Social impact, Skills & Human Capital
“Making money care more” isn’t just a tagline for our social impact campaign. It’s about ensuring that every euro spent has an impact well beyond its financial journey. More importantly, it’s a principled position that informs our support for social entrepreneurs and micro enterprises, empowering them with the requisite financing to generate the widest social impact possible. That’s why we extended support to microfinance institutions, social impact funds and social enterprises, all of which have a societal component as much as they do a business one. In concrete terms, this support included guarantees, counter-guarantees, loans, equity investments and capacity-building support.
In an EIF first, we embarked on our very first social housing programme, and we look forward to expanding our activity in this domain in the future. And since Europe and culture are synonymous, we bolstered our support for the cultural and creative sectors, which continue to inspire and define our individual and shared identities as well as draw people from all over the world to our cities, museums, festivals, and concert halls.
In addition, we continued our work in support of students and learners of all ages who are looking for that financial boost that will allow them to invest in developing their skillset and meet the demands of the twenty-first century’s changing economic landscape. And speaking of change, we have continued to push ahead with our diversity agenda, making every effort to promote better gender balance across the venture capital ecosystem in particular, through financing, research and knowledge-sharing initiatives.
Financing the smallest and most vulnerable actors of the economy
From emerging fintech start-ups to more traditional financing in rural areas, we extended financial support to the smallest and most vulnerable actors within the economy through a wide range of resourceful financial intermediaries.
In the Baltics, Noviti, a young fintech, provides business loans to micro-enterprises via digital channels. With the support of an EIF capped guarantee (for a maximum portfolio volume of €47m), Noviti is expected to support more than 2,500 microloans in Latvia, Lithuania and Poland. Their aim is to provide affordable and accessible loans while maintaining social (minimum 40% borrowers in rural areas) and gender equality (minimum 30% female borrowers).
Building on a strong previous partnership, in Greece, we renewed our co-operation with the Cooperative Bank of Karditsa in the field of microfinance, which is expected to support around 400 micro-borrowers and 50 social enterprises. This partnership was further extended in response to the devastating flash floods in September, when around 25% of Greece’s agricultural production in Thessaly was flooded, resulting in severe damage to agricultural production, livestock, industry and infrastructure. The extended agreement aims to support businesses encountering difficulty in accessing finance due to the adverse impact from the flooding, particularly those lacking sufficient collateral and in need of financing to replace damaged or destroyed assets.
In neighbouring Bulgaria, we extended support in the form of a capped guarantee to Bulgarian Development Bank MicroFinancing (BDB MF), which is fully owned by EIF shareholder the Bulgarian Development Bank. The guarantee will enable BDB MF to provide financing to the tune of around €10m to micro businesses, including the self-employed, on more favourable terms. This translates into reduced cost of financing, substantial reduction in collateral requirements by requesting only the personal guarantee from the customer, and financing borrowers that would otherwise not be considered for such financing.
Outside the EU, we provided a loan of €5m to Podgorica-based Alter Modus. The leading microfinance institution in Montenegro is a known EIF counterpart, having worked with us in the past. 1,000 loans are expected to be provided to vulnerable persons and micro-enterprises established and operating in Montenegro. In-house developed client-tailored training, coaching and mentoring programmes will be provided to the different client groups, such as women in business and agri-business entrepreneurs, among others.
In Serbia, a tier-2 subordinated loan transaction will support 3Bank with €4m in its endeavour to increase its outreach, including new underbanked client market niches and new geographical territories. 3Bank is the only microfinance bank in Serbia with a strong outreach to vulnerable groups in rural areas, including small farmers and micro-entrepreneurs, and their product offering includes free business development services to entrepreneurs in the form of education, which is available to clients before as well as after the loan disbursement.
Fairness in algorithmic decision systems: a microfinance perspective
Capacity-building efforts
Alongside more traditional financing efforts, we also engaged in extending capacity-building support, particularly to intermediaries that may have not yet reached sustainability or are in need of risk capital to sustain their growth and development. Approximately €40m was committed through the EaSI Programme for this initiative in the past, followed by a Capacity Building Investment (CBI) product under InvestEU, with its first signatures this year. Ultimately, the aim is to use various capital strengthening measures to enhance the institutional capacity of financial intermediaries, both ‘greenfield financial intermediaries’ as well as all other intermediaries, particularly in the fields of microfinance, social entrepreneurship, or skills and education.
38,690 micro-enterprises supported
In Latvia, the CBI was used in the form of a €1m subordinated loan to support Flexidea’s organisational and operational development in the current markets (Latvia and Poland) as well as its expansion into new markets (Romania and the Czech Republic). This support aims to strengthen Flexidea’s organisational structure and increase its leverage capacity in the new markets, through actions such as investing in and developing IT infrastructure, conducting marketing activities, covering licensing and working capital costs relating to the expansion and strengthening of the capital base, all of which will allow the intermediary to attract both equity and debt funding from private investors.
Meanwhile, in Romania, a €5m loan was given to Patria Bank, a Romanian lender specialised in financing small and micro-entrepreneurs with limited access to finance. The objective of the loan is to help strengthen Patria Bank’s capital position, thus facilitating further growth and development, with the ultimate goal of improving access to finance for micro-entrepreneurs located in rural and small urban areas in Romania.
Skills & education in a changing world
With digitalisation changing the way we work and relate, climate change altering the way our economies and industries function, and new sectors growing and traditional ones shrinking, Europe’s workforce needs to remain agile and flexible, which often means access to education for skilling and re-skilling. To this end, the European Commission and the EIF designed a dedicated instrument under the InvestEU programme, which has been used extensively to support education and training.
In France we signed a €4m counter-guarantee agreement with SOGAMA (Sogama Crédit Associatif), which will support around 50 social enterprises, including associations, foundations, co-operative organisations or other entities operating in the education field that offer training services for young apprentices or students typically excluded from mainstream credit markets.
SOGAMA will also support social enterprises that provide training to their employees, organisations active in the skills, education and training sectors, and organisations providing services ancillary to skills, education and training to develop the nascent market for education finance, which traditional market players often underserve.
In northern Italy, we signed a guarantee transaction with Banca Cassa di Risparmio di Savigliano (Banca CRS) that will make around €500,000 available to develop the nascent market for education finance. Banca CRS will thus expand its lending activity, implementing a new commercial strategy focused on the skills and education sectors. In the recent past, Banca CRS has not financed such projects because of the difficulty in measuring the related credit risks.
Further north, we signed a multi-pronged agreement in April with Swedish Ark Kapital, a niche debt-finance provider active in financing technological innovators and start-ups in Sweden, Denmark and Germany. Broadening its reach through this agreement, Ark will also be able to enhance access to finance for enterprises active in the skills, education and training sectors, as well as provide ancillary services, with a focus on educational technology (edtech), to the tune of €50m.
Supporting the cultural & creative sectors
The cultural and creative sectors (CCS) enrich our imaginative lives, drive economic growth, foster innovation and creativity, promote social cohesion and community engagement, and enhance Europe’s soft power globally. For these reasons and others, it is important to build on pilot instruments such as the CCS Guarantee Facility, which was conceived with the European Commission and met with strong demand in the markets. Not only have we therefore continued these efforts under InvestEU, we have also expanded them to include an equity component.
At the San Sebastian Film Festival in September, we announced a guarantee transaction with MDDG, a new Luxembourgish asset manager specialised in investments in the audio-visual sector and, in particular, the co-production and production of films and TV series projects. The guarantee will cover senior loans and minimum guarantees to European film productions, for an expected total portfolio volume of €47m. Senior loans bridge the financing gap during the development stage of an audio-visual project, while minimum guarantees are a specific type of financing of the production gap provided against future revenues of a film or TV series.
Finally, capped and uncapped guarantee transactions with Komerční banka will facilitate around €265m in new financing to Czech and Slovakian SMEs and mid-caps, covering sectors across our spectrum of social activity. The guarantees will support debt financing for about 6,500 businesses, facilitating lending on favourable terms to support investment in innovation and digitalisation, sustainability, social entrepreneurship, and skills and education, as well the cultural and creative sectors, all of which will foster the wider entrepreneurial sector in the region.
Achieving social impact – social businesses
Aligned with key EU policy objectives, the EIF’s support for social businesses, especially those with an emphasis on social inclusion, sustainability, and responsible business practices, prioritises positive social and environmental outcomes alongside financial sustainability. Perhaps more importantly, our continued engagement in this sector reflects our commitment to fostering a more inclusive and socially responsible European economy.
Three years after launching the very first Social Impact Bonds fund in the EU, BNP Paribas launched a second fund, BNP Paribas European Impact Bonds Fund 2, with the participation of the EIF. With a target size of €40m, the new fund aims to intensify the development of the European impact bond market, with two strategic investors having joined the EIF in creating it: Banque des Territoires (part of Groupe Caisse des Dépôts), and BNP Paribas Cardif, the Group’s insurance subsidiary. The fund will finance projects that have a positive impact on society or the environment, promoting innovation in public policy while generating budgetary savings in government.
In the CEE region, we made an important commitment in Tilia Impact Ventures II, a Czech fund – the first institutional impact fund in the country. Tilia’s goal is to support around 25 early-stage investments in the Czech Republic and broader CEE region, looking in particular for companies developing technologies to tackle issues linked to social inclusion and civic empowerment, education and training, health and wellbeing, environment and sustainability. Our €18.8m commitment constitutes an important contribution to this fund with a total size of €26.5m. The transaction lies at the core of our impact investing strategy, as our commitment has made possible the emergence of a new impact investor on the European scene, while at the send time, Tilia does not compromise between impact and financial performance and aims to invest in scalable opportunities addressing pressing social and climate-related issues.
We also invested €20m in French Ring Mission Venture Capital I, managed by a new VC team in the tech-for-good French market. This VC fund targets investments in impact-driven, early-stage companies using technology to solve social and environmental issues. With a target size of €70m, it aims to invest in about 20 early-stage, tech-for-good companies with strong potential for growth and impact in sectors such as education, financial inclusion, the silver and circular economies, clean tech, green finance and digital health.
The EIF’s support will allow the Fund to approach its optimal target size, supporting the emergence of a still underserved segment of the impact market.
On the guarantee front, we signed a guarantee agreement with Erste Group Bank AG and 11 additional banks in Austria, the Czech Republic, Hungary, Romania and Slovakia that is expected to unlock at least €66m for more than 500 social enterprises (which often have trouble obtaining credit) and to create around 1,750 jobs. These social enterprises will also benefit from specialised capacity-building and networking opportunities. The transaction is also expected to have a strong positive impact on the social economy in the CEE region, which is not yet fully developed.
We also signed a guarantee transaction with the leading ethical bank in France and our long-term partner, Société financière de la Nef (La Nef). The guarantee will enable La Nef to provide €73m worth of financing on more favourable terms for approximately 250 social enterprises that are established and operating in France. La Nef has a clear focus on start-ups in its social loan activity.
Gender matters, which is one of the reasons we also supported F’in Common, a small female-led Belgian co-operative active in the field of social enterprise finance. Only social enterprises that have been awarded with the Financité Solidarity-based Finance Label can request a loan, which ensures a strong focus on social impact. On the back of this agreement, F’in Common will be able to increase its portfolio volume over five years by €5.9m, supporting a growing number of newly and already established social enterprises in Belgium that would otherwise not be financed.
Finally, in Spain, we signed a €145m guarantee agreement to support more than 5,000 micro and social entrepreneurs, in the form of up to €2m for social enterprises and microcredits up to €50,000. This new agreement builds upon and consolidates a ten-year co-operation between the EIF and Laboral Kutxa in the field of social economy, which has seen more than 15,000 micro and social businesses supported, creating more than 24,000 jobs.
Social housing programme – a first
A €300m agreement with CDP Real Asset SGR (owned by Cassa Depositi e Prestiti - CDP) in Italy constitutes the EIF’s first national social housing programme in Europe. The agreement will enable the EIF and Fondo Nazionale dell’Abitare Sociale (FNAS—National Social Housing Fund) to support real estate projects that will have a direct impact on social inclusion and urban regeneration in Italy. FNAS’s main objectives include supporting the creation of around 10,000 new beds for students as well as housing solutions for self-sufficient elderly people, with a strong focus on ESG principles.
The EIF will play a dual role vis-à-vis FNAS, namely, as a consultant to pinpoint and assess the investment opportunities and, subsequently, as a co-investor in the funds identified, resulting in an overall commitment to Italy’s social housing sector of up to €300m (shared equally between the EIF and FNAS).
Diversity
We remain actively engaged in promoting diversity, gender equality, and female entrepreneurship through a variety of initiatives that recognise the importance of inclusive economic growth as well as gender parity for its own sake. In fact, we’ve intensified our efforts, most notably in the venture capital ecosystems, via cross-sector investments under tthe European Commission's InvestEU programme, amongst others. These have included investments in Helsinki-based technology transfer fund Voima Ventures, Lithuanian crowd-lending platform Heavy Finance, Italian private credit funds Azimut Diversified Corporate Credit ESG-8 and MPI Italia III, and also F’in Common, a co-operative active in the field of social enterprise finance in Belgium. In total, around 38% of the funds that we have supported under InvestEU comply with at least one gender criterion, representing close to €1.6bn in commitments. The criteria most frequently met relate to the participation of women as partners, and women in the senior investment team.
On the knowledge sharing front, in October we hosted the second Empowering Equity event in Luxembourg, bringing together fund managers from across Europe for a day of exploration, insights, debates, and networking with like-minded GPs. Whether gender smart investments, practical advice on pitching, or sorting out legal matters, the underlying goals were to identify opportunities, to elevate investment proposals, and, ultimately, to strengthen women’s voices and make the European economy even stronger.
In parallel, research efforts have progressed in collaboration with InvestEurope, culminating in the publication of the third edition of the VC Factor. This year’s study approached the subject through a gender lens, offering data-driven insights about gender diversity trends in the European VC and start-up ecosystems.
In relation to our ESG reporting, we launched a new fully-fledged ESG questionnaire – again with InvestEurope - to collect ESG data at fund- and investee-company level. Special focus is placed on gender-related data at all levels. This is the first time that such a broad and systematic effort has been undertaken and it is envisioned that this will become an annual exercise, offering an opportunity for ongoing monitoring, improved data availability and transparency, and ultimately helping to measure the EIF’s impact and the main trends across the European VC industry.
Finally, the Gender Smart Equity Investment Programme (GESIP) has started to materialise. GESIP’s goal is to allow the EIF to join forces with Member States in promoting professional women in leadership and decision-making positions at financial institutions. This year saw a first signature in December, integrating gender criteria into existing investment programmes in an agreement with the German government. The GESIP programme uses the same gender criteria as InvestEU to ensure a coherent approach towards the market and the EIB Group Gender Action Plan.
VC Factor – Gender Lens edition
S&E Guarantee Pilot: Antoaneta Stefanova
Location: Sofia, Bulgaria
Financial Intermediary: Telerik Academy
Beneficiary: Antoaneta Stefanova
Studies: software engineering; coding
Institution: Telerik Academy
EIF financing: Skills & Education Guarantee Pilot
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