IFC Invests €65M in Erste Bank Serbia to Boost MSMEs and Green Initiatives

The MREL regulatory framework, aligned with EU guidelines, ensures that banks maintain a buffer of loss-absorbing capital to avert taxpayer-funded bailouts, thereby reinforcing market stability.

In a landmark deal to strengthen Serbia’s financial sector and fuel sustainable economic growth, the International Finance Corporation (IFC) is committing up to €65 million to Erste Bank a.d. Novi Sad. This investment represents Serbia’s first MREL-eligible (Minimum Requirement for own funds and Eligible Liabilities) senior preferred loan instrument, signaling a significant shift toward resilient financing structures for micro, small, and medium enterprises (MSMEs) and green projects.

The MREL regulatory framework, aligned with EU guidelines, ensures that banks maintain a buffer of loss-absorbing capital to avert taxpayer-funded bailouts, thereby reinforcing market stability. The recent adoption of MREL targets by Serbian regulators is pivotal in building confidence in local financial markets, encouraging banks to expand lending and investment capabilities.

Key Economic Impact on MSMEs and Green Transition

With 99% of Serbian businesses categorized as micro and small, this sector is a vital contributor to the national economy, employing over 65% of the workforce. Yet, limited access to finance continues to impede growth, with the financing gap estimated at 12% of Serbia’s 2022 GDP. Through IFC’s support, Erste Bank aims to enhance access to longer-term loans for nearly 9,000 micro and smaller businesses over the next three years, a move anticipated to strengthen job creation and local entrepreneurship.

“This partnership with IFC is a milestone for both Erste Bank and Serbia’s financial sector. By aligning our resources to back sustainable growth, we’re empowering key drivers of our economy—micro and small enterprises—with the essential financial tools they need,” said Jasna Terzić, CEO of Erste Bank Serbia. “Our commitment to dedicate a substantial portion of this financing to climate-focused projects reinforces our strategic direction toward green banking. Together with IFC, we’re proud to contribute to Serbia’s transition to a greener economy.”

At least 30% of IFC’s investment will support climate change mitigation initiatives in Serbia. The country’s energy consumption and carbon emissions remain significantly higher than the EU average, underscoring the urgency of addressing environmental impacts. Air pollution, particularly in urban areas, has become a critical concern, adding pressure to accelerate the country’s green transition.

Setting a Benchmark in the Region’s Financial Sector

According to Nicolas Marquier, IFC Regional Manager for the Western Balkans, “This pioneering MREL financing sets a powerful market benchmark, paving the way for other banks in Serbia to explore similar financial instruments. By stabilizing the financial sector, we are enabling long-term funding crucial for MSME expansion and environmental sustainability.”

As a subsidiary of Erste Group, one of Central and Eastern Europe’s largest banking groups, Erste Bank Serbia gains strategic support from IFC, which has a longstanding commitment to private sector development in Serbia. Since 2001, IFC has invested over €2 billion in the country, with current commitments of €316 million directed towards green projects, connectivity, and Serbia’s deeper integration into global value chains.

Expanding Sustainable Finance and Long-Term Growth

IFC’s investment is part of a broader trend aimed at integrating climate resilience and sustainability in financial markets across the Western Balkans. By leveraging MREL financing, Serbia not only strengthens its economic fabric but also positions itself as a regional leader in sustainable finance. The collaboration between IFC and Erste Bank will likely encourage other Serbian banks to adopt MREL instruments, enhancing overall market resilience and supporting Serbia’s ambition to align with EU environmental standards.

This €65 million investment signals IFC’s confidence in Serbia’s financial sector and its potential to drive sustainable growth and green finance. As the first MREL financing in Serbia, it is expected to serve as a model for both market stability and sustainable development across the Balkans.