Distinguishing from lenders such as the World Bank, The European Bank for Reconstruction and Development (EBRD) is a development bank that explicitly supports pro-democracy and open economies mandate. Established in April 1991, the EBRD emerged in the post-Cold War era with a mission to facilitate the transition towards open-market-oriented economies in Central and Eastern Europe.
The EBRD upholds the core values of multiparty democracy and pluralism, transition, environmental and social sustainability, gender equality, integrity and compliance in their operations. The Bank actively engages in crucial areas such as banking system reform, the liberalisation of prices, privatisation, and the creation of a proper legal framework for property rights. These policies foster a more cohesive business environment to incentivise foreign businesses, encouraging sustainable economic development.
Good reputations in the 90s have improved the EBRD, allowing the Bank to expand its scope to new countries such as Mongolia (2006), Türkiye (2009), Egypt, Jordan, Morocco, Tunisia and Kosovo (in 2012), Cyprus (2014), Greece (2015) and Lebanon (2017). Since then, the EBRD has invested over €190 billion in more than 6,800 projects across three continents in 35 countries.
The EBRD is not a retail bank; they do not offer commercial products such as mortgages and bank accounts; instead, they offer financial products tailored to each client. The EBRD supports clients from a range of scales, from SMEs to large local businesses in the country. However, companies must meet the minimum requirement to bring positive community impacts to be eligible for the EBRD's funding. Defence-related, tobacco, substances banned by international law and gambling facilities are all out of EBRD's consideration. To support the growth of businesses, the EBRD provides a range of services such as loans and equity investment and guarantees to promote trade by offering the Trade Facilitation Programme (TFP). The TFP provides guarantees to international commercial banks, thereby covering the political and commercial payment risk of transactions undertaken by partner banks in the EBRD regions. Such a programme is deemed valid to encourage Foreign Direct Investment by mitigating the costs of other banks.
Over the years, the EBRD has promoted economic growth by supporting local businesses on different continents. These included infrastructure projects to enhance economic competitiveness, transforming Chornobyl to secure and improve the world's worst nuclear accident site, and responding to refugee crises in Jordan and Türkiye.
Despite these initiatives, there are some criticisms about the EBRD. Thomas Wieser, former EU official, argues that the EBRD has been doing business with manifestly undemocratic governments for the last 10 or 15 years despite upholding the pro-democracy principle in their mandate. Furthermore, organisations such as Bankwatch have observed that loopholes exist in the project-screening system, well-developed and yet ineffective, allowing for projects to inflict harm on local communities and individuals.
Despite facing criticism, the Bank's commitment to fostering economic transition, supporting local businesses, and addressing global challenges remains unwavering. The EBRD continues to evolve, adapt, and play a vital role in shaping a more sustainable and equitable future for the regions it serves.
Author: Thomas Chan
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