The European Commission has invested an additional €40 million into the European Fund for Southeast Europe (EFSE) to help combat the economic effects of the coronavirus pandemic in the Western Balkans and EU Eastern Neighbourhood Region. The capital will be used to bolster the ability of local financial institutions to support micro and small enterprises in overcoming the challenges of the crisis.

The new funding will contribute to providing financial institutions in the EFSE target region with the means to continue serving micro and small enterprises. A significant portion of the sum has been designated explicitly for financing in local currency – providing an extra level of security by safeguarding borrowers from exchange rate risk.

Micro and small enterprises play a significant role in income generation and employment creation in these regions. Yet, most entrepreneurs in the Western Balkans and EU Eastern Neighbourhood have reported severely negative consequences on their businesses from the coronavirus outbreak, including suspension of operations and drastic declines in revenue. According to a study conducted by the EFSE Development Facility, four out of five small businesses have experienced a ‘negative to extremely negative impact’ on their operations, with others reporting temporary layoffs that could become permanent. By providing new and restructured business loans, local financial service providers play a crucial role in keeping these enterprises afloat.