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EBRD and EU foster small business growth in Central Asia
Kyrgyzstan | business | 14:22, 02 August 2017 | 1316

AKIPRESS.COM - Central Asia has been on the trading route between East and West for centuries. But small and medium-sized enterprises (SMEs) have only slowly developed in the region. Yet they are a vital engine to spur sustainable economic growth in the Kyrgyz Republic, Tajikistan and Turkmenistan, the EBRD reported.

One reason for this is that they often find it challenging to access the finance necessary to grow. That is why the EBRD offers a financing package of more than €42 million in loans to SMEs for this market segment in these countries.

These loans are backed by more than €11.2 million in funds by the European Union (EU) to provide direct support to SMEs through risk-sharing and technical assistance.

Many companies have already benefitted from this support.

In Khujand, Tajikistan’s second largest city, wood processing company Fortuna is one of them. The demand for timber products has risen in the country over the last few years – a typical phenomenon in many emerging economies where the population is interested in good quality furniture products.

Fortuna therefore decided to take the next step and grow its activities from local to larger scale industrial production. With a US$900,000 loan, the company invested in automated wood processing equipment, such as automated sawing and splicing machines, calibrating machines, a matching centre with computerised numerical control and a wood drying chamber.

“This investment was a crucial step for us that led to a 25 per cent increase in our turn-over of locally produced timber products,” said Dado Ochilov, Fortuna’s owner.

“Our company now offers a full range of different products: standard and custom-made doors, wooden window frames, parquets and moulding products. Each year, we manufacture more than 500 cubic meters of finished goods. ”

Entrepreneurs around the region have taken the plunge of expanding their activities. In Turkmenistan, local brewer Yager has benefitted from an increasing demand for its beer – so much so that the company brought a former brewery back into action in the capital Ashgabat.

Furthermore, it had to increase production in its main plant in the country’s second largest city, Turkmenabad.

“The initial plan for buying the old brewery was to use it as a warehouse, but we soon realised that it served its initial purpose much better,” said the owner, Abray Allaberdiyev.

“It was an excellent opportunity to grow our market share and expand our offer more extensively to our capital city, but we needed to invest first to seize it.”

Over the last three years the EBRD has supported Yager’s ambitions with several loans. It helped the company to boost production by 50 per cent at its main site and to purchase distribution vans, fridges and equipment for its new brewery in Ashgabat.

Yager invested not only in its own but in the planet’s future, by procuring a CO2 recovery system. This will help to recover all CO2 generated in the fermentation and heating process and reuse it for the beer production.

Central Asia has been on the trading route between East and West for centuries. But small and medium-sized enterprises (SMEs) have only slowly developed in the region. Yet they are a vital engine to spur sustainable economic growth in the Kyrgyz Republic, Tajikistan and Turkmenistan.

One reason for this is that they often find it challenging to access the finance necessary to grow. That is why the EBRD offers a financing package of more than €42 million in loans to SMEs for this market segment in these countries.

These loans are backed by more than €11.2 million in funds by the European Union (EU) to provide direct support to SMEs through risk-sharing and technical assistance.

Across the Central Asian steppe and mountain ranges – a similar company faces different challenges in the Kyrgyz Republic. An EBRD loan helped local drinks producer Bear Beer to successfully expand its offer, which includes the popular brands Ala-Archa water and the newly introduced Bomond beer.

However, Bear Beer’s success only partially insulated it from the effects of the economic slowdown and currency depreciations in Central Asia. The cost of debt rose sharply for firms and households that had borrowed in foreign currency but received their revenue in local currency.

This is part of the broader problem that affordable local currency funding is rarely available in the region. The EBRD’s SME Local Currency Programme is tackling it by developing local currency and local capital markets in general, but also by exploring new ways to support its existing clients in challenging economic times.

The programme is supported by the Early Transition Countries Fund*, the US Treasury, Switzerland and Japan.

For Bear Beer this meant that the company was able to convert the existing loan, provided in hard currency, into local currency som.

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