Bridging the Financing Gap for Small Businesses in Romania

SMEs financed
Average loan size

We invest in RoCredit

Small businesses play a significant role in Romania’s employment landscape, accounting for every two out of three persons employed in the country. Yet, these businesses face constraints in access to funding. The SME Finance Gap in Romania is estimated at US$32.7 billion.1 While SMEs account for half of the country’s GDP, Romania still has the lowest ratio of SMEs per 1,000 inhabitants in all of the European Union. There is much potential for this segment to grow, but capital must be available to fund it.

RoCredit is a Romanian Microfinance Institution that was originally founded in 2007 as a regulated Non-Bank Financial Institution. The company fills an important gap in the Romanian financial services system by providing financing to SMEs and micro entrepreneurs that are unable to access credit from traditional banks. RoCredit provides a wide range of financial products to its borrowers, such as working capital credit lines, loans secured by promissory notes, investment loans, and factoring services, among others.

The company’s core invoice discount product, called the “scont” loan, fills a much needed liquidity gap for individuals and businesses. How it works is that each time a small business borrower fulfills an order for its customer, it generally will not receive payment until between 60 and 120 days following delivery. Without liquidity during this period, businesses may be required to forgo additional work and delay salary payments to employees, thus missing out on further revenue generating opportunities. Through a comprehensive legal, financial and fraud risk assessment of both the borrower and the payer, RoCredit is able to turn around funds to its customers within approximately 3 days of the invoice date (or as little as 24 hours in the case of a new disbursement to an existing borrower), which allows small businesses to continue to pay salaries, purchase raw materials and maintain uninterrupted operations. RoCredit is more suited to meet MSMEs’ invoice financing needs than banks, which cater mostly to larger suppliers of corporations.

Client Stories

The portfolio company profiled here is for educational purposes only and may not represent all of the portfolio holdings. It should not be assumed that investments in the company identified and discussed were or will be profitable. The companies profiled were selected based on their financial inclusion and impact with no reference to amount of profits or losses, realized or unrealized. Any portfolio metrics listed here have been self reported by RoCredit as of 6/30/2021.