What Is the European Bank for Reconstruction and Development (EBRD)?

The European Bank for Reconstruction and Development (EBRD) is a bank that was established in 1991 to aid ex-Soviet and Eastern European countries transitioning into democracies by developing free-market economies. Today, the EBRD continues its work in 27 countries from Central Europe to Central Asia, investing mainly in private banks and businesses, including both new ventures and existing companies.

Understanding the European Bank for Reconstruction and Development (EBRD)

The EBRD is publicly owned by shareholders in 61 countries and only supports countries committed to democratic principles. Furthermore, the EBRD promotes environmentally sustainable development. It will not finance activities or projects related to the tobacco industry, defense, certain alcoholic products, stand-alone gambling facilities, or substances banned by international law. The EBRD also helps facilitate the transition of public companies to becoming privately held entities as well as restructuring state-owned firms and helping to improve municipal services. Since its inception, only one country has graduated from recipient nation to financing nation; that country is the Czech Republic.

Funding Offered by the EBRD

The EBRD offers financing in the form of equity financing and loans, leasing facilities, trade financing, professional development, guarantees and other support programs. It finances both large and small projects, with the latter typically being financed indirectly through intermediaries. Some of these smaller projects include micro-business banks, commercial banks, leasing facilities, and equity funds. The EBRD offers financing intended to support the establishment and development of the private sectors of formerly communist and Eastern Bloc countries, including working to help privatize companies that were previously publicly owned.

In order to receive funding from the EBRD, the project must be located within a recipient country of the EBRD, be commercially promising, involve in-kind or in-cash contributions from a sponsor, contribute to the development of the private sector and the strengthening of the local economy, and satisfy environmental sustainability standards and banking best practices. The EBRD offers financing for projects in a range of sectors, including public works, agribusiness, financial institutions, energy efficiency, manufacturing, property, tourism, telecommunications, natural resources, transport, information technology, and municipal infrastructure.

Controversies Surrounding the EBRD

The EBRD has faced controversy for financing projects considered socially or environmentally harmful by some, including investments in oil, coal and gas production, and dams on wild European rivers. A planned investment in a dam at a national park in the Republic of Macedonia had to be suspended when it came to light that the area was an important center for biodiversity and a crucial reproductive territory for the Balkan lynx.