Competitiveness & Growth
Economic aftershocks from the recent pandemic were felt across Europe during the first half of 2023, while the ongoing geo-political situation, inflation and energy prices have continued to put pressure on small businesses across the continent. But we made every effort, alongside the European Commission, the EIB and our partners on the ground, to foster growth and competitiveness, ensuring that European small and medium-sized businesses—the backbone of our economy—had better access to finance to help them grow, compete and scale within their respective industries.
We have pursued this goal making full use of all the tools in our financial toolkit: portfolio guarantees, equity investments and securitisation, and working through a range of different types of partners, ranging from banks and VC/PE funds to private credit funds and crowdlending platforms amongst others.
In parallel, we have set up new mandates with various Member States like Romania, Bulgaria and Malta, to secure a steady flow of financial support for local businesses and promote economic convergence, cohesion and equal opportunities for businesses across Europe.
Central and Eastern Europe
We have been especially active in Central and Eastern Europe (CEE) this year, reinforcing our commitment to the countries, economies, and fellow European citizens within this rich and diverse region, thus making a meaningful contribution to the EU’s Cohesion Policy.
One of the largest transactions signed this year concerns a capped and uncapped guarantee umbrella deal with UniCredit, a well-known EIF counterpart. It covers seven countries: Czech Republic, Romania, Bulgaria, Croatia, Slovenia, Slovakia, and Hungary. The EIF guarantees will enable UniCredit to provide loans on favourable conditions to 2,500 SMEs and small mid-caps across Europe, mobilising an investment of no less than €1bn into the real economy. The resources of this wide-ranging transaction will primarily go towards investments contributing to the twin green and digital transition, but also to boost the cultural, educational and social sectors.
As part of UniCredit’s green lending strategy, loans will also be provided to housing associations and individuals for their own renewable energy and energy efficiency investments in residential buildings, as well as to promote the development of sustainable mobility. Borrowers will benefit from reduced risk spreads and, in the case of microfinance borrowers, also reduced collateral requirements. 80% of the borrowers are expected to be located in Just Transition or Cohesion regions.
In Romania, our close collaboration with the national government is delivering good results. Following last year’s equity mandate, we launched a new debt mandate this year, using resources from RRF Romania and tapping into the InvestEU Member State Compartment. On the back of that agreement, we signed a series of uncapped direct guarantees totalling €1b with five banks (Banca Comercială Română, Banca Transilvania, CEC Bank, Raiffeisen Bank and ProCredit Bank) to further strengthen access to finance for the country’s small businesses. Our guarantee enables our Romanian partner banks to offer improved financing terms like lower interest rates, reduced collateral requirements and down-payment requirements as well as longer maturities and increased financing volumes and support for excluded segments such as start-ups.
With financing available in both RON and EUR, this endeavour will bolster Cohesion regions in Romania, fostering business growth and expansion, supporting value chains, sustainable infrastructure products and services, renewable energy and energy efficiency, and clean transport, while strengthening the Romanian financial ecosystem. In parallel, we signed the first deal under RRF Romania Equity mandate, in which €20m were invested into AMC V, a hybrid debt-equity fund supporting SMEs in Central and Eastern Europe.
At the same time, we have also signed a new guarantee mandate with the Bulgarian government, connecting a Bulgarian RRF budget of €150m to the InvestEU Member State Compartment. Indicatively, half will be dedicated to promoting the competitiveness and growth of local enterprises, while the other half will focus on climate action, energy efficiency and renewable energy. By helping local businesses to weather the negative effects of the crisis and continue on their growth path, this instrument will focus on addressing the structural weaknesses of the Bulgarian economy, such as lack of liquidity and solvency risks faced by the local enterprises, ultimately contributing to greater resilience, increased productivity and sustainable growth of the Bulgarian economy.
Also in Bulgaria, we signed a synthetic securitisation agreement with ProCredit Bank, providing protection on a mezzanine tranche and a senior tranche of a portfolio of SME loans with a total outstanding balance of about €300m. Close to half of the EIF’s exposure is counter-guaranteed by the EIB. The transaction allows ProCredit to expand its support to small and medium-sized companies in Bulgaria and Greece. In turn, ProCredit will provide new loans to SMEs, with approximately €140m of the expected financing allocated to projects contributing to climate action and environmental sustainability.
In Hungary, a new capped guarantee agreement with K&H Bank Zrt will pave the way for a portfolio of more than 1,000 loans on more favourable terms for Hungarian businesses, most of which are expected to be in Cohesion or Just Transition regions. With the guarantee backing, K&H will be able to improve the competitiveness of the final recipients by facilitating access to finance to riskier SMEs or businesses lacking sufficient collateral.
In Slovakia, we signed a guarantee deal with Slovenská záručná a rozvojová banka (SZRB), a state-owned financial intermediary, enabling them to provide over €70m in new loans to Slovak small and medium-sized enterprises through targeted financing. The initiative represented a significant step towards fostering economic recovery and strategic investments in the country.
And further north, in Poland, we signed a guarantee transaction with PKO Leasing, with a strong competitiveness component. The guarantee will generate a loan portfolio of around €474m, supporting approximately 13,000 loans and leases, including start-ups, with clients benefitting from an increase in financing volumes or longer financing maturities.
First IPO-focussed fund supported
We also renewed our support to CVI, the leading Eastern European private credit manager, by committing €40m to their new private debt strategy which, with a €200m target fund size, will provide tailor made credit financing to SMEs in Poland and neighbouring countries.
Meanwhile, in the Western Balkans, through the Western Balkans Enterprise Development and Innovation Facility (WB EDIF), we have been deploying significant amounts in support of local businesses as they confront challenging economic times for the region. In the course of 2023, we signed portfolio guarantee agreements with 11 banks and financial intermediaries in all Western Balkan economies, which alongside further operations scheduled for early 2024, will allow them to generate SME loan portfolios at favourable lending conditions worth around €700m. These efforts are intended to improve access to finance for small businesses, enhance their resilience to ongoing economic distress, and create better conditions for business extension, employment and innovation. Since 2013, we have unlocked a total of €3.5bn worth of financial support for no fewer than 67,000 businesses in the region.
Recent trends in EU corporate demography and policy: COVID and beyond
Southern Europe
We pressed ahead with our equity work, targeting funds that focus on later-stage investments. In Spain, we invested €30m in Axxon Fondo ISETEC V, a Spanish fund focusing on pre-IPO, at-IPO, and post-IPO investments in SMEs. With a target size of €100m, it will be active across Southern Europe.
Also on the Iberian peninsula, we signed a guarantee agreement with Caixa Geral de Depósitos, mobilising up to €378m in new credit lines to improve access to finance for Portuguese SMEs. The aim of the agreement is to leverage the financing of eligible companies in Portugal across seven thematic areas, with approximately 25% dedicated to competitiveness. The operations will benefit from a guarantee of between 50% and 80% from the EIF and will have a maximum maturity of 12 years.
Across the Mediterranean, we signed an agreement with Cassa Depositi e Prestiti (CDP), the aim of which is to facilitate the provision of over €4.3bn in new financing for small and medium-sized enterprises in Italy, supporting competitiveness and investment in all sectors, with a particular focus on education, training and culture.1
We will provide a counter-guarantee of €120m at favourable terms to CDP, which, in turn, will offer guarantees to Italian financial institutions to facilitate this access to credit for SMEs. This instrument will generate an estimated leverage effect of 36x, making it possible to unlock financing from the banking system to support almost 50,000 SMEs.
SMEs in Malta are set to receive substantial support totalling €16.6m through the Malta InvestEU Member State Compartment, a collaborative effort with the Maltese government and the successor to the SME Initiative. The Malta Member State Compartment begins with an initial budget of €16.6m, made up of European Regional Development Fund (ERDF) and national resources through JEREMIE reflows. This funding will be directed at building a €60m loan portfolio that will enhance access to finance and improve financing conditions for Maltese businesses, potentially also resulting in lower interest rates and reduced collateral requirements.
Northern Europe
In Finland, we signed two new portfolio guarantee agreements (capped and uncapped) with Finnish alternative lender LocalTapiola, which will provide an expected total of €39m in new loans to Finnish small businesses and mid-caps. The guarantees will allow LocalTapiola to support Finnish companies with improved lending conditions such as reduced interest rates, thereby broadening the spectrum of companies and industries that they are able to support.
In Denmark, we signed an agreement with Danish crowdlending platform Flex Funding for a guarantee of DKK 111.7m (€15m). The new agreement will ensure that up to 160 smaller Danish companies can more easily obtain funding with attractive terms so that they can continue their growth and development.
We also committed €30m into Ture Credit Fund III, in Sweden, advised by a local private credit boutique specialized in providing tailor-made financing to mainly SMEs and small mid-caps in the Nordics.
And in Lithuania, we invested €25m in Sound Senior Private Debt Fund 1, a newly established independent alternative asset management company headquartered in Vilnius and fully owned by its five founders. The Fund will address a significant market gap by providing tailor-made facilities adapted to the underserved needs of predominantly SMEs and small mid-caps in a region where alternative financing is nascent.
Western Europe
In the Netherlands, we invested €15m in Karmijn Kapitaal Fund, a fund led by female founders, applying an investment strategy focused on companies led by gender diverse management teams. The fund has a target size of €100m and focuses on the growth and expansion of Dutch SMEs.
In partnership with InvestNL, we also invested in WDL SME Fund, which is run by a first-time team and provides senior financing to Dutch SMEs. The EIF and InvestNL cornerstone investment of €25m will support the fund’s first closing at €40m and thus the establishment of a new player in the Dutch alternative financing market. It will provide alternative private credit solutions – medium and long-term debt financing – to SMEs established in the Netherlands.
We also joined forces with three regional Belgian partners—Finance & Invest Brussels, PMV, and Wallonie Entreprendre (formerly Sowalfin), providing guarantees to build a total portfolio of loans worth more than €600m in which all final beneficiaries will benefit from a reduction in collateral.
Working in conjunction with Bürgschaftsbank (BB) Baden-Württemberg and Bürgschaftsbank Nordrhein-Westfalen in Germany, we provided counter-guarantees on SME loan portfolios in the German states of Baden-Württemberg and North Rhine-Westphalia. The agreement with BB- Nordrhein-Westfalen will focus on the competitiveness and growth of local SMEs, while the agreement with BB Baden-Württemberg will cover a broader spectrum of sectors, including sustainability, innovation, competitiveness and also the cultural and creative sectors.
In neighbouring Austria, we supported Austrian businesses active in a range of different sectors through our long-term partner aws. The agreement aims to improve the overall competitiveness of more than 2,500 Austrian businesses by facilitating access to finance to riskier SMEs or those lacking sufficient collateral. In total, the agreement will make more than €550m available in the form of SME lending.
€1.4bn invested in PE funds
SAPOTEC: energy always and everywhere
Location: Salzburg, Austria
Financial Intermediary: UniCredit Bank Austria
SME: Sapotec
Sector: energy
Number of employees: 61
Financing purpose: product development
EU financing: InvestEU
1. The €4.3bn figure is the expected volume of SME loans inclusive of the counter-counter-guarantee rate.
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