Introduction to Financing Dutch Business in Serbia

Introduction to Financing Dutch Business in Serbia AccraVaticaanstadPortOfSpainHoustonPretoriaFrankfurtMainLaPazBelgradoBoedapestHamburgVancouverDhakaDubaiBangkokAnkaraAlgiersKhartoemDubaiKobgP

2 Contents Introduction 3 1 Multilateral and Bilateral Institutions 4 1.1 European Bank for Reconstruction and Development 5 1.2 European Investment Bank 6 1.3 International Finance Corporation 7 1.4 FMO 8 2 Comparative Overview of Financial Products Offered by Local Commercial Banks 9 3 Serbian State Support 12 3.1 Supporting Employment by the National Employment Agency in Serbia 13 3.2 Serbian Export Credit and Insurance Agency - AOFI 14 4 Annexes 15

3 Introduction Smart business decisions depend on reliable information. But obtaining and processing that information comes at a cost, and is often more difficult when operating, or starting a business in another country. Discovering the best location, learning about local laws and customs, and finding out about available sources of funding are important steps in building your business abroad. Yet you might have limited resources available for the exploration of these important factors. Through our daily work and communication with companies we realize how difficult it can be to obtain and process relevant information on operating in Serbia. We are aware it can be especially challenging to find the optimal way of financing your business. This brochure gives you a brief overview of major financing sources available for Dutch firms operating, or looking to operate, in Serbia, including financial support mechanisms offered by the government of Serbia, especially with regard to export. It points to institutions that offer various types of project or export financing in Serbia. While the brochure naturally cannot provide detailed advice regarding the suitability of individual financing schemes for specific projects, it does offer you some general directions and guidelines for addressing potential partners. We hope that this makes your search for funding shorter, easier, and more efficient. So that you do not miss out on great opportunities to innovate, benefit the community, and grow your business. The brochure is divided in three sections. The first part is primarily focused on financing larger projects. It describes funding via multilateral institutions, including the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the International Finance Corporation (IFC) and the Dutch Development Bank (FMO). All institutions offer a wide range of financial services and products. We made a selection of the most general credit lines, which can serve as navigation points during your search. The second part of the brochure includes a comparative analysis of multi-purpose and working capital loans offered by local commercial banks in Serbia, presented in the form of a table. The third part of the brochure describes state support programs established to foster employment, together with the services offered by the Serbian Agency for Export Credit and Insurance. The annexes include contact details of local commercial banks which can be contacted for further information on how to finance your operations. Laurent Stokvis, Ambassador

4 1 4 Multilateral and Bilateral Institutions Financing larger projects

5 1.1 European Bank for Reconstruction and Development The EBRD is an international financial institution that supports projects from central Europe to central Asia. It provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. The EBRD also works with publicly owned companies. The EBRD uses a broad range of financing instruments, tailored to specific projects. The main instruments are loans, equity investments and guarantees. For more insight in the latter, we advise you to take a look at the EBRD website or contact the EBRD directly. EQUITY FOR LARGE PROJECTS AMOUNT 2 million - 100 million EQUITY FOR SMALL PROJECTS LOANS FOR LARGE PROJECTS 5 million - 250 million LOANS FOR SMALL PROJECTS MATURITY Long term 5-15 years OTHER DETAILS Eligible sectors: Industry, infrastructure and the financial sector Indirect via local commercial banks supported by the EBRD* Grace periods and hedging are possible Indirect via local commercial banks supported by the EBRD* REQUIREMENTS Depend on risks and prospective returns associated with each project. Consistent with EBRD policy - Sponsor - Insurance against normally insurable risks - Secure loan with company assets - Typical project finance covenants * A list of all local commercial banks supported by the EBRD together with the contact details can be found in annex I - Sound business plan - Solid management - Competitive products - Information on owners and partners - Financial history - Security in the form of pledges/ mortgages - Due attention for environmental standards - Equity contribution of around 35% In order to be eligible for either of the above products, your company or enterprise must meet the following criteria - your operations must be located in Serbia, they must not be in defense-related activities, tobacco, substances banned by international law or gambling facilities. Also, they must not relate to subsidies, sponsorship or donations. Spanskih Boraca 3, 6th floor 11070 Novi Beograd +381 11 212 0529 www.ebrd.com

6 1.2 European Investment Bank The EIB, the European Union s bank, is the largest multilateral borrower and lender by volume. It provides finance and expertise for sound and sustainable investment projects which contribute to furthering EU policy objectives. More than 90% of their activity is focused on Europe. The vast majority of EIB financing is through loans, but they also offer guarantees, microfinance and equity investment. Support from the EIB also helps to unlock financing from other sources. The table includes products that might be interesting for you. Yet, for a complete overview we advise you to take a look at their website. LOANS FOR LARGE PROJECTS AMOUNT Minimum 25 million the EIB will cover up to: 30% - 50% of the total investment costs LOANS FOR SMALL PROJECTS ELENA EUROPEAN LOCAL ENERGY ASSISTANCE Up to 90% of the technical support cost MATURITY Long term Long term OTHER DETAILS Eligible sectors: Infrastructure, energy efficiency, renewable energy, transport and urban renovation. Indirect via local commercial banks supported by the EIB* The EIB aims to maximize investment in sustainable energy and covers up to 90% of the technical support cost needed to prepare, implement and finance an investment program. REQUIREMENTS Projects must be economically, financially, technically and environmentally sound. Other requirements depend on the investment type and the security offered by third parties. ELENA can also help attract funding from private banks and other sources, including the EIB.** RSFF RISK SHARING FINANCE FACILITY Maximum 10 billion for projects with a higher than normal risk/ reward profile The Risk Sharing Finance Facility (RSFF) improves access to financing for all types and size of private company and public institution undertaking research, development and innovation (RDI) projects.*** Projects backed so far include clean auto technology, energy efficiency, pharmaceuticals, bio-medical engineering, transport and communication. The project must be technically, economically, financially and environmentally sound. * A list of all local commercial banks supported by the EIB together with the contact details can be found in annex II **Detailed information can be found via the following link: http://www.eib.org/attachments/thematic/elena_en.pdf *** Detailed information can be found via the following link: http://www.eib.org/attachments/rsff_faq_31052007.pdf Project must also be promoted by creditworthy counterparties based in the EU and certain partner countries Vladimira Popovica 38-40 11070 Belgrade +381 11 3121 756 www.eib.org

7 1.3 International Finance Corporation The IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. It operates on a commercial basis: IFC invests solely in for-profit projects in developing countries and charges market rates for its products and services. In Serbia, the IFC focuses predominantly on the development of the financial sector, with a special emphasis on SMEs and energy efficiency lending. Other sectors such as infrastructure, agribusiness, waste management and value-added manufacturing are also priority. A-LOANS - DIRECT LOANS EQUITY FINANCE AMOUNT 1 million - 100 million 5% - 20% of a project s equity The IFC will cover up to: - 25% for greenfield projects - 35% for small projects - 50% for expansion projects MATURITY 7-12 years 8-15 years OTHER DETAILS Eligible: Private sector projects in developing countries REQUIREMENTS Case by case Case by case IFC takes equity stakes in private sector companies, financial institutions and investment funds. In addition to A-loans and Equity Finance, IFC also makes loans to intermediary banks, leasing companies, and other financial institutions for on-lending. The credit lines are often targeted at small and medium enterprises or at specific sectors. For more information on the products and services offered by the IFC we advise you to visit their website or contact the corporation directly. Bulevar Kralja Aleksandra 86 11000 Belgrade + 381 11 3023 750 www.ifc.org

8 1.4 FMO FMO is the Dutch development bank. It finances companies, projects and financial institutions from developing and emerging markets. FMO offers several financing and services products, from loans and credits and guarantees to mixed packages, often in local currencies. In addition, FMO s involvement, reputation and experience often gives incentive for other commercial banks to open up their services, mobilizing substantial long-term capital. AMOUNT DIRECT LOANS up to 25% of a company s balance sheet or up to 25% of the estimated investment costs FOM FONDS OPKOMENDE PRIVATE EQUITY MARKTEN 500.000-10.000.000 MATURITY 3-12 years 3-12 years OTHER DETAILS Grace period: possible Eligible: Companies with a Dutch interest of at least 51% and a turn-over of approximately 15 million. Primary sectors: Agri- and horticulture, transport, logistics, agro-processing and manufacturing. Real estate and the financial sector are excluded REQUIREMENTS Case by case Download document* Case by case * In order to assess whether your company fulfills the necessary requirements download the quick scan document on: www.fmo.nl/fom Direct equity investments in financial institutions or energy companies and projects In accordance with other big development institutions, FMO also offers loans to financial sector institutions for on-lending. Last year, the bank provided a 20 million senior loan to Komercijalna Banka and in 2012, FMO supported Cacanska Banka with 7 million. The loans will support the Serbian banks to further expand their lending activities to small and medium businesses. Anna van Saksenlaan 71 2593 HW The Hague +31 70 314 9696 www.fmo.nl

9 2 10 Comparative Overview of Financial Products Offered by Local Commercial Banks Financing smaller projects

10 2. Comparative Overview of Financial Products Offered by Bank Banca Intesa Komercijalna Banka UniCredit Bank Raiffeisen Bank Societe Generale Hypo Alpe-Adria- Bank Type of Lender Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Type of Product Working Capital Credit Multi Purpose Working Capital Credit Multi Purpose (RSD only) Working Capital Credit Working Capital Credit Loan ammount (minimum) 5.000 depending on creditworthiness and offered security instruments 3.000 500 1.000 Loan Amount (maximum) 150.000 depends on creditworthiness and offered security instruments 200.000 RSD 10.000.000 (EUR 90.000) depends on creditworthiness Loan Term (range in months) Effective Interest Rate (RSD) 12-24 months up to 24 months up to 24 months up to 60 months up to 24 months up to 35 months 20,52% to 21,58% case by case from 19.89% from 23.81% 17% to 22% (IR) Od 6M BELIBOR + 3,8% (IR) Effective Interest Rate (EUR) 12,52% to 13,41% case by case from 13.90% 11.50% to 15.75% (IR) Od 3M EURIBOR + 7,5% (IR) Payment Type monthly monthly monthly monthly, quarterly, half-yearly, annual Allowable Grace Period up to 6 months up to 6 months up to 6 months Other Fees 2% one time fee and 0,3% quarterly 1% to 1.5% of the loan amount from 0,3% Collateral Requirements pledge on movables, co-debtor, bonds of old foreign currency saving, bonds, mortgage case by case case by case pledge on movables, mortgage, authorizations and promissory note indemnity agreement of another legal entity, pledge or mortgage pledge or mortgage Additional Products Available for SMEs revolving credit, short term credit, long term investment credit, long term credit for entrepreneurs, guarantees, letter of credit, overdraft micro business credit, short term credit, working capital credit, revolving credit, investment credit, overdraft, export financing fast business credit (within 24 hours), investment credit, overdraft, guarantees (documentary business), subsidized loans overdraft, (unsecured) working capital loan, short term credit, long term credit, guarantees (documentary products), revolving credit overdraft, express loan, investment loan, subsidized credit for equipment purchase real estate credit, business equipment credit, revolving credit, overdraft Sector Specific Products Agriculture and Energy Efficiency, Real Estate Agriculture and Energy Efficiency Agriculture and Real Estate Energy Efficiency (KfW credit line) Agriculture Bi- and Multilateral Institutions' Credit Lines EFSE, LEDIB (fund for local economic development in the balkans), Italian Government, EFSE, EAR, Italian Government, EBRD, EIB, FMO Italian Government and EIB EIB, KfW

11 Local Commercial Banks Bank Sberbank AIK Banka Alpha Bank Erste Bank ProCredit Bank Pireaus Bank Type of Lender Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Type of Product Working Capital Credit Multi Purpose Working Capital Credit Working Capital Credit (RSD with currency clause) Working Capital Credit Working Capital Credit Loan ammount (minimum) 5.000 10.000 500 50.000 Loan Amount (maximum) up to 10% of the total annual operating income 200.000 100.000 depends on creditworthiness depends on creditworthiness Loan Term (range in months) up to 12 months 18-36 months 6-36 months up to 24 months up to 36 months up to 60 months Effective Interest Rate (RSD) from reference interest rate +7% to +10% (IR is variable) from 16.25% (NIR: 2w repo + 4%) Effective Interest Rate (EUR) from 13.57% 10% - 12% (IR) from 17% (NIR) from 9.91 % from 19.6% (NIR: 3m belibor + 8%) Payment Type monthly or quarterly monthly or quarterly monthly Allowable Grace Period up to 12 months Other Fees 2% one-time fee 1% of lump sum 0.5% to 1% Collateral Requirements bill of exchange, guarantee of a legal entity and/or natural person, mortgage pawns, mortgages, warranties and other types of guarantees promissory notes with a no protest clause and authorisation, promissory notes of owners and founders, contractual authorisations promissory notes, mortgage on registered residential or business real estate or real estate under construction, guaranty of individual or legal entity, deposit Additional Products Available for SMEs real estate credit, car and equipment credit, revolving credit, refinancing credit, overdraft export financing credit overdraft, bills of exchange, revolving credit, business equipment credit, real estate credit, guarantees and letters of credit, fixed assets and investment credit short term credit, liquidity credit, working capital credit, export operations credit, revolving credit, refinancing credit, longterm credit, investment credit, non-current working assets credit, letter of credit, guarantees, overdraft investment credit, refinancing credit, liquidity and current assets credit, commercial and passenger vehicles, revolving credit, overdraft, documentary products general purposes credit, investment credit, revolving credit, long term investment credit, long term real estate credit, overdraft, letter of credit Sector Specific Products Energy Efficiency Energy Efficiency and Agriculture Bi- and Multilateral Institutions' Credit Lines EIB EIB

12 3 10 Serbian State Support Supporting Employment by the National Employment Agency and Export Financing and Insurance

13 3.1 Supporting Employment by the National Employment Agency in Serbia The National Employment Agency of the Republic of Serbia offers attractive advantages for companies providing employment to a particular group of people. The Serbian law on social insurance states that an employer who employs a person, who belongs to a specific unemployment-category, for an indefinite period of time, has the right on exemption from paying obligatory social insurances which are at the expense of the employer. UNEMPLOYMENT CATEGORY Persons older than 50 years Persons older than 45 but younger than 50 years Trainees Persons younger than 30 years Persons with disabilities REQUIREMENTS TO BE MET BY THE EMPLOYEE Employee must be older than 50 years on the date of concluding the employment agreement. - Employee must be older than 45 years on the date of concluding the employment agreement. - Employee is a past user of financial compensation by the National Employment Agency (NEA) during the period of unemployment or registered as an unemployed person at the NEA for a consecutive period of at least 6 months. - Person has the status of trainee according to the labor law of the Republic of Serbia - Person is younger than 30 years - Person is registered as an unemployed person at the NEA Employee is registered as an unemployed person at the NEA for a consecutive period of at least 3 months. Employee must have a medical record DURATION OF THE EXEMPTION RIGHTS FOR EMPLOYER CONTRIBUTIONS BY EMPLOYER OBLIGATION TO KEEP THE EMPLOYEE EMPLOYED AFTER EXPIRATION OF THE INCENTIVE 100% exemption for 2 years At least 3 years of employment 80% exemption for 2 years At least 3 years of employment 100% exemption for 3 years At least 3 years of employment 100% exemption for 2 years At least 2 years of employment 100% exemption for 3 years No obligation In 2013, the National Employment Agency also offered additional financial support for companies employing people from vulnerable, underdeveloped regions. The support per employee ranged from 1000 to 4000. However, it is still not clear whether this type of financial support will be available in 2014 and future years. We advise you to contact the National Employment Agency of the Republic of Serbia for more information. Kralja Milutina 8 11000 Belgrade +381 11 29 29 800 www.nsz.gov.rs

14 3.2 Serbian Export Credit and Insurance Agency - AOFI AOFI, the Serbian Export Credit and Insurance Agency, was established in July 2005 and is the official export credit agency of the Republic of Serbia. The agency is 100% owned by the state. Although AOFI is a relatively young institution, during the past nine years it has become an important determinant of Serbian economic growth and internationalization of its companies. Being focused on stimulating and supporting exports, developing economic relations with international business entities and reducing the overall risks arising from international trade, AOFI s main objective is the strategic improvement of the business environment for Serbian exporters by means of providing a wide range of export credit insurance and financing products and services. The scope of AOFI activities comprises of the following short term export credit insurance and export credit financing. For a detailed overview of the products terms and conditions we advise you to contact AOFI directly or visit their website. PRODUCT DESCRIPTION BASIC CONDITIONS TO BE MET SHORT-TERM EXPORT CREDIT INSURANCE Insures against short term commercial risks towards foreign buyers for delivered goods or rendered services. FACTORING Implies the repurchase of the exporters receivables to domestic and foreign debtors by means of which the exporter surpasses current liquidity issues. SHORT-TERM EXPORT CREDIT FINANCING Implies financing of working capital based on a concluded export contract, with a simple approval procedure and under favorable interest rates. GUARANTEE ISSUANCE Through which a buyer requests a mode of insurance which will cover the exporter s business performance. - The client or adherent must be an exporter. - There must be a solid contract between the adherent and its debtor/buyer for invoiced and delivered goods. - The client must have positive net results. Reducing the foreign trade deficit of the Republic of Serbia, thus the increase in export revenues, is only possible through a significant increase in exports. Therefore, encouraging export activities is a strategic interest of the Republic of Serbia in which AOFI is working intensively. Headquarter Office Nikole Pasic Street 30 31000 Uzice +381 31 521 561 www.aofi.rs Branch Office Bulevar Zorana Djindjica 121 11070 Belgrade +381 11 2205 750 www.aofi.rs

15 4 Annex

16 ANNEX I Local commercial banks supported by the EBRD* BANK HEAD OFFICE CONTACT DETAILS Čačanska Banka Pivarska 1 32000 Čačak +381 32 302 100 +381 32 302 200 +381 30 302 203 Opportunity Bank Serbia Bulevar Oslobodjenja 2a 21000 Novi Sad +381 21 530 111 +381 21 530 024 ProCredit Bank Milutina Milankovica 17 11070 Novi Beograd +381 11 2077 906 Societe Generale Bulevar Zorana Dindica 50a/b 11070 Novi Beograd +381 11 3011 555 UniCredit Bank Rajiceva 27-29 11000 Belgrade +381 11 3777 888 CUSTOMER CONTACT WEBPAGE SECTOR SPECIFIC PRODUCTS MSME lending department +381 32 302 153 nikola.ranitovic@cacanskabanka. co.rs Business lending +381 21 4893122 nrakocevic@obs.rs Agro rural lending +381 11 6557 997 oadamovic@obs.rs Small Business +381 11 2057 000 small.business@procreditbank.rs MSME lending +381 11 3011 400 privreda.sgs@socgen.com Mid-Market Customers Unit +381 11 3204 575 milos.bojanic@unicreditgroup.rs www.cacanskabanka.rs www.obs.rs www.procreditbank.rs www.societegenerale.rs www.unicreditbank.rs Energy Efficiency Reusable Energy Agriculture Energy Efficiency Agriculture Agriculture Real Estate * The information is retrieved from: http://www.ebrd.com/downloads/funding/micro-small-medium.pdf

17 ANNEX II Local commercial banks supported by the EIB* BANK HEAD OFFICE CONTACT DETAILS Raiffeisenbank Djorda Stanojevica 16 11070 Novi Beograd +381 11 3202 100 Banca Intesa KBC Banka Milentija Popovica 7b 11070 Novi Beograd +381 11 3108 888 Omladinskih Brigada 90v 11070 Novi Beograd +381 11 4409 667 ProCredit Bank Milutina Milankovica 17 11070 Novi Beograd +381 11 2077 906 Erste Bank Milutina Milankovica 11b 11070 Novi Beograd +381 60 7979 000 Credit Agricole Brace Ribnikara 4-6 21000 Novi Sad CUSTOMER CONTACT WEBPAGE SECTOR SPECIFIC PRODUCTS Mrs. Ljiljana Turopoljac www.raiffeisenbank.rs Financial Institution Correspondence Department +381 11 2207 161 ljiljana.turopoljac@raiffeisenbank. rs Mrs. Jasmina Jankovic Relationship Manager Financial Institutions +381 11 201 1401 jasmina.jankovic@bancaintesa.rs Mrs. Lidija Vladisavljevic Executive Director for Credit and Risk Management +381 11 3050 384 lidija.vladisavljevic@kbcbanka.rs Mrs. Jelena Grbic Controlling Department +381 11 2077 906 j.grbic@procreditbank.rs Mrs. Dijana Jankovic-Jasic Head of ALM Department +381 11 2015 083 dijana.jankovic-jasic@erstebank.rs Mr. Zeljko Obradovic Chief Financial Officer +381 21 4876 834 zeljko.obradovic@creditagricole.rs www.bancaintesa.rs www.kbcbanka.rs www.procreditbank.rs www.erstebank.rs www.creditagricole.rs Agriculture Energy Efficiency Real Estate Energy Efficiency Agriculture Agriculture * The information is retrieved from: http://www.eib.org/attachments/lending/inter_rs.pdf

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19 Disclaimer This publication has been prepared solely for informational purposes. While the Embassy of the Kingdom of the Netherlands has endeavored to ensure the accuracy of the information, it does not guarantee or give any warranty as to the accuracy, timeliness or completeness of any information or material in this publication. We accept no liability for its content, or for the consequences of any actions taken on the basis of the information provided. All information expressed herein is current as of publication date and subject to change without notice. Front page photo: Marc Heeman / Rotterdam Image Bank Page 2 photo: Totenmetontwerpen / Rotterdam Image Bank Page 18 photo: Energising the Future Last page photo: B en U, Diemen If necessary, the Communications department of the Ministry of Foreign Affairs may be contacted regarding information about the copyright holder: com@minbuza.nl

Embassy of the Kingdom of the Netherlands Simina 29 11000 Belgrade T +381 (0)11 20 23 900 F +381 (0)11 20 23 999 bel@minbuza.nl www.nlembassy.rs January 2014 cravaticaanstadportofspainhoustonpretoriafrankfurtmainlapazbelgradoboedapesthamburgvancouverdhakadubaibangkokankaraalgierskhartoemdubaikobgista