OREANDA-NEWS. December 07, 2010. The EBRD signed a five-year loan agreement with Open Joint Stock Company MDM Bank under which it will provide USD 100 million to finance the small business lending programme of Russia’s third largest private bank. MDM Bank will on-lend the funds to small business clients in roubles, reported the press-centre of EBRD.

This is the second EBRD loan in a week ear-marked for on-lending to a vital sector of the economy particularly hard hit by the 2008 crisis which left Russia’s small businesses largely cut off from traditional bank lending for over 18 months. Although such lending resumed late in 2009, volumes still remain far below pre-crisis levels.

Today’s five-year loan to MDM Bank will help it meet the anticipated increase in demand from the small business sector for long-term capital.

“This loan deepens our strategic relationship with MDM Bank and is particularly important because it provides funding for a grassroots sector of the economy at a time when Russian banks in general still face an acute shortage of long-term debt financing,” said Nick Tesseyman, the EBRD’s Managing Director for Financial Institutions.

MDM Bank has the country’s sixth largest regional network and its 370 branches will enable the EBRD’s funding to reach small businesses deep in Russia’s regions. At least 70 percent of the loan amount is scheduled to be on-lent to borrowers outside Moscow. MDM Bank is at present the eighth biggest lender to Russia’s small businesses.

The EBRD is a minority shareholder in MDM Bank with an equity stake amounting to 5.2 percent of ordinary voting shares.

MDM Bank, Russia’s 13th largest bank as measured in terms of assets, was founded in 1993 and began its relationship with the EBRD in 2007 when the Bank raised USD 300 million for it through a syndicated loan. Its current structure is the result of a 2009 merger with URSA Bank, in which the EBRD held a minority equity stake.   

Last week, the EBRD advanced a three-year loan of USD 65 million, also targeted at small businesses, to Bank St. Petersburg, the largest private bank in Russia’s North-West.