The big potential of small business
Micro, small and medium-sized enterprises (MSMEs) represent around 99% of all enterprises in the EU and over 95% in OECD countries. While a lack of access to finance remains their greatest impediment to growth, the CEB continues to support these vital enterprises.
Putting MSMEs in perspectiveRecent Eurostat statistics reveal that MSMEs provided employment to more than 90 million, or two-thirds of the active working population in the EU, demonstrating that MSMEs play an essential role in job creation and employment, and significantly contribute to countries’ GDPs. The same goes for the non-EU member countries of the Bank. In short, MSMEs are important drivers of economic growth. Yet, crucially, they lack access to finance.
To remain competitive in today’s business environment, MSMEs need to be continuously engaged in new technology investment, process optimisation and innovation. These areas require stable longer term finance that, often, is not supported by local financial intermediaries. Development finance institutions therefore have a key role to play.
A vital supportJob creation and preservation is one of the CEB’s main sectoral lines of action and a priority in the current economic context in Europe. Recognising the potential of MSMEs as drivers of economic growth, net employment generators, and promoters of social cohesion, the CEB is responding to their limited access to finance by providing them with medium- and long-term financing.
While the CEB has invested in MSMEs since the 1970s, its support has intensified in the aftermath of the economic crisis in Europe.
Under the 2014-2016 Development Plan the CEB invested €2.3 billion in the MSME sector, which amount to almost a third of its portfolio. Plus, in 2016 alone, it approved €1.18 billion for MSME financing – a third of all loans approved. This resonates with wider European efforts to boost economic growth in Europe, such as the ‘Investment Plan for Europe’ (also known as the ‘Juncker Plan’).
The CEB is increasingly supporting state-owned banks that finance MSME activity. Between 2014-2016 this kind of financing represented 13% of all MSME loans.
As a social development bank, the CEB supports financial inclusion. In doing so, the CEB aims not only to reach a broad spectrum of MSMEs, whose access to credit is constrained, but also target whenever possible the smaller segment of the sector. Furthermore, the CEB funds microcredit providers that help the most disadvantaged to be financially independent and have a transformational impact on people’s lives.
The CEB’s financing of the MSME sector consists of multiple operations across Europe, further proof of the Bank’s ability to respond to needs wherever they arise. CEB funds are primarily used to finance productive investment projects for the acquisition of machinery, equipment, vehicles, office and manufacturing premises, and production installations.