Patrice LIAUZU
EIF Brussels officeEIF’s role in Microcredit
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This presentation was prepared by EIF. The information included in this presentation is based on figures available for August 2007. Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.
SMEs and Entrepreneurship –
successful local strategies
EIF at a glance
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Aaa-rated European institution with MDB status
Established 1994 EU specialised financial institution for
SMEs, acting through: Venture Capital (Fund-of-
Funds),Guarantees for SME portfolios and financial
engineering
Rating Standard & Poor’s: AAA
Moody’s: AaaFitch: AAA
MDB status 0% weighting
ShareholdersEIB, EU,
Financial institutions
Subscribed capital EUR 3bn
Resources and objectives
and generate good return on equity
To be committed to venture capital funds and guarantees
in the EU and Candidate Countries
EUR 4bnRevolving
EUR 1.1bn (CIP)
Up to EUR 1bn
BMWA - ERP
Dahlia SICAR S.R.
EUR 955mAt 31 Oct 2007
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Demand for microcredit is sustained by three major trends
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Growing importance of small enterprises
Unemployment and exclusion
The role of the informal sector
Microfinance institutions in some countries are not allowed to borrow and to on-lend
Interest rates are capped, making it impossible to cover the additional cost of distributing small loans
Need to also “think sustainability”
And more..
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Institutional barriers to the development of microfinance
EIF microcredit operations across Europe
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EIF microfinance guarantees
EIF microfinance securitisations
France
(Adie)
Germany
(KfW)
Ireland (First Step)
United Kingdom (The Prince’s Trust + The Enterprise
Fund)
Norway (Cultura
Sparebank)
Belgium
(FdP)Spain
(La Caixa)
Western Balkans, South-East Europe and Bulgaria
Microcredit guarantees
Microcredit guarantees under the Multiannual Programme (MAP 2001/2006), in 7 different countries
Designed to encourage micro-lending by banks/institutions in the EU
Guarantees for microcredit
Financial institutions cooperating with NGOs and grassroots organisations to provide appropriate « mentoring »
Guarantee rate of 75%
As at end of June 2007, some 35,503 SMEs had benefited from over 38,323 loans
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EUR 259.3m outstanding microfinance guarantee volume (as at 30 June 2007) makes EIF the leading microfinance guarantor in
Europe
Bridging a gap in commercial lending:EIF microcredit securitisation
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Historically, Microfinance Institutions (MFIs) rely on donor/development bank funding
2005: Pioneer securitisation of loans to MFIs in Western Balkans and South-East Europe
2006: First securitisation of a loan portfolio of an MFI in Bulgaria
Supporting MFIs securing long-term funding continued growth in micro-lending activitySuch transactions are an interesting
new funding source for MFIs
The way forward
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Joint initiative of the European Commission and EIB Group
An option for each Member State and/or region
Objective: use Structural Funds for enhancing the access to finance to SMEs through sustainable and “revolving” financial instruments
Tool Kit approach
Evaluation of demand/supply : 2007/2008
Implementation: 2008 onwards
Microcredit through JEREMIE
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A targeted regional/national support tailored to needs and address market
failures
The EU microcredit initiative
Adopted by European Commission November 2007.
4 main measures:
a) Improving legal and institutional environment in EU Member States;
b) Further changing the climate in favour of Entrepreneurship;
c) Promoting the spread of best market practices;
d) Providing additional capital for microfinance institutions (MicroFund).
The MicroFund
Target: non banking MFIs
Instruments: equity, quasi-equity, subordinated debt, technical assistance etc.
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The Micro fund
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MicroFund
An independent
fund,
managed by the
EIF
Investors/Support
Institutions (European Commission, EIB, EP…)
Private investors (Eurofi, banks, financial institutions…etc)
Investments
Direct funding of MFIs
Indirect funding of MFIsvia national/regional funds specialised in microfinance
EIF shall be in charge of the setting up and the management of the MicroFund.
Contact
European Investment Fund
JEREMIE
43, avenue J. F. Kennedy L-2968 Luxembourg
Tel.: (+352) 42 66 88 212Fax: (+352) 42 66 88 280
Patrice LiauzuEIF Brussels OfficeTel.: (0032 2) 2 35 00 71
www.eif.org/jeremie
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