MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD) to Loan $34.3m to European Fund for Southeast Europe (EFSE) for On-lending to 4k Micro- and Small Enterprises (MSEs) via Retail Lenders

The European Bank for Reconstruction and Development (EBRD), a UK-based multilateral development bank, recently announced that it will extend a loan of EUR 25 million (USD 34.3 million) to the European Fund for Southeast Europe (EFSE), a Luxembourg-based microfinance investment vehicle (MIV) that was initiated by German development bank Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW) with the financial support of the German development ministry Bundesministerium für Wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) and the European Commission. EFSE intends to use the funds to extend loans to retail institutions to fund approximately 4,000 new loans to micro- and small enterprises (MSEs) and will have the flexibility to draw the funds from EBRD in EUR as well as USD. No further information is available about the financial terms of the loan.

As of June 2013, EFSE has an outstanding investment portfolio of EUR 774 million (USD 1 billion), which is placed in Southeastern Europe and Central Asia. As of 2013, EFSE also holds a microfinance label from the Luxembourg Fund Labeling Agency (LuxFLAG), an NGO that certifies that social investment vehicles actually invest as advertised. In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries.

By A’kos Szebeni, Research Associate

About European Fund for Southeast Europe (EFSE)

The European Fund for Southeast Europe (EFSE) was established in 2005 by Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW), a German development bank, with financial support from the German Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung) and the European Commission of the EU. EFSE seeks to aid economic development in southeastern Europe and parts of central Asia by supporting the provision of financial services to low-income households and micro- and small enterprises via local financial institutions. EFSE is privately managed, with Oppenheim Asset Management Services of Luxembourg acting as fund manager and Finance in Motion GmbH of Germany acting as fund advisor. As of June 2013, EFSE has an investment portfolio of EUR 774 million (USD 1000 million). As of 2013, EFSE also holds a microfinance label from Luxembourg Fund Labeling Agency (LuxFLAG), an NGO that certifies that social investment vehicles actually invest as advertised.

About European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development (EBRD) is a multilateral development finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries, and it is owned by 61 countries as well as the European Investment Bank and the European Union as of 2012. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe, Central Asia and North Africa. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs). In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries.

About Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW)

Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW) is a state-owned development bank in Germany. KfW has three goals: to reduce poverty, to make globalization “fair” and to conserve natural resources. KfW collaborates with local financial institutions in approximately 60 countries, including microbanks, commercial banks, village savings banks, non-governmental organizations and regional microfinance funds. KfW made new financing commitments of EUR 1.7 billion (USD 2.3 billion) through the first three fiscal quarters of 2013 and as of October 2013, reported total assets of EUR 476 billion (USD 653 billion).

Sources and Additional Resources:

[1] European Bank for Reconstruction and Development (EBRD), “EBRD invests additional EUR 25 million in EFSE,” http://www.ebrd.com/pages/news/press/2013/131115.shtml

MicroCapital, January 18, 2014, “European Bank for Reconstruction and Development (EBRD) to Loan $2m to FINCA Jordan for On-Lending to Micro-, Small Enterprises (MSEs),” http://www.microcapital.org/european-bank-for-reconstruction-and-development-ebrd-to-loan-2m-to-finca-jordan-for-on-lending-to-micro-small-enterprises-mses/

MicroCapital, January 8, 2014, “European Bank for Reconstruction and Development (EBRD) Loans $4m to Microfund for Women (MFW) of Jordan to Support Onlending to Female Entrepreneurs,” http://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-loans-4m-to-microfund-for-women-mfw-of-jordan-to-support-onlending-to-female-entrepreneurs/

MicroCapital, December 27, 2013, “European Bank for Reconstruction and Development (EBRD) May Loan $27m to Tunisie Leasing to Support On-lending to Micro-, Small, Medium-sized Enterprises (MSMEs) in Tunisia,” http://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-may-loan-27m-to-tunisie-leasing-to-support-on-lending-to-micro-small-medium-sized-enterprises-msmes-in-tunisia/

MicroCapital, December 23, 2013, “European Fund for Southeast Europe (EFSE) Loans $3.4m to Agricultural Cooperative Bank of Armenia (ACBA) Leasing in Armenia, Makes $106k Equity Investment in Kreditimi Rural i Kosoves of Kosovo,” http://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-3-4m-to-agricultural-cooperative-bank-of-armenia-acba-leasing-in-armenia-makes-106k-equity-investment-in-kreditimi-rural-i-koso/

MicroCapital, December 19, 2013, “European Fund for Southeast Europe (EFSE) Loans $63m to Belorusian-Russian Belgazprombank of Belarus, Banca Transilvania of Romania, Microfinance Institution AccessBank of Azerbaijan,” http://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-63m-to-belorussian-russian-belgazprombank-of-belarus-banca-transilvania-of-romania-microfinance-institution-accessbank-of-azerbai/

MicroCapital, November 9, 2013, “European Fund for Southeast Europe (EFSE) Lends $10m to Megabank of Ukraine to Support Agricultural Lending,” http://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-lends-10m-to-megabank-of-ukraine-to-support-agricultural-lending/

MicroCapital Universe Profile: European Fund for Southeast Europe (EFSE), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Fund+for+Southeast+Europe+%28EFSE%29

MicroCapital Universe Profile: European Bank for Reconstruction and Development (EBRD), http://microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+%28EBRD%29

MicroCapital Universe Profile: Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=KfW+Entwicklungsbank+%28KfW%29

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