Until recently, nature protection in Bulgaria has relied predominantly on international donor funding, such as GEF, UNDP, the World Bank, GTZ, SDC and other development organizations. However, with EU accession, a number of new opportunities have emerged, while the “old” sources have started to gradually pull out of the country. This transition to market based mechanisms provides an array of opportunities for the private sector to benefit while protecting nature and biodiversity.
The main institutions financing nature conservation in Bulgaria are the State Enterprise for Environmental Management and the relevant ministries, responsible for absorbing targeted EU funding. The banking sector has only been involved in environmental issues through several projects, such as the energy efficiency credit line, the organic farming credit line guaranteed by SDC (Swiss Development Cooperation), USAID guaranteed micro-crediting scheme.
At the project outset, a banking sector study was conducted with a view of evaluating the financial institutions and frameworks in Bulgaria. This study observed that there is rapid development of the SME sector triggered by positive economic expectations before and after EU accession and increase in foreign investment, leading to banks to compete to attract SMEs as an important set of business customers.
Alongside these observations, some general issues and trends emerge, such as low quality of financial documentation of SMEs, demonstrated by the fact that more than 70% of the SMEs who applied for credits had to be additionally interviewed in order to be approved for credit, and that the quality of the collateral is also a problem for banks and customers. These trends demonstrate clearly the need for technical assistance and the potential direct role of the BTAU in the set up and implementation of the PBB credit scheme.
Bulgaria has experienced a rapid expansion of bank services, an example is the Raiffeisenbank solution branches network, further to this is the centralized decision making – evaluation model, as well as the fact that many banks work with a number of programs for SME development – The Guarantee Fund for micro-credits of the Ministry of Social Affairs, USAID – guarantee schemes, and EBRD – ProCredit Bank.
However, improving business relations between banks and SMEs, banks are mostly interested in the financial returns from their products and do not have specific environmental requirements, besides those which are legally binding. All SMEs are treated the same way by banks irrespective of their sector of operation. When a credit line targets specific effects, such as sustainable use of natural resources - PBBs, a special unit monitoring these results is required, because banks do not have the expertise or vested interest. Most Bulgarian banks do not have a CSR policy, and the few who have undertaken some steps towards CSR have not made it publicly known.
In this financial institutional environment, there is a large role for the BTAU in creating the capacity both at the financial institution level as well as at the level of SMEs, to tackle the development, assessment and monitoring of PBB investment proposals.
In light of the improving banking sector services in Bulgaria, sector targeted funding opportunities from the EU create a favorable competitive environment and a niche for the creation of “pro-biodiversity” credit products. |
