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Patrice LIAUZU EIF Brussels office

SMEs and Entrepreneurship – successful local strategies. Patrice LIAUZU EIF Brussels office. EIF’s role in Microcredit. Porto, 7 December.

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Patrice LIAUZU EIF Brussels office

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  1. SMEs and Entrepreneurship – successful local strategies Patrice LIAUZU EIF Brussels office EIF’s role in Microcredit Porto, 7 December 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.

  2. EIF at a glance Established 1994 EU specialised financial institution for SMEs, acting through: Venture Capital (Fund-of-Funds), Guarantees for SME portfolios and financial engineering • ShareholdersEIB, EU, Financial institutions • Subscribed capital EUR3bn • Rating Standard & Poor’s: AAA Moody’s: Aaa Fitch: AAA • MDB status 0% weighting Aaa-rated European institution with MDB status 2/15

  3. Resources and objectives BMWA - ERP EUR 955m At 31 Oct 2007 EUR 4bn Revolving EUR 1.1bn (CIP) Dahlia SICAR S.R. Up to EUR 1bn To be committed to venture capital funds and guarantees in the EU and Candidate Countries andgenerate good return on equity 8 / 41

  4. Demand for microcredit is sustained by three major trends • Growing importance of small enterprises • Unemployment and exclusion • The role of the informal sector 3/15

  5. Institutional barriers to the development of microfinance • 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.. 4/15

  6. Norway (Cultura Sparebank) Ireland (First Step) Germany (KfW) Belgium (FdP) Spain (La Caixa) United Kingdom (The Prince’s Trust + The Enterprise Fund) Western Balkans, South-East Europe and Bulgaria France (Adie) EIF microfinance guarantees EIF microfinance securitisations EIF microcredit operations across Europe 5/15

  7. 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 EUR 259.3m outstanding microfinance guarantee volume (as at 30 June 2007) makes EIF the leading microfinance guarantor in Europe 6/15

  8. Bridging a gap in commercial lending:EIF microcredit securitisation • 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 activity Such transactions are an interesting new funding source for MFIs 7/15

  9. The way forward 9/15

  10. Microcredit through JEREMIE • 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 A targeted regional/national support tailored to needs and address market failures 11/15

  11. 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. 13/15

  12. The Micro fund • Investors/Support • Institutions (European Commission, EIB, EP…) • Private investors (Eurofi, banks, financial institutions…etc) • Investments • Direct funding of MFIs • Indirect funding of MFIs via national/regional funds specialised in microfinance MicroFund An independent fund, managed by the EIF EIF shall be in charge of the setting up and the management of the MicroFund. 14/15

  13. Contact European Investment Fund JEREMIE 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (+352) 42 66 88 212 Fax: (+352) 42 66 88 280 Patrice Liauzu EIF Brussels Office Tel.: (0032 2) 2 35 00 71 www.eif.org/jeremie 15/15

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