Small businesses power the Croatian economy. But they often struggle to get finance. Three European guarantees are changing that

Ante Jurišić

“It is a Croatian success story,” says Jurišić. “We were 50 people, and today we are 150. We are collaborating with several big public and private companies and have offices in four cities, along with three internal start-ups and one subsidiary.”

SedamIT is one of the companies that benefitted from the guarantee agreement between Erste &Steiermärkische Bank d.d. and the European Investment Fund, signed in July 2017. Backed by the European Commission’s InnovFin initiative and the European Fund for Strategic Investments, the guarantee facility made it possible for Erste Group to provide €230 million of loans and leases to innovative small and medium-sized companies (SMEs) in Croatia.

“Small businesses are the drivers of economic growth,” says Sanja Gracin, head of trade finance at Erste&Steiermärkische Bank d.d. “This agreement allowed us to support riskier businesses and offer them financing on better terms.”

For SedamIT, the new loans meant more funding to finance the next big technological advancements and talents in Croatia, cover general expenses and expand into new and innovative markets. The company has also won many prestigious international awards, gained more than 300 certificates, and supported the establishment of successful start-ups, such as 7pay. 

Supporting risky business in a pandemic

Croatia has a lot of SMES with about 180 000 operating there in 2022. They employ around 760 000 people, making it one the most important sources of employment in the country.

But many SMEs have struggled to get finance, limiting their possibilities to grow and remain competitive. It also reduces the economic opportunities for the local population, especially in lagging regions.

“We have brilliant minds in the country, cultivated by an excellent climate for innovation and many successful entrepreneurs,” says Jurišić. “But, sometimes, if you are a start-up working hard to materialize a good idea, you need reliable financial support. And it is often difficult to get the necessary amount of starting capital.”

The COVID-19 pandemic made this problem worse. Even healthy small companies found it hard to pay wages and bills, let alone invest for the future. In most cases, they had to turn to a bank to stay afloat.

To alleviate the burden on Croatian businesses, the European Investment Fund provided another guarantee worth c. €350 million to Erste&Steiermärkische Bank d.d., signed in 2021. The guarantee was made under the Pan-European Guarantee Fund (EGF) — a €25 billion guarantee facility set up by the European Investment Bank Group in 2020 to accelerate the post-COVID-19 recovery of European economies, safeguard jobs, and provide much-needed liquidity to European SMEs amid the crisis.

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• Read about how Croatia built a new bridge, modernised railway lines and water systems, and brought lasers to its university with a European programme loan

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Building Croatia’s future

The Croatian economy and SMEs benefit most from the cooperation between the European Investment Fund and the Erste Group.

“More than 1000 companies were supported by EGF in Croatia in only two years,” says Erste’s Gracin. “To date, we have provided a total of €560 million in funding supported by EGF and InnovFin guarantee instruments.”