The access of Estonian companies and households to bank loans is generally good. This is shown by loan growth that is notably faster than the average in Europe. The opinion of Estonian companies about the climate for borrowing improved further in 2025 and was above the average in Europe. It improved primarily because of interest rate cuts, but also because the outlook for the economy strengthened, and because of the good capacity to lend of the banks. Sentiment was better in all sectors, but especially so in real estate and ICT. Although it remains harder for small companies to access financing than it is for large ones, their access to funding has equally improved.

Competition pressures have driven the interest margins on housing loans to close to the average in the euro area, but interest rates on corporate loans remain high in international comparison. Whether interest margins on corporate loans fall in future will depend on whether competition pressures pass through into loan conditions more strongly than they have done so far, and on how the general appetite for risk in the economy changes.

Growth in lending can be expected to remain strong in the coming years and it will be driven by faster growth in the economy and the elimination of the tax hump. The growth in corporate borrowing is being led by real estate companies, while manufacturing and agricultural companies have also increased their borrowing. The stock of loans to retail and wholesale has declined however. Interest rates stabilising and the economy starting to grow are giving companies and households the confidence to make more investments and raise more new equity and debt capital. The latest Eesti Pank forecast expects that corporate bank loans will grow by around 6% a year on average in the coming years, and loans to households will grow by around 9%.

The banks are offering more loans than before and with better conditions for housing associations to renovate residential properties. Loans from banks to apartment associations have increased several times over in recent years, mainly because of interest margins narrowing, access to loans improving, and demand growing. The state has mainly supported the renovation of apartment buildings through subsidies, and to a lesser extent through guarantees and direct loans. Given that state funding is limited, it is important that the support planned for improving the housing stock be well targeted and give efficient backing to the funding options offered by the private sector. This would allow funding for more apartment buildings to be renovated and faster.

The direct and indirect role of state subsidies in the corporate loan market has increased since the pandemic. The state has substantially increased its direct support for business in the past couple of years, but its plan moving forwards is to reduce direct subsidies and offer more loan products. The business policy of the state should prefer loans, and especially guarantees, to direct subsidies, as this can preserve the useful risk assessments of the private sector, harm competition less, and achieve the same goals using less taxpayers money. A major benefit of guarantees is that companies have earlier identified that the lack of sufficient suitable collateral is one of the main obstacles to accessing financing.

The supply of equity from private equity and venture capital funds gives substantial support to the development of companies that are just starting up. Non-bank financial intermediation still plays only quite a small role in financing the Estonian economy, but it is an important source of financing for small companies and those in the startup or scale-up phase. Bank loans are often not an appropriate or accessible solution for such companies. Increasing sums of money are entering the Estonian economy through investment funds, but direct investment in Estonian companies by pension funds has declined since the second pension pillar was made voluntary. Pension funds remain an important anchor investor for investment funds though.

New investment from abroad in Estonian non-financial companies has held at around the same level in recent years. The reduction in foreign investment made earlier has also held at around the same level as in earlier years. The data consequently do not show any increase in departures of foreign investors from Estonia in the face of security risks or economic difficulties. Foreign-owned companies increased their dividend payouts substantially in 2024 in advance of the the rise in income tax, but dividends paid and profit reinvested were back at their usual levels in 2025.

The review of the Financing of the Economy will soon be available on the Eesti Pank website.

Additional information:
Hanna Jürgenson
Communications Specialist
Eesti Pank
Tel: 5692 0930
Press enquiries: [email protected]