Bulgarian Development Bank has put up 230 million leva to 12 banks for loans to small and medium enterprises (SMEs), while in less than a month, 43 million leva worth of projects had been fulfilled, the Cabinet press office said on February 9.

The announcement came as the Government continues to appear to be attempting to portray Bulgarian Development Bank as a major symbol of its steps against the economic crisis.

Prime Minister Sergei Stanishev, in a statement after meeting Finance Minister Plamen Oresharski, Bulgarian Development Bank executive director Dimitar Dimitrov and Chairperson of the Association of Banks in Bulgaria Violina Marinova, said that the Bulgarian Government had sufficient financial resources, and the fiscal reserve built up in the past few years would be used to consolidate the economy in the face of the financial crisis.

The Cabinet said that Bulgarian Development Bank had so far arranged 230 million leva in credit lines to small and medium-sized businesses as part of a total support package of 500 million leva.

Twelve commercial banks will make the money available in medium- and long-term investment loans and pre-export loans and for projects approved for financing from European Union Structural Funds.

Dimitrov said that 43 million leva had already reached beneficiaries. It was expected that the full 500 million leva would be made available to beneficiaries by the end of March, he said.

SMEs will be loan-financed by up to two million leva at an interest of eight per cent and with up to 0.7 per cent charges and commissions a year. The loans will be for up to 10 years with a three-year grace period.

Regarding the Joint European Resources for Micro to Medium Enterprises Initiative (JEREMIE), Bulgarian Development Bank and the European Investment Fund are to set up a special-purpose joint venture with capital of 200 million leva. The company will develop financial products for commercial banks in Bulgaria.

This programme will make it possible to extend the period for absorption of the resources for small and medium-sized enterprises from EU Structural Funds from two to seven years, the Cabinet media statement said.

Farmers will be handed about 100 million leva of Bulgarian Development Bank’s total resources, but more cash may be made available if needed.
The resources will soothe farmers’ pain from the strained credit conditions that have left them short of operating cash, national grain producer’ association chairperson Radoslav Hristov said.

On February 10, Dnevnik reported that Bulgarian Development Bank may place bond issues with pension funds and spend proceeds on infrastructure, energy, renewables and other investments, under a new Government project.

The measure will aim to provide a further cushion against the global economic crisis, which is squeezing bank funding. In addition, it will expand pension insurers’ investment options at home.

The first bond, of about 100 million leva, could be placed within a few months, Bulgarian Development Bank executive director Angel Gekov said. Talks had already been held with the pension fund asociation.

Pension insurers, in turn, have discussed with the Financial Supervision Commission possible amendments to the social security code to allow for the funding option, association chairperson Nikola Arabadjiev told Dnevnik.

Pension funds will be able to invest 10 to 20 per cent of their assets in corporate bonds issued by banks with more than 50 per cent state interest, both Bulgarian and EU-registered, Arabadjiev said.

Whatever benefits there may be from the Bulgarian Development Bank initiatives, it became clear that lending activity was shrinking significantly.
January 2009 data compiled by the moitepari.bg site, which compares loan and other banking products, showed that Bulgarian banks had further toughened up household loan criteria and put up fees and interest rates.

Dnevnik, in its report on the moitepari.bg figures, said that the latest round of restrictions saw new consumer loan terms from Municipal Bank, Emporiki Bank, Société Générale Expressbank, Alpha Bank, DSK Bank, Piraeus Bank, Central Cooperative Bank (CCB) and UniCredit Bulbank.
While Alpha Bank chopped rates, all others added between 0.5 and 2.9 percentage points.
All banks launched higher loan application and one-off absorption tariffs.

In the mortgage segment, there were rate hikes at Société Générale Expressbank, UniCredit Bulbank, Piraeus Bank, DSK Bank, Municipal Bank, ProCredit Bank, Emporiki Bank and Alpha Bank. Mortgages now come with higher annual service, administration and rework fees.
Lenders also slashed mortgage sizes to 85 to 70 per cent of the cost of the property, and now offer funding for 60 to 50 per cent of the price of prefab concrete flats.
Mortgage repayment periods were cut further, with Piraeus Bank launching a reduction of 35 to 25 years.

However, financial advisors Fincity said consumer loans demand had surged 15 per cent in January from the previous month, and interest in mortgages was also intensifying.
Credit consultants Credit Center reported the average mortgage has shrunk to 34 207 euro from more than 50 000 euro in the previous months.
At the same time, Bulgarian banks extended ongoing term deposit promotions, moitepari.bg said, explaining that the high return offered for deposits of one, three and six months points to bank’s short-term thirst for liquidity.

Dnevnik said that last year the credit market slowed growth pace to an annual 32 per cent from 60 per cent a year earlier and is expected to pick up five to 15 per cent in 2009.
Bulgarian National Bank data showed that in the final quarter of 2008, Bulgarian banks gave out almost five times fewer corporate loans in the final quarter of 2008 in comparison with the three months before.

Firms took 2287 loans worth 440.6 million leva in the period, down from 9259 of 2.095 billion leva in the previous quarter.
The biggest victims of the slump were firms in property and business servics – down 99 per cent, trade and renovation down 89 per cent, and construction down 88 per cent.