OREANDA-NEWS. April 14, 2010.  State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ and the Banking Group KfW signed a Memorandum of Understanding on the German-Russian Innovation and Modernization Program.

On behalf of Vnesheconombank the memorandum was signed by Management Board Member- Vnesheconombank Deputy Chairman Mikhail Kopeikin and on behalf of KfW – by its First Vice President Roland Ziller.

This Memorandum aims to encourage innovative development and modernization of small and medium-sized enterprises (SME) in the Russian Federation as well as to intensify economic cooperation between Russian and German enterprises.

Under the Memorandum the parties intend to assist banks operating in Russia in obtaining financing to further bankroll SMEs to enhance their innovative development and modernization.  Innovations and modernization are taken to mean a successful development and implementation of technologically new products and processes as well as technologically upgraded products and processes and market penetration (product innovation) or use in the production process (process innovation).

The total amount of funds that Russian banks are to receive to further finance innovative SMEs will amount to 100 million euros (in addition to200 million euros to be made available to banks under the German-Russian Initiative  on Providing Financial Support  for SMEs). The Memorandum also determined requirements to SMEs – potential recipient of financial support as well as top-priority sectoral lines of activity to be financed.

The following mechanisms are to be used to implement the Memorandum:
Vnesheconombank is to extend individual guarantees to cover credits with priority right of claim to be extended by KfW to partner banks in the Russian Federation to subsequently finance SMEs;
Vnesheconombank is to obtain funding from KfW to use the funds  to finance innovative SMEs (subject to the Procedure for Providing Financial Support for SMEs approved by Vnesheconombank’s Supervisory Board );
The Russian Development, Vnesheconombank’s subsidiary bank, is to obtain funding from KfW to subsequently use the funds to finance innovative SMEs (through the Russian Development Bank’s network of partner banks).

The Memorandum was signed to build on the Agreement on Cooperation concluded earlier under the German-Russian Initiative on Providing Financial Support for SMEs.