Rosen Karadimov: BDB can offer financing according to the region in order to overcome imbalances

28 February 2023

The bank is developing eight bridge financing programs under measures from the Recovery Plan, among them for renovation and for renewable energy sources for households - said the Chairperson of the Supervisory Board of BDB, Rosen Karadimov, in an interview with the "24 Chasa" newspaper.

And also:

• I don't see an obstacle for BDB not to participate in infrastructure projects - its resources are public

• The bank can provide targeted financing to Bulgarian businesses in North Macedonia - this is how the tension shall be overcome

•The previous management made hefty claims before taking office in the bank, but there was only silence while they were there.

Here is the full text of the interview:

- Mr. Karadimov, what are your forecasts for our economy - are we in for a recession after both the Bulgarian National Bank and the IMF have become increasingly optimistic that we will get away with it?

- I very much hope that we are not in for a recession. The Bulgarian National Bank raised the principal interest rate, which is an attempt to control inflation and at the same time will stimulate the release of liquidity from the banks and its direction to the real sector and consumption.

- Judging by the activity of businesses, can it be said that the end of the crisis is near?

- A key tool is the Recovery Plan. These are huge funds for Bulgaria and if they are directed correctly, our country will become unrecognizable within a few years. We have the advantage of being a small economy and the effect can be felt very quickly.

So far, my observations - at least by our principal, the Ministry of Innovation, are that the funds under the Plan are being channeled extremely well.

- How will BDB be involved in the utilization of funds under the Plan?

- This was one of the main goals I set for myself when I took office. This was also a very clear mandate given by Minister Aleksandar Pulev.

One of the key mechanisms is the so-called bridge financing. This means that if you have a business and decide to apply under a certain program, you usually get grants up to a certain percentage. There are also those with 100% free financing. In both cases, you need to find financial resources to implement the project and then the money will be reimbursed.

BDB can participate during this interim period. We are currently trying to develop at least eight programs that are based on different measures. The role of the bank is to make them accessible, to unify them, to process the information as quickly as possible. I hope that within days we will have results and will start conversations with the ministries.

- One of the programs is for households to install renewable energy sources on their roofs. How can they apply and what are the conditions?

- Minister Aleksandar Pulev presented a bold idea at the event of the "24 Chasa" newspaper regarding the Recovery Plan - to combine two programs with the same goal. One of them is at the Ministry of Innovation; it will support small and medium-sized businesses to implement green energy and has a 50% grant and a threshold of BGN 1 million per project. The Ministry of Energy has a similar program for residential users., which is a 100% grant scheme up to BGN 15,000.

BDB can be a unifying hub of these two programs. It is true that this will be a big challenge for the bank, because for the first time it will work with individuals. But I hope we will manage because that is the purpose of the bank's existence - to step in when there is uncertainty.

Within a few days we are going to discuss and establish an Advisory Council together with the National Association of Municipalities, and I rely heavily on it in the development of these programs. We will discuss which programs we can partner on because the mayor of a settlement is the person closest to the households.

- What are the other programs that you are working on?

- Two of them are the programs of the Ministry of Regional Development and Public Works for renovation - for households and for office buildings. Here, the sensible approach would be to directly credit the small and medium-sized enterprises that will carry put the renovation.

We have already established an Advisory Council with all employers' organizations. It has two goals - to provide an information channel from the bank to the business, as well as to involve the employers' organizations in the preparation of the bank's products. For me, it is very important that this Council plays the role of public control of BDB's activities and provides maximum transparency because the bank works with public funds.

- And what is the goal of the Advisory Council with regard to municipalities?

- One of the bank's goals is to work to overcome regional imbalances, which means to fund targeted projects as a matter of priority. For example, a targeted product could be created for small and medium-sized enterprises operating in Northwestern Bulgaria.

- With regard to municipalities, will the loans be greater than the limit of BGN 5 million?

- No, it cannot be exceeded. Even with the program for hospitals, which is being worked on at the moment, the limit is also 5 million. However, when working on programs that have been adopted by acts of the government, the limit can be increased.

- Are you working on expanding BDB’s branch network?

- I am more inclined to developing mobile branches - for example, if a special program is made for Northwestern Bulgaria, it will make sense to have one there. We were met with incredible understanding from the mayors at our first meeting and they are willing to give us premises where people from the bank can work. If companies know that they can get information and have their documents processed on site, it can have a big effect.

We are preparing a leaflet with all detailed programs, with QR codes and links. We may add links to our products on the municipalities' websites. In addition, the bank is developing software for mobile loan applications.

- Is business’ interest in the bank increasing? The small number of loans granted last year was one of the main criticisms of the previous management.

- According to the law, the main goal of the bank is not only direct lending, but also the creation of an environment for financial support of small and medium-sized businesses. It is a mistake to consider the bank's results only according to the criterion of direct lending. This goal is fundamentally correct, but reducing the bank's activity to only this leads to the "phenomenal" result of 170 loans per year. There are two reasons - the first is that not enough efforts have been made to attract companies. That is why we want the entry to the bank to be absolutely free and there to be no doubt as to whether you need to be someone’s protégé to enter. The second reason is that the bank does not have a branch network, which is a hindrance if it focuses only on giving loans and neglects its main goal - to develop such financial instruments that create an environment to support small and medium-sized businesses. If the programs we develop under the Recovery Plan are modulated and administered in the proper manner, they can give much greater results.

- Together with the Bulgarian Stock Exchange you established an investment fund to support small and medium-sized enterprises. What does this mean and what companies will be supported?

- This is a fund with a capital of BGN 10 million. This instrument aims to enter the low segment of the Stock Exchange. There, small and medium-sized enterprises can issue shares and bond loans without going through the mandatory procedure through the Financial Supervision Commission, but this market is regulated.

The fund can quickly buy stocks or bonds in this market. It is a very mobile mechanism for equity or financial participation. This is another example of how an environment is created to support small and medium-sized businesses.

- Should the bank also return to large projects - investments with added value?

- This is the purpose of the bank as stated in the law - to support public policies and nationally significant projects of the state. I see no obstacle to the bank being integrated into large infrastructure projects, given that it has public resources. Where there is a decision of the Council of Ministers, whether it concerns the public or private sector, the bank could be such an instrument.

I am even considering BDB developing a program for targeted financing of business projects of Bulgarian companies in North Macedonia. This will probably be treated as risky financing by the commercial banks and here comes the role of the development bank because it is extremely important that Bulgarian companies enter that economic area. Overcoming the tensions between the two countries should go along three lines - religion, culture and economy.

- What did the inspection show regarding problematic large loans? Has the Audit Office completed its audit of BDB?

- The audit by the Audit Office is not over yet. Our audit showed that 6 of the 8 large loans are being regularly serviced.

Regarding the most problematic loan of "Roadway Construction", there is a delay in the actions to realize the collaterals, which is in great contrast to the political statements that were made by the previous principals. Hefty claims were made before taking office in the bank, but there was only silence while they were in the bank. And even heftier claims were made when they left the bank - that those who are now taking office are taking office so that not to act.

- And how do you act?

- We will review how the company’s managing director was appointed pursuant to the Special Pledges Act and he should propose a comprehensive program for the company's activities. We commissioned this a week ago; no one was even looking for him before that.

- And the other problematic loan?

- All documents, collaterals, business plans shall be reviewed. It is true that the pandemic has also had a very severe impact there because it is about bus transport. We shall assess how the loan is being managed and an attempt shall be made to get it into a regular repayment schedule, but this is the responsibility of the bank's Management Board. 

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