Hrvoje Čuvalo: HBOR is now an equal partner for dialogue with the European Commission

The Urban Development Fund intended for the public sector is a new financial instrument that the Croatian Bank for Reconstruction and Development (HBOR) is just beginning to implement. It enables, emphasized Hrvoje Čuvalo, CEO of HBOR, for the first time that EU fund resources finance public infrastructure projects with social and commercial content and those that generate revenue from service fees. He explains that this will allow financing for the construction of multifunctional, sports, tourist, socio-cultural, business, and similar infrastructure. HBOR continues to implement the National Recovery and Resilience Plan (NPOO). So far, more than three hundred projects worth a total of 430 million euros have been supported.

What makes the Urban Development Fund special?

– This financial instrument is specific and very attractive due to its structure. It is a combination of loans and non-repayable funds in the form of a reduction of part of the loan principal, known as a capital rebate. The capital rebate is achieved after meeting predefined criteria and can amount to up to fifty percent of the total loan. Borrowers will have access to more than 170 million euros, and HBOR will conduct the lending directly. I am pleased that since we announced this program, we have received many inquiries and expressed interest from public sector entities.

As part of the NPOO, you have offered many benefits.

– HBOR has developed several financial instruments from NPOO funds. These include favorable loans, interest subsidies, guarantees, and the development of the venture capital market. For small and medium-sized enterprises investing in less developed areas or belonging to the group of young entrepreneurs, beginners, women entrepreneurs, or investing in research and development, we have a special program that allows lending at interest rates of 0.4 or 0.8 percent. These loans have lower collateral requirements as the collateral is usually machinery, equipment, or a facility being purchased or constructed with the loan. Within the NPOO, we have also considered other entities that are not in these special target groups. For their needs, we have developed an interest rate subsidy instrument that can range from 50 to 75 percent. All projects financed with NPOO funds must meet the principle of not causing significant environmental harm, as the issue of climate and environmental sustainability increasingly becomes a question of the long-term competitiveness of the domestic economy.

Are you preparing any new interesting programs?

– Yes, we are preparing three new financial instruments that will also have a combination of loans and non-repayable funds in the form of a capital rebate. These are loans intended for financing sustainable tourism, modernizing production, and loans for energy efficiency for entrepreneurs. HBOR will conduct loans for sustainable tourism and production modernization directly, and we expect them to become operational during the fourth quarter. The financial instrument for energy efficiency for entrepreneurs will be implemented through commercial banks and will require public procurement, so we expect it to become operational by the beginning of next year at the latest. Within these three instruments and the Urban Development Fund, more than 650 million euros of favorable loan funds will be available to private and public entities.

At the beginning of the year, HBOR also completed the process of obtaining accreditation from the European Commission, thus gaining the authority to directly manage EU funds.

– HBOR is now an equal partner for dialogue with the European Commission (EC), no longer needing an intermediary to create credit lines or other forms of financial instruments. Only a few development banks in the EU have this accreditation. The evaluation process took several years as we conducted a trial before the formal assessment. This was an excellent decision by HBOR. Since we started the process four years ago, significant changes have occurred, and the EU has intensively committed to promoting projects in digital and green or using some innovative modern technologies. The answer to how to realize this lies precisely in platforms such as national development banks. The European Commission devises special financial instruments to promote such projects, which are then typically integrated into national economies by national development banks. We take over financial instruments from them: special financial schemes that are either very broadly set or extremely administrative. The national development bank then negotiates with them on how to integrate them into the national economy, as it is not the same whether it is a Croatian, German, or Bulgarian economy. It is impossible to simply copy a decision. HBOR can now negotiate directly and tailor financial instruments to the needs of the Croatian economy.

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