According to information provided by the Ministry of Finance to Politis, the organisation's objective is to address financing gaps while operating complementarily to, rather than in competition with, the banking sector. Its aim is to facilitate business access to capital and help mobilise private investment.
The new organisation will begin operations with €60 million in state capital and is intended to address financing shortcomings in the market. Its purpose is not to compete with the banking system but to complement it.
According to the Ministry of Finance, the CBDO will have access to a wide range of financial instruments designed around actual market needs. At a later stage, the organisation will also be able to utilise revenues generated from its activities and seek additional resources from European, international and national institutions, subject to the necessary approvals.
A new financing tool
With the adoption of the Cyprus Business Development Organisation Law of 2026, Cyprus gains, for the first time, a specialised development finance institution, following a model that has been applied in many EU member states for years.
The creation of the CBDO constitutes a significant institutional reform, introducing a new development financing mechanism aimed at addressing market financing gaps and broadening funding options for Cypriot businesses.
The need for such an institution had been highlighted repeatedly through European recommendations and specialised studies, which found that a significant number of start-ups and small and medium-sized enterprises struggle to access suitable financing.
The approval of the legislation by the House of Representatives on 14 July 2026 now clears the way for implementation of a reform expected to strengthen the country's financing ecosystem and create new opportunities for entrepreneurship.
Why the CBDO was created
The organisation is being established to support businesses that, despite being financially healthy and having viable business plans, struggle to obtain financing from traditional sources.
According to the ministry, these difficulties often stem from insufficient collateral or from financing needs that are not fully covered by available banking products.
The Ministry of Finance stresses that the organisation's role is not to compete with banks but to complement them.
"Through partnerships with credit institutions and other financing bodies, the organisation will seek to address market financing gaps, facilitate access to capital for businesses and contribute to the mobilisation of private investment."
The organisation aims to support investments that strengthen economic growth and modernisation, including:
- Digital transformation
- Energy upgrades
- Innovation
- Export-oriented development
- Improved competitiveness
- Other development initiatives requiring specialised financing solutions
Financing difficulties
According to the ministry, many start-ups and SMEs have promising investment plans but frequently struggle to secure the funding needed to implement them.
For example, a company seeking to invest in new digital technologies, modernise equipment or expand operations may be unable to secure sufficient financing through existing banking products alone.
These difficulties may result from:
- Insufficient collateral
- Limited business and financial track records, particularly among start-ups
- Financing requirements not fully covered by available banking products
"The CBDO is being created precisely to help address such financing gaps."
Financial tools tailored to market needs
The CBDO will provide a broad range of financing instruments, designed according to actual market needs and financing gaps identified during each programming period through specialised studies.
The organisation may develop financing solutions that include:
- Guarantee schemes
- Direct lending, in line with its legal framework
- Co-financing through risk-sharing mechanisms
- Participation in the creation and financing of investment funds
- Other modern development-financing tools already used in European countries
Based on the findings of these studies, the Ministry of Finance, as the supervisory authority, will determine the organisation's strategic priorities for each programming period, while the CBDO will develop and implement the appropriate financing instruments.
According to the ministry, this approach ensures that the organisation's interventions respond to the real needs of businesses and remain aligned with the country's development priorities.
Initial interventions
According to the study conducted for the establishment and operation of the CBDO, the organisation's initial interventions are expected to focus on:
- Improving business access to finance through guarantee mechanisms
- Supporting digital transformation investments through lending
- Providing advisory services to help businesses build capacity and strengthen competitiveness
The final design of the first financing instruments will be completed after the financing-gap study is updated and the organisation's strategic priorities are defined.
Implementation of the first financing tools is expected to begin once organisational preparations are completed, including:
- Staffing the organisation
- Developing the necessary systems and procedures
- Designing the individual financing instruments
Structure and operation
The CBDO is being established as a public law entity and will operate under the general supervision of the Ministry of Finance.
It will be administered by a seven-member board of directors, responsible for strategic direction and overall management.
The Council of Ministers has appointed the board, which includes:
- Five members appointed by the Council of Ministers upon the recommendation of the Finance Minister, including the chair and vice-chair.
- Two ex officio members representing the Ministry of Finance and the Deputy Ministry of Research, Innovation and Digital Policy.
The appointments are:
Chairman: Michalis Kammas
Vice-Chairman: Stelios Theofanous
Board Members:
- Philippos Chatzizacharias
- Marinos Lambrianides
- Andreas Eisodiou
Ex Officio Members:
- Aliki Sergi (Ministry of Finance)
- Constantinos Kleovoulou (Deputy Ministry of Research, Innovation and Digital Policy)
The next phase will involve organising and staffing the institution, while also developing the required information systems and internal procedures to enable operations to begin.
Transparency and accountability
The legislation establishes a modern governance framework with clear mechanisms for:
- Internal control
- Risk management
- Regulatory compliance
It also includes procedures designed to ensure transparency, objectivity and accountability in the management of available resources.
The framework is intended to support the sound use of public funds and the effective management of any fiscal risks associated with the organisation's operations.
The objective is for the CBDO to operate in line with internationally recognised governance standards similar to those applied by development finance institutions across Europe and internationally.
A new development financing ecosystem
According to the Ministry of Finance, the creation of the CBDO represents a major institutional reform in the financing of entrepreneurship.
Cyprus is acquiring a specialised development finance institution comparable to those operating in many European countries.
The significance of the organisation extends beyond the creation of new financing instruments.
The CBDO introduces a new development-financing institution designed to fill market financing gaps and expand the options available to businesses beyond traditional funding sources.
In combination with the Cyprus Equity Fund, a more comprehensive development-financing ecosystem is gradually taking shape, similar to those operating elsewhere in Europe.
Through the complementary operation of the two tools, businesses will gain access to a broader range of financing options depending on their stage of development and specific needs.
According to the ministry:
"The creation of the CBDO is an investment with a long-term developmental footprint, introducing a new model for supporting entrepreneurship aimed at strengthening investment, innovation and the competitiveness of the Cypriot economy."
The ministry added:
"At the heart of the reform are SMEs, self-employed individuals and start-up companies, namely the productive forces that form the backbone of the Cypriot economy."
Loans remain the main source of business finance
The issue of financing gaps in the Cypriot market has also been highlighted by the European Commission.
According to a European Commission document published in June 2025, loans remain the primary source of financing for non-financial corporations in Cyprus, while corporate bonds and listed shares remain underutilised.
The Commission noted:
"Cyprus operates a bank-based financial system in which banks are the primary source of financing for households and companies."
Bank loans account for 45% of the financing needs of non-financial corporations, significantly above the EU average of 27%.
Financing through capital markets remains considerably below the EU average.
Listed shares account for only slightly more than 1% of total financing needs, while corporate bond issuance by non-financial corporations is almost non-existent, compared with corresponding EU averages of 19% and 5% respectively.
