The new economic environment that is taking shape is characterized by the need to transform the economic model, emphasizing the sustainable development of businesses and society, addressing the challenges of climate change as well as the energy transition and digital transformation. The governments of all countries have oriented their industrial strategies, as critical parameters of their development policy, to achieve this transformation of the economic model.
The operating status of development banks allows them to make available resources on more favorable terms in terms of financing costs and repayment time than commercial or investment banks. At the same time, they are willing to take on a higher level of risk for sustainable and innovative projects than commercial or investment banks.
At the domestic level, our economy is emerging from a long period of crisis, with the Greek banking system, thanks to the development policy of the government of Kyriakos Mitsotakis and the reforms he implemented, including the radical reduction of the volume of non-performing loans through the of the “Hercules” plan, but also the recent acquisition of investment grade, to be on an upward trajectory. The challenges of transforming the country’s economic model, however, remain strong and necessary. The financing of sustainable infrastructure projects, the limited access of SMEs to sources of financing, the need for an energy transition of the economy are some of the challenges that need to be addressed.
The Hellenic Development Bank is the development bank of our country. The EBA, as a development bank, provides long-term financing (e.g. 10-year repayment loans with a 36-month grace period), facilitating the implementation of projects that have sufficient maturity time, such as infrastructure projects and innovation projects.
It shares the risks undertaken in cooperation with the private sector, thus making projects more attractive to private investors. This is done by providing loan guarantees of up to 80% but also by co-financing loans. With this equal sharing of risks, it becomes possible to finance projects that would otherwise not be possible. With the support of the EBA, financing costs for businesses are reduced, especially in times of rising inflation and rising interest rates. Indicatively, in September, financing rates through the EBA reached 3.68% compared to market rates that reached 7.14%.
It is a mechanism for leveraging public resources and attracting private ones, making use of its financial tools, as for every 1 euro of public resources available to the EBA, 3 euros in total are available on the market.
It maximizes synergies with the domestic credit system of commercial banks and other financial institutions, in order to have an optimal and, above all, inclusive allocation of resources, also improving the conditions of competition. At the same time, it maintains excellent relations with European financial organizations, such as the European Investment Bank (EIB), for the provision of new financial tools to the Greek market. A recent example is the EUR 400 million collaboration with NBG, based on which three new programs for SMEs were created, the “Business Liquidity Loans”, the “Green Co-financed Loans”, the “Digital Upgrade Loans”, which will make available a total of over 2 billion euros in new loans. The first tranche of 1.3 billion euros for SME loans is already available, with a significant response from businesses.
Proof of the activity and the impact that the Hellenic Development Bank has had in the last four years is that to date it has financed more than 45,000 new loans to businesses, with their amount amounting to 9.4 billion euros. He strongly supported the revival of the social housing policy in the country, by taking over the management of DYPA’s “My Home” program, with approximately 9,500 loans worth 1 billion euros. Particular emphasis has been placed on supporting very small businesses as 75% of these financings are addressed to businesses with up to 10 employees and 81% to businesses with a turnover of up to 2 million euros. It is this category of businesses that faces the most significant difficulties in accessing funding sources. Finally, the impact of the activity on employment and on the contribution to the GDP is also important, as more than 306,000 jobs were supported through the financing, while there was also an additional contribution to the country’s GDP of 7.7 billion euros.
The EBA is ready to play a leading role in the implementation of the government’s ambitious development policy through innovative financing tools.
George Zavvos is the president and CEO of the Hellenic Development Bank