The European Bank for Reconstruction and Development (EBRD) and the European Union (EU) have launched a portfolio risk-sharing facility in Montenegro aimed at expanding financing for micro, small and medium-sized enterprises (MSMEs), as development institutions increase their use of guarantees to mobilize private-sector lending in the Western Balkans.
The facility, launched in Podgorica, is co-funded by the EU through the European Fund for Sustainable Development Plus guarantee programme and will allow local banks to extend new loans to smaller businesses with reduced credit risk exposure.
Under the scheme, the EBRD will provide participating financial institutions with unfunded guarantees covering as much as 50% of the credit risk on eligible MSME loans, according to details released by the institutions.
The mechanism is designed to help banks increase lending to businesses that often face difficulty accessing credit due to limited collateral, shorter operating histories or higher perceived risk profiles.
The EBRD said the instrument has been recognised by the Central Bank of Montenegro as an unfunded credit protection instrument, allowing lenders to obtain regulatory capital relief on the guaranteed portion of the exposure.
The facility will initially be available in Montenegro through Crnogorska komercijalna banka, while similar programmes are being rolled out across other Western Balkan markets.
The programme also targets underserved segments, including women-led and youth-led enterprises, as well as MSMEs operating in rural areas.
Development finance institutions have increasingly used risk-sharing structures and guarantees to mobilize local bank lending without directly deploying large amounts of balance-sheet capital, particularly in emerging markets where smaller businesses remain underserved by commercial banks.
Valentina Di Sebastiano, programme manager at the EU Delegation to Montenegro, said the EU wants to support private-sector development as Montenegro moves toward integration with the EU single market.