The European Investment Bank (EIB), the long-term lending bank of the European Union; the World Bank Group, a family of five organizations that provide leveraged loans and grants to developing countries; and the European Bank for Reconstruction and Development (EBRD), a development finance institution headquartered in London, recently launched a new joint international financial institution (IFI) action plan that is intended to rekindle growth in Central and South-Eastern Europe by supporting private and public sector initiatives including infrastructure, corporate investment and local financial sectors. EIB, EBRD and the World Bank Group will provide financial support to Albania, Bosnia and Herzegovina, Bulgaria, the Czech Republic, Croatia, Estonia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia. These countries will benefit from a EUR 30 billion (USD 38 billion) commitment during a 12-month period from 2013 to 2014.
EIB has committed EUR 20 billion (USD 25 billion) to the project, which will mainly consist of long-term loans to the private and public sector, addressing sectors including small and medium-sized enterprises (SMEs). EIB will also provide technical support for the mobilisation of EU grants, leverage both private and public funds, and provide advisory services. Werner Hoyner, President of the EIB Group, said, “I strongly welcome the coordinated effort of our institutions. I believe that each one, in its own area of expertise, can contribute to consolidated growth in Central and South Eastern Europe. The EIB, as the bank of the EU, will support growth and employment in the region and always keeping the need to improve long-term competitiveness as the guiding factor.”
The World Bank Group is expected to provide a total of EUR 6.5 billion (USD 8.3 billion) in support to the effort. The World Bank’s International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) will provide lending and technical assistance. The International Finance Corporation (IFC), the private-investment arm of the World Bank Group will support the private sector through investments and advisory services in sectors including banking, infrastructure, manufacturing, agribusinesses and trade. World Bank Group, the Multilateral Investment Guarantee Agency (MIGA) will provide political risk insurance to support investments in a range of sectors.
EBRD expects to invest EUR 4 billion (USD 5.1 billion) in the effort through loans, equity and trade financing intended to facilitate regional integration and export-led growth.
By Chioma Okwudiafor, Research Associate
About European Investment Bank (EIB)
The European Investment Bank (EIB) was created in 1958 and now serves as the long-term lending bank of the European Union. In addition to supporting projects in EU member states, its main priorities include financing investments in likely future member states and EU partner countries, principally in the area of small and medium-sized enterprises. According to its website, “the EIB operates on a non-profit maximizing basis and lends at close to the cost of borrowing.” The total subscribed capital of the Bank is EUR 232 billion (USD 297 billion) as at December 2011.
About European Bank for Reconstruction and Development (ERBD)
The European Bank for Reconstruction and Development (EBRD) is a development finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries and is now owned by 61 countries as well as the European Investment Bank and the European Union. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe, Central Asia and more recently in Southern and Eastern Mediterranean region. 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 2011, EBRD disbursed a total of EUR 6.7 billion (USD 8.3 billion).
About World Bank Group
A member of the World Bank Group, the World Bank is an international financial institution that provides loans to developing countries for capital programs. The World Bank’s official goal is the reduction of poverty. According to the World Bank’s Articles of Agreement (as amended effective 16 February 1989), all of its decisions must be guided by a commitment to promote foreign investment, international trade, and facilitate capital investment. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID). World Bank currently has 188 member countries.
Sources and Additional Resources:
Joint Press Release Statement by EIB, World Bank and EBRD- “New Joint IFI Action Plan for Growth in Central and South Eastern Europe”
MicroCapital Universe Profile: European Investment Bank (EIB)
MicroCapital Universe Profile: European Bank for Reconstruction and Development (ERBD)
MicroCapital Universe Profile: World Bank Group http://www.microcapital.org/microfinanceuniverse/tikiindex.php?page=The+World+Bank+Group
MicroCapital Universe Profile: International Finance Corporation
MicroCapital Universe Profile: Multilateral Investment Guarantee Agency
MicroCapital Story: November 14, 2012, “MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD) Lends $70m to Garanti Bank of Turkey, Hipotekarna Banka of Montenegro, Bai Tushum of Kyrgyz Republic”
MicroCapital Story: March 21, 2012, “MICROCAPITAL BRIEF: European Investment Fund, Banca Transilvania Sign $10m Loan Agreement for Microfinance in Romania” http://www.microcapital.org/microcapital-brief-european-investment-fund-banca-transilvania-sign-10m-loan-agreement-for-microfinance-in-romania/
MicroCapital Story: August 23, 2012, MICROCAPITAL BRIEF: World Bank Releases Government Electronic Payment Program Guidelines http://www.microcapital.org/microcapital-brief-world-bank-releases-government-electronic-payment-program-guidelines/
MicroCapital Story: June 29, 2012, “MICROCAPITAL BRIEF: European Union (EU), European Bank for Reconstruction and Development (EBRD) Partner to Support Small and Medium-Sized Enterprises in Mongolia, Turkey”
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at http://www.microcapital.org/products-page/