The CEB and central credit unions join forces to support Lithuanian MSMEs

MSMEs are essential to Lithuania’s economy. They employ over 75 per cent of the workforce and generate 59 per cent of the domestic export of goods. However, these MSMEs, like others across the EU, were disproportionately affected by the COVID-19 pandemic and generally experience huge challenges when accessing finance, which severely impacts their ability to grow. In fact, Lithuania stands below the EU average on MSMEs’ access to finance.  

A key feature of the Lithuanian banking system is that it is predominantly dominated by subsidiaries of large Scandinavian banks, which have tightened financing conditions in the last few years. This makes it difficult for MSMEs to access finance from the traditional commercial banks.

A positive development

However, credit unions have emerged as a new actor in Lithuania’s financial landscape. They operate as not-for-profit financial cooperatives with the primary aim of serving their members. They enable low-income people to access finance and trading platforms by pooling their resources – a factor that’s vital in the many rural areas of Lithuania.  

Working with central credit unions is a new departure for the CEB but in Lithuania, where credit unions are providing an alternative source of funding to the country’s MSMEs, the Bank’s involvement may have a significant impact on the growth of this business sector. As a result, in the space of just 13 months, the CEB has approved programme loans worth a total of €6 million for two Lithuanian central credit unions, the Lithuanian Central Credit Union (LCCU) and the United Central Credit Union (KREDA).  

Merve Akinci, Technical Advisor at the CEB, says, “Lithuanian credit unions provide their members with a wide range of financial services, serving in particular local businesses and individuals. They play an important role in territorial development. The sector comprises 60 credit unions, out of which 56 are united under the LCCU and KREDA.  

The CEB loans will support business lending activities across Lithuania, where large regional disparities prevail. 

The majority of CEB loan beneficiaries are expected to be micro-enterprises, including start-ups, women entrepreneurs and smallholders in remote areas who have limited or no access to finance.”   

The LCCU and KREDA

The LCCU is the first central credit union that was established in Lithuania and received its license from the Bank of Lithuania at the end of 2002. Today it offers a range of financial and business services to 45 member credit unions. In September 2021, the CEB approved a €4 million programme loan to the LCCU. The loan will enable the LCCU to provide financing for MSMEs, contributing to the creation and development of income generating activities, self-employment and other job opportunities.  

KREDA is the second central credit union in Lithuania and was established in 2017. In March 2022, the CEB approved a €2 million programme loan to KREDA with the objective of contributing to and further expanding KREDA’s support to Lithuanian MSMEs. Both CEB loans are covered by CEB’s Social Dividend Account financial guarantee.  

Commenting on the CEB loans, Diana Bertjē, Country Manager for Lithuania at the CEB, says, “MSMEs in Lithuania are essential for the economy, and central credit unions play an important role in Lithuania in promoting regional economic development. They provide targeted support to MSMEs which have limited access to finance and other financial services.  

“These loans are also relevant in a post-COVID-19 context and the recovery process and the ongoing challenging economic circumstances. 

I believe there’s a strong potential for replicating programmes like this throughout the Baltic region.”

Supporting children with disabilities

Mindaugas Vijūnas, Chief Executive Officer and Chairman of the Board of the LCCU, says that empowering the MSME sector in Lithuania is a priority area for the LCCU.

 “Access to additional finance, especially in these difficult times for everyone, is critical for small businesses to start up or continue their operations as well as to create and maintain jobs. 

I am pleased that the share of socially responsible business projects funded by our credit unions is increasing significantly year after year.

 “LKU Credit Unions Group [one of the credit unions within the LCCU] has become a financial partner of the Child Development Clinic which started operating in Kaunas this year.

 “Until now, children with disabilities have not been able to receive the treatment they need in Lithuania, yet rehabilitation abroad is costly and difficult to access for many. Thanks to our collaborative efforts, today children can attend the Child Development Clinic in Kaunas and receive innovative rehabilitation services that meet the highest standards, closer to home.”

Listening to small businesses

Jolita Česonienė, Chief Executive Officer of KREDA explains how KREDA works with MSMEs.  

“As a group, we feel the growing need for MSME financing and understand the challenges local businesses face, both after the pandemic and now during the ongoing war in Ukraine. 

“We talk to each MSME representative individually, and our advantage over a bank is our analysis of each situation and the exceptional attention we pay to each business. We evaluate its financial reports and learn about the business’s plans and ambitions. 

We’re particularly proud that this year 40.8% of business enterprises financed by the KREDA group are led by women. 

We believe that the involvement in business of the whole of society is obligatory.”  

Edita Kerbedienė, manager and owner of JSC “Interjero virtuvė” has been running her business for seven years. With financing support from KREDA, she has been able to employ another person and buy premises that she plans to transform into a demonstration/exhibition space. “I made the decision to take a loan from KREDA because banks didn’t trust my business idea,” says Edita. “I’m very grateful to the KREDA managers. They made the process easy and listened to all my financial needs. Now I can expand my business and do what I know best.”