NIB lending to SMEs to boost productivity and competitiveness

Small and medium-sized enterprises are very significant to the economy of the Nordic-Baltic region. They employ two thirds of all employees in the region and contribute a similar share of the added value produced. NIB President & CEO, Henrik Normann, says that this is precisely why lending to SMEs should be a priority for the Bank.

“Since productivity growth largely depends on the availability of financing for investments, we hope that the NIB’s offering to SMEs will continue to boost their productivity and increase the competitiveness of the economy,” says NIB President & CEO, Henrik Normann.

Enterprises considered to be SMEs, in accordance with an EU definition, employ fewer than 250 persons with annual turnover below EUR 50 million or an annual balance sheet less than EUR 43 million. On average, SMEs numerically by this definition accounts for 99% of all enterprises in the Nordic-Baltic region.

In 2013, NIB’s total lending to SMEs represented EUR 230 million, which is by 16% more than in the previous year.

NIB’s loan offering for onlending to SMEs includes environmental and renewable energy projects, investments in new machinery, production or service provision facilities and investments in ICT and R&D.

Senior Economist Ville Mälkönen at NIB says the Bank chose these investment types due to their positive impact on productivity.

“We know that investments in tangible capital, ICT infrastructure and programmes, research and development can be significant sources of increased productivity,” says Mälkönen.

NIB lends to SMEs via local commercial banks. NIB’s top credit rating gives the possibility to provide favourable terms to NIB’s banking partners, which in turn are passed on to SMEs.

It is also important that loan allocations through the partner banks to particular SME projects are evaluated according to NIB’s requirements. NIB has, therefore, developed a set of requirements for financial intermediary projects located in the Nordic-Baltic region. The partner banks allocate the funds themselves and report to NIB on how much they have extended to different types of projects.

“NIB would not have been able to make these loans if we had not broadened the scope of the loan offering,” says Mr Mälkönen.

NIB is constantly looking to develop its partnerships with financial institutions in order to help meet the funding needs of the region’s small and medium sized companies. A number of loan facilities have recently been placed with Sparbanken Öresund and Sparbanken Nord in Sweden, Säästöpankki Optia and Liedon Säästöpankki in Finland, SG Finans in Norway and Ringkjøbing Landbobank in Denmark and some other local banks.

Senior Manager Marjo Harri, heading NIB’s lending to financial institutions and SMEs, says NIB’s focus is to meet the SME sector’s need for long-term financing.

“We have identified a number of interesting financial institutions and are currently evaluating them for their existing SME portfolios and future plans. Other than that it is of course important that we share the same views on loan terms, credit quality, covenants and pricing,” says Ms Harri.

See also:

Researcher: Well-being of SMEs key for Nordic Baltic competitiveness