Leasing in CEE

Increasing SMEs’ Access to FinanceAndreea Moraru, EBRD

2 February 2012

Table of Contents

A. EBRD Background

B. SMEs – A Key Driver of Economic Growth

C. EBRD’s SME Funding Programs

D. Case Studies

EBRD: A Driving Force for Promoting Open Market Economies

A Driving Force for Promoting Market Economies

1991 our year of establishment

61 countries as shareholders

20 years of investment experience

29 countries of operation to promote transition to market economies

AAA rated International Financial Institution

Shareholder BreakdownJapan, 9%

USA, 10%

Others, 7%

Russia, 4%EU - 27

countries, 63%

EU Region (excluding

EU members),

7%

EBRD Investments

Data as of YE 2011

€71 billion investedin over 3,389 projects

€71 billion investedin over 3,389 projects

0

10

20

30

40

50

60

70

1994

1996

1998

2000

2002

2004

2006

2008

2010

EUR bn

FI is a key element of the EBRD’s portfolio

Debt €59 bn Equity €12 bn

Financial Institutions (FI)

€25 billion invested in 1,443 projects

`Debt €22 bn

`Equity €3 bn

EBRD: More than 300 Banking Staff in a Network of 34 Offices in 29 Countries

EBRD: Commitment to the SME Sector

EBRD portfolio€ 34.7 bn*

EBRD portfolio€ 34.7 bn*

FI€ 9.5 bn

FI€ 9.5 bn

SME€ 2.3 bn

SME€ 2.3 bn

Other€ 7.2 bn

Other€ 7.2 bn

Leasing€ 370 m

Leasing€ 370 m

Bank lending€ 1.9 bn

Bank lending€ 1.9 bn

EE€ 135 m

EE€ 135 m

More than 24% of total FI portfolio is dedicated to SMEs!

Data as of YE 2011

The economic situation and leasing in CEE

Country

GDP growth

YoY 2012 vs. 2011* 1.6% 2.2% 1.1% 0.5% 0.5% 2.1% 2.4% 2.6% 3.5% 1.1% 2.3% 4.2% 2.5%

Growth of new leasing volumes 1H2010 vs. 1H2011

16% 28% 33% 11% -4% 33% 32% 71% 80%** 23% 45% 101% 92%

Leasing volumes grow significantly throughout CEE!

EBRD & OECD forecasts

** 1Q 2011

EBRD’s Commitment to the Leasing sector in CEE

EBRD is highly active in the leasing sector with an annual business volume of around EUR 100 mln in the last 5 years

Given the characteristics of the financial markets, CEE represents the most important leasing market for EBRD

As of 31/12/2011 EBRD‘s leasing portfolio in CEE consists of 41 projects and amounts to EUR 260 mln

0

2040

6080

100120

140160

180

2006 2007 2008 2009 2010 2011

EU

R m

ln

Non-CEE CEE

Table of Contents

A. EBRD Background

B. SMEs – A Key Driver of Economic Growth

C. EBRD’s SME Funding Programs

D. Case Studies

EBRD recognizes the importance of SMEs for economic development in the CEE region based on SMEs’ vital role in the EU

In the EU SMEs represent more than 99% of the total number enterprises and hence contribute significantly to economic output and employment

A thriving SME sector is crucial for economic success

SMEs: Reasons for their success

Nearly 60% of all SMEs are engaged in innovate activities and hence boost growth

Source: EC, SMEs’ Access to Finance Survey 2011

34%

26%

22%

23%

33%

25%

23%

22%

0% 5% 10% 15% 20% 25% 30% 35% 40%

A new or significantlyimproved product orservice to the market

A new way of sellingyour goods or services

A new organisation ofmanagement

A new or significantlyimproved productionprocess or method

2009 2011

External financing – One of SMEs’ most pressing problems

According to a survey in the EU-27, access to almost all sorts of external financing deteriorated or remained unchanged in 2011

Enhancing access to external funding for SMEs is crucial!

Source: EC, SMEs’ Access to Finance Survey 2011

15%

15%

45% 8%

8%41%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Bank overdraft, creditline or credit card

overdraft

Bank loans

Deteriorated Remained unchanged Improved

Table of Contents

A. EBRD Background

B. SMEs – A Key Driver of Economic Growth

C. EBRD’s SME Funding Programs

D. Case Studies

In 2006 the EU/EBRD SME Finance Facility was established to:

Improve access to finance for SMEs

Increase sustainability of SME finance through local financial intermediaries

Initially, EU grant funds contributed to accelerate access to finance through the provision of technical assistance and performance fees

In accordance with the European Commission recommendation, SMEs are defined as follows:

EBRD’s priority – Expanding access to finance for SMEs

Enterprise category Headcount Turnover (Or) Balance sheet size

Medium-sized < 250 ≤ EUR 50 mln ≤ EUR 43 mln

Small < 50 ≤ EUR 10 mln ≤ EUR 10 mln

Micro < 10 ≤ EUR 2 mln ≤ EUR 2 mln

EU/EBRD SME Finance Facility - Structure

Leasing Company

Sub-project

Sub-project

Sub-project

LoansRepayments

EC

Grant

Leases

RepaymentsTA & PF

EU/EBRD SME Finance Facility – Expanding access to finance for SMEs

With other 100,000 sub-projects amounting to almost EUR 2,400 mln, the EU/EBRD Facility has been a great success

With an average sub-project size of EUR 22,730 and 41% of total disbursements directed to micro borrowers, especially the smallest enterprises have profited significantly from the facility

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

Dec-00

Jun-01D

ec-01Jun-02D

ec-02Jun-03D

ec-03Jun-04D

ec-04Jun-05D

ec-05Jun-06D

ec-06Jun-07D

ec-07Jun-08D

ec-08Jun-09D

ec-09Jun-10D

ec-10Jun-11

Eu

ro M

illio

n

Bulgaria Croatia Czech Republic Estonia

Hungary Latvia Lithuania Poland

Romania Slovakia Slovenia Regional

EBRD Disbursements EBRD Commitments

EU/EBRD SME Finance Facility – Leasing for SMEs in CEE

Loans to participating leasing companies substantially contributed to expand access to finance for SMEs further

Leasing companies have disbursed almost EUR 1,000 mln under the facility to eligible sub-borrowers as of 30/06/2011

0

50

100

150

200

250

BG HR CZ HU LV PL RO SK SI

EU

R m

ln

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Nr

of l

ea

ses

In EBRD has added several SEFF facilities to foster investments in energy efficiency and renewable energy measures at SMEs targeting CO2 emissions reductions

In several countries the EU will provide grants for technical assistance to provide training and capacity building and support for financial intermediaries and sub-borrowers with project identification and preparation

Based on CO2 emission reductions, sub-borrowers will receive performance fees

Sample of eligible sub-projects:

On site co-generation of heat and electricity

Installation of absorption chillers

Rehabilitation of boilers

Rehabilitation of compressed air systems

Energy saving measures in the built environment

SEFFs – Sustainable Energy Efficiency Facilities

PolSEFF – Fostering energy efficiency in Poland

In June 2010, the Polish SME sustainable Energy Financing Facility (PolSEFF) was established by the EU and EBRD

EBRD has committed EUR 150 mln to PolSEFF with the EU providing funding for TA & PF

Leasing Company

Sub-project

Sub-project

Sub-project

Loans

Repayments

EC

Gra

nt

Leases

Repayments

TA TA

PF

Advantages of for all participants of SEFF

Leasing Companies Sub-BorrowersEBRD

Improve skills for SMEs and EE projects

Foster growth

Increase revenues

Enter relationship with EBRD

Increase availability of finance for SMEs

Contribute to enhanced energy efficiency

Develop partnerships with leasing companies for future business

Achieve good financial results

Gain access to funding for EE projects

Benefit from TA

Increase cost efficiency through EE projects

Potentially earn PF

Table of Contents

A. EBRD Background

B. SMEs – A Key Driver of Economic Growth

C. EBRD’s SME Funding Programs

D. Case Studies

Raiffeisen Leasing – Leasing for SMEs in CEE

Countries Regional

Currency EUR

Sector Leasing

Product Senior Debt

Amount EUR 55,000,000

HIGHLIGHTS

Raiffeisen Leasing is one of the leading players on the CEE leasing market

SME financing accounts for more than 40% of the company’s portfolio

Before Raiffeisen’s market entry the leasing market for SME clients was mostly untapped, particularly for long-term loans. EBRD was among the first financiers to provide long-term leasing solutions to SMEs

Under the EU/EBRD SME Facility Raiffeisen Leasing has provided almost 6,000 SMEs with total leases amounting to EUR 121 mln

TRANSACTION SUMMARY DISBURSEMENTS TO SMEs UNDER EU/EBRD SME FINANCE FACILITY

Source: EBRD

05

1015

2025

3035

4045

BG HR CZ PL RO SI

EUR

mln

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Nr o

f lea

ses

BZWBK Leasing EEF – Dedicated to energy efficiency

TRANSACTION SUMMARY POLISH LEASING MARKET

HIGHLIGHTS

March 2011

Country Poland

Currency EUR

Sector Leasing

Product Senior debt

Amount EUR 15 million

WBK Finance & Leasing, a subsidiary of Bank Zachodni WBK, serves SMEs throughout Poland, providing them with financing for machinery and other equipment

The project is the first EBRD loan to a leasing company under a sustainable energy finance facility

The loans will be used to finance investments in energy efficiency and small-scale renewable energy projects with a maximum lease size of EUR 1 mln

14.216.3

21.8

23.223

32.932.6

1%

-30%

1%

50%34%

15%

28%

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010

PL

N b

n

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Market volume Growth,%

Case Study Sub-Project: Wood Processing Industry

TRANSACTION SUMMARY EXAMPLE: MODERNISATION OF PRODUCT LINE

Investment amount USD 750,000

Period 60 months

Down payment 10%

Monthly leasing rate 59 x USD 12,700

Annual revenue saving USD 240,000

Investment amount USD 450,000

Annual energy saving 200 MWh (20 %)

Annual revenue savings USD 120,000

HIGHLIGHTS

The wood processing and forestry industries typically have considerable energy costs

Energy efficiency investments are cost-saving improving product quality

Experience showed that a significant part of the investment costs can be covered by energy savings

Leasing can assist businesses in creating cash-flow-neutral equipment upgrades

The company installed modern equipment at several stages of the production line to:

increase productivity

save material and

reduce energy consumption

EBRD Leasing Contacts

Name Business Phone Other Contact Details

Noel Edison Director, Insurance and Financials Services

Tel: (+44) 20 7338 6638 Email: edisonn@ebrd.com

PRIMARY CONTACT

Andreea MoraruSenior Banker – FI Leasing Coordinator

Tel: (+44) 20 7338 6718 Email: morarua@ebrd.com

EBRDOne Exchange Square, London. EC2A 2JN, United Kingdom

www.ebrd.com