The European Investment Bank (EIB) is introducing new trade finance instruments to help small- and medium-sized enterprises (SMEs) to continue trading despite a shortage of letters of credit (L/Cs).

EIB president Werner Hoyer recently explained how the bank is helping SMEs mitigate the effects of Europe's financial crisis by deploying new instruments to support SMEs in Greece, and by planning to do so in other troubled European economies.

New instruments

Hoyer explains that the EIB is helping SMEs by stepping beyond its traditional role of providing more money and by offering the new instruments.

For SMEs, the bank has provided a wider and more diverse array of instruments, says the EIB president, who believes the guarantee fund for Greece has already proved very successful. The EIB has also signed agreements for trade finance in Greece.

L/C shortage

Hoyer recognises that many Greek SMEs are not only having problems in securing finance for exporting their goods, but also in financing the necessary imports of primary products, because they cannot obtain L/Cs for this.

The EIB is now seeing what Hoyer describes as "incredible demand" from other member states for trade finance agreements.

Rolling out

The EIB wants to extend trade finance to the other troubled EU economies of Cyprus, Portugal and Ireland.

The instruments are comparable to, or variations of, export credit guarantees, according to Hoyer.

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