European support for SMEs in Estonia and Lithuania

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Additional financial support is being available for micro-enterprises in Estonia and Lithuania that are facing some economic fallout due to present post-pandemic crisis. A new transaction between the European Investment Fund (EIF) and financial intermediary Finora Capital is expected to support at least 100 micro borrowers in these two countries. The long-term working capital loans offered by Finora will be essential in providing liquidity to companies during the post-crisis’ economic recovery in the states.

Intensive support for business in the two Baltic States is backed by the financial instruments under the EU program for Employment and Social Innovation.

For example, €2 million EIF loan will go to Finora Capital to increase micro-lending in Estonia and Lithuania is supported by the EU’s programme for Employment and Social Innovation (EaSI). Under the agreement, Finora expects to serve more than 100 micro-enterprises in the two Baltic States with new, long-term lending under favourable conditions.

The EIF loan will allow Finora Capital, a fully digital, alternative finance providing company, to offer loans and leasing to bigger number of micro-enterprises at more favourable terms than it has been so far.


Official comments

Nicolas Schmit, Commissioner for Jobs and Social Rights underlined that as soon as small businesses in the member states are trying to cope with the fallout of the pandemic, the EU institutions are providing sufficient support for SMEs in order to keep them alive and sustain employment and future jobs. With financial backing from the EU’s Employment and Social Innovation programme, micro-enterprises in Estonia and Lithuania will improve access to loans, while getting an additional boost for businesses to thrive again.

Alain Godard, Chief Executive of the EIF, commented on the deal by stating: “Finora’s focus on SME-financing, and particularly micro-lending, adds an important piece of the puzzle when it comes to access to finance in the Baltics. Micro-enterprises are an important part of the local economy, currently significantly impacted by COVID-related uncertainties, and we’re glad to be partnering with Finora to help them prepare for the return to normal economic circumstances.”

Andrus Alber, the CEO of Finora Capital, said that  smaller credit companies have difficulties to raise financing at reasonable cost of capital as capital markets in the Baltic region are not well developed and banks are often not interested to cooperate with SMEs. That is why the EIF is well positioned to mitigate this market inefficiency with its credit line to Finora.

Note about participating institutions:

= The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized enterprises by helping them to access finance. The EIF’s task is to design and implement venture and growth capital operations, as well as guarantee and microfinance instruments specifically targeting this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

= Finora Capital is an Estonian FSA licensed credit provider. Finora currently provides mortgage-based loans, factoring, working capital loans, leasing and guarantees to SMEs in Estonia and Lithuania.

= The European Union Program for Employment and Social Innovation (“EaSI”) aims at supporting the EU’s objective of high level employment, adequate social protection, fighting against social exclusion and poverty and improving working conditions. The microfinance and social entrepreneurship axis of the EaSI programme provides support to financial intermediaries that offer microloans to entrepreneurs or finance to social enterprises.

The objective is to increase access to microfinance, which includes microcredit i.e. loans of up to € 25,000, in particular for vulnerable persons and micro-enterprises. In addition, for the first time, the EU is supporting social enterprises through investments of up to € 500,000.

The microfinance and social entrepreneurship support is currently being implemented through the EaSI Guarantee, which enables financial intermediaries to reach out to (potential) entrepreneurs that would not have been able to gain finance otherwise due to risk considerations. Social entrepreneurship is also being implemented through two EU’s facilities: a) the EaSI Capacity Building, to reinforce the capacity of financial intermediaries in the areas of microfinance and social finance through equity investments; and b) the EaSI Funded Instrument, which provides senior and subordinated loans to microfinance institutions and social enterprise lenders to boost on-lending to micro-enterprises and social enterprises.

The European Commission has selected the EIF to implement the EaSI financial instruments in the member states.

General source: -6.04.2021

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