the consequences excessive regulation and red tape can have on economic growth, Chakrabarti is committed to working with government to create favorable business conditions for small businesses. This commitment is reflected in the newly created Small Business Initiative. Business advice and policy is built into the program.

As part of the expansion of the EBRD’s programs directed at small business, the bank plans to began its first study of the small businesses it assists. The study will begin before the end of the year and follow small businesses for three to five years. Through the study, the institution will be able to measure quantitative measurements of business improvement.

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