Keve hails reform to support SMEs and startups

The Cyprus Chamber of Commerce and Industry (Keve) on Thursday welcomed Parliament’s approval of legislation establishing the Cyprus Business Development Organisation, describing the move as a major reform that will expand access to finance for small and medium-sized enterprises, startups and self-employed professionals.

“The creation of the Cyprus Business Development Organisation constitutes a substantial reform for the Cypriot economy,” Keve said.

The chamber explained that the new organisation is expected to help close existing financing gaps in the market, support entrepreneurship, strengthen the competitiveness of businesses and promote innovation, as well as Cyprus’ green and digital transition.

Keve said it has repeatedly highlighted that the limited availability of alternative sources of finance remains one of the biggest obstacles to the growth of small and medium-sized enterprises in Cyprus.

It added that “businesses’ heavy reliance on the banking system has restricted access to capital for investment, expansion and innovation“.

The establishment of the organisation, it argued, is expected to “broaden the country’s financing ecosystem by providing new avenues of support for entrepreneurship and the productive economy”.

What is more, the chamber said it had been actively involved in shaping the reform from the outset, both during the public consultation on the draft legislation and in the wider development of the organisation’s operating framework.

It explained that it submitted a series of proposals and observations aimed at creating an effective, flexible and credible organisation capable of meeting the real needs of Cypriot businesses.

“The adoption of the legislation is only the first step,” Keve said.

The chamber added that the next challenge is to “ensure the organisation becomes operational swiftly and effectively so that it can evolve into a genuine development tool that improves businesses’ access to finance, encourages investment and supports the sustainable growth of the Cypriot economy”.

“Keve reaffirms its readiness to work closely with both the Finance Ministry and the management of the new organisation, contributing its experience and expertise to the successful implementation of the organisation’s objectives for the benefit of the business community and the Cypriot economy more broadly,” the chamber said.

The legislation establishing the Cyprus Business Development Organisation was approved unanimously by the House of Representatives on Tuesday, creating a new public law body tasked with improving access to financing for SMEs, startups and self-employed people while addressing financing gaps in the market.

Parliament also approved a joint amendment submitted by Disy, Diko and Alma, requiring that the criteria and conditions governing loans and guarantees issued by the organisation be set through regulations approved by the House.

The amendment passed with 40 votes in favour and six against, with Elam voting against.

A separate joint amendment tabled by Akel, Alma and Direct Democracy, which proposed limiting medium-sized enterprises to 20 per cent of the organisation’s total financing, was rejected, along with seven additional amendments submitted by Alma president Odysseas Michaelides.

Under the new legislation, the new entity will function as Cyprus’ national business development organisation, with responsibilities that include designing financing schemes, providing loans and carrying out studies to identify weaknesses in the financing market.

The organisation will operate under the supervision of the Finance Minister, while oversight of matters relating to anti-money laundering legislation will be exercised by the Central Bank of Cyprus (CBC).

The Republic of Cyprus will provide €60 million in initial capital to establish and launch the organisation.

Thereafter, the organisation will be able to meet its financing needs through its own activities and by borrowing from European and international institutions, while also being eligible to receive state guarantees for loans linked to approved strategic priorities.

The establishment of the organisation forms part of Cyprus’ Recovery and Resilience Plan and represents a key milestone for the release of the plan’s ninth and final payment, which requires both the enactment of the legislation and the appointment of the organisation’s board of directors.

During parliamentary consideration of the bill, the Finance Ministry submitted a revised version incorporating recommendations from MPs and stakeholders.

Among the changes introduced, provisions allowing the organisation to establish companies and assume additional powers through secondary legislation were removed, while the scope of eligible beneficiaries was narrowed through the exclusion of small mid-cap companies.

The revised legislation also strengthened corporate governance and transparency through stricter suitability criteria for board members, measures to prevent conflicts of interest and the exclusion of politically exposed persons and public officials from serving on the board.

Additional provisions require consultation with the State Aid Commissioner before financing schemes are introduced, the submission of the organisation’s annual report to the House of Representatives and the establishment of performance indicators and borrowing limits.

The new organisation’s board will comprise seven members appointed by the Cabinet, while a transitional board will serve for two years until the organisation becomes fully operational.