Second set of guarantee tools approved for funding from the European Fund for Sustainable Development (EFSD) part of the EU External November 2018
EFSD Guarantee Priority Area Financing for micro-, small and medium-sized enterprises (MSMEs) and agriculture
Intermediate Lending for MSMEs and Agriculture Catalysing investment and support for local businesses in riskier environments Lead financial institutions and corresponding EFSD guarantees 1 : Total Total investment expected: Regions covered: Consortium of: - 15 European Development Finance Institutions (EDFIs) - African Development Bank (AfDB) up to 60 m European Bank for Reconstruction and Development (EBRD): up to 30 m European Investment Bank (EIB): up to 20 m Agence Française du Développement (AFD): up to 85 m Up to 195 m Up to 18 m Up to 1.7 bn EU Neighbourhood These four guarantee tools will provide affordable funding to small businesses, many of which are engaged in agriculture. It is estimated that, together, the tools will: directly and indirectly create or support over 1.3 million jobs provide funding and assistance to around 450,000 companies scale up local green energy projects. The tools will enable financial institutions to provide major investment for small businesses. As a result these firms will become more resilient and will be able to start expanding. The tools will target in particular businesses owned by women and young people. They will also: foster economic development that benefits all sections of society raise living standards promote the adoption of high social and environmental standards reduce incentives for people to emigrate address gender equality, empower women and young people, help solve social problems support innovation and early stage projects mobilise domestic resources and expand the tax base 1 Precise list of institutions and corresponding guarantees to be confirmed in week of 19 November 2018.
InclusiFI Financial inclusion driven by diasporas Lead financial institutions: AECID (Spain) COFIDES (Spain) CDP (Italy) Up to 20 m Up to 11 m (approved in June 2018) Total investment expected: At least 120 m Region covered:, EU Neighbourhood The guarantee tool will enable up to 13,000 small businesses and households to access new financial products, such as mobile bank accounts, long-term credit for capital expenditures, and savings and protection programmes, or to receive lower-cost remittances from overseas. InclusiFI will create over 26,000 jobs in small businesses. It will benefit in particular the poorer sections of society, by narrowing income inequality, creating jobs, and making it easier for women and young people running micro- and small businesses to access finance. MSME Investment Platform (MIP) Investing in start-ups and venture capital, and developing sustainable innovation ecosystems Lead financial institution: Total investment expected: Regions covered: European Investment Bank (EIB) Up to 25 m At least 83 m EU Neighbourhood East and South This guarantee tool will help create jobs in the private sector, and develop people s skills and encourage entrepreneurship. In this way it will address many of the root causes of migration in countries neighbouring the EU. The EIB estimates that the Platform will directly create 2,000 permanent jobs and indirectly some 6,000 more. It will focus on empowering women and young people in particular.
FISEA EFSD SME Investment Guarantee Catalysing investment and support for small and medium-sized businesses in riskier environments Lead financial institution: Total investment expected: Region covered Agence Française du Développement (AFD) Up to 35 m Up to 5 m Up to 263 m This guarantee tool will create jobs and promote development that benefits all sections of society in Africa, by boosting private equity investments in promising African businesses. It will target vulnerable communities and regions that have experienced instability or are emerging from crises, as well as sectors of the economy traditionally bypassed by investors. The AFD estimates that this new FISEA initiative will create jobs for up to 60,000 people many of them women and young people - and indirectly support a further 430,000. This will reduce poverty and widen access to education, healthcare and other essential services. Archipelagos - One Platform for Africa (ONE4A) Supporting African SMEs throughout their lifecycle and developing capital markets Lead financial institutions: Total investment expected: Region covered: CDP (Italy) African Development Bank (AfDB) Up to 30 m Up to 5 m 150 m Africa This guarantee tool will support high potential African SMEs in reaching their next stage of growth, catalyse access to debt financing notably by piloting innovative capital markets solutions, and enable financing partners to share the risk of investing in projects. ONE4A will generate up to 50,000 jobs, many for young people, and benefit about 1,500 small businesses in some 10 countries in Africa. This will drive economic growth that benefits all sections of society, help to raise living standards, and enable many more people to access healthcare and education services.
EFSD Guarantee Priority Area Sustainable energy and connectivity
European Guarantee for Renewable Energy Supporting investment in sustainable energy in Lead financial institutions: Total investments expected: Regions covered: Agence Française du Développement (AFD) CDP (Italy) European Investment Bank (EIB) KfW Group (Germany) Up to 168.5 m Up to 24 m Up to 3.371 bn This guarantee tool will help to expand the generation of renewable energy in Sub- Saharan Africa and cut the region s carbon emissions, increase energy efficiency, enable many more people to access energy and reduce often daily power shortages. It will cover the offtake risks in renewable energy projects such as windfarms and solar energy. The resulting investment will create more than 11,000 jobs and add around 2 gigawatts of generating capacity from renewable sources. This guarantee tool will benefit directly wide sections of the population, especially those from poorer backgrounds. Renewable Energy Support Programme for Enhancing private investments in sustainable energy Lead financial institutions: EFSD Guarantee Contribution: Total portfolio budget: Region covered: AECID (Spain) COFIDES (Spain) Up to 20 m Up to 2 m Up to 320 m This guarantee tool will promote private sector financing for wind, solar, hydro, geothermal and biomass energy-generation projects. The resulting investment will: add 120 megawatts in generation capacity from renewable energy sources improve living standards help provide reliable, clean energy to rural, remote and underserved regions cut the generation of energy which produces greenhouse gases. As a result, countries in will be able to move more rapidly to producing sustainable, reliable energy, and source their energy in a more secure way.
Room2Run Helping to raise up to 2 bn in fresh investments for new sustainable energy projects Lead financial institution: Total investments expected: Regions covered: The African Development Bank (AfDB) Up to 37 m (on top of up to 50 m allocated in June 2018) 1-2 bn EU Neighbourhood Room2Run will allow the AfDB to finance more sustainable renewable energy projects in. The EFSD Guarantee supports a securitisation structure that enables private investors to invest in AfDB projects by taking credit risk on a defined tranche of the private sector portfolio. This will free up AfDB capital and thus enable the bank to finance new renewable energy projects. Some of these projects will be located in fragile states, focusing on: large-scale, renewables-based solar power producers, which provide electricity to the national grid distributed renewables-based programmes, which are not connected to the national grid but supply particular communities or areas. Several pension funds have concluded that the risks of African private sector investments are lower than is commonly assumed. Through the EFSD-enabled transaction, they will for the first time invest in the highest-risk components of African private sector loans. So the transaction will have an important demonstration effect, as well as bringing in more investment in renewable energy projects. AfDB worked closely with Standard & Poor's, the rating agency, to prepare this project. The AfDB estimates that the energy projects it tracks over the medium-term will: provide electricity for over a million households by creating over one gigawatt of generating capacity create 15,000 jobs offer better access to more affordable, more reliable and cleaner electricity to industries, businesses and local communities.
EFSD Guarantee Priority Area Sustainable cities
Sustainable Cities Investment Fund Platform Creating resilient and climate-friendly urban infrastructure Lead financial institutions: Total investments expected: Regions covered: European Investment Bank (EIB) Up to 37 m Up to 11 m Up to 370 m EU Neighbourhood This guarantee tool will address the current market failures and risks that hamper investment in urban infrastructure. It will mobilise private and public capital in cities where resilient municipal infrastructure and services are lacking, including in fragile and least-developed countries. Who ll benefit? These cities will benefit from new infrastructure, including: reliable and clean electricity supplies better and safer water supply and sewerage services improved access to public transport higher air quality, and less polluting and better functioning solid waste services. Such investments will also improve cities competitiveness and attractiveness to businesses and investors. And the EIB estimates that they will create: up to 350,000 jobs during the construction of the infrastructure being financed up to 15,000 permanent jobs linked to its operation and maintenance. European Guarantee to Increase Local Governments Access to Financing Developing urban infrastructure and services in African cities Lead financial institution: Total investments expected: Region covered: Agence Française du Développement (AFD) Up to 30 m 2 m 150 m This guarantee tool will create incentives for domestic commercial banks in Africa to lend at affordable rates to local governments and public sector companies. It will also develop local borrowing markets for them. Investment in urban infrastructure and services will create jobs, and inhabitants will benefit from higher environmental standards, and better waste management, water and sanitation services, and public transport.
EFSD Guarantee Priority Area Digitalisation
Social Impact Fund for Africa (SIFA) Investing in digital innovation projects with a high social impact Lead financial institution: EFSD Guarantee Contribution: Total portfolio budget: Region covered: African Development Bank (AfDB) Up to 25 m Up to 2 m 350 m EU Neighbourhood South SIFA will lower the current barriers to investment in, and increase capital available for, more than 200 businesses engaged in digital innovation projects. It will do so by enabling investors to share the risks involved, and/or by lower such risks considerably. The AfDB estimates that SIFA will create directly 55,000 jobs and indirectly some 165,000 more. It will focus on projects that: in particular involve women and young people on low incomes are in rural areas in least developed, fragile, or landlocked countries The Bank also estimates that the tool will: improve access to education through digital technology for 1.5 million people bring renewable energy supplies to up to 400,000 people. FMO Ventures Programme Empowering entrepreneurs for sustainable development Lead financial institution: Total investments expected: Region covered: FMO (Dutch Development Bank) Up to 45 m Up to 6.5 m Expected to catalyse up to 1.125 bn EU Neighbourhood South This guarantee will boost private investment in innovative start-ups that use digital technologies to offer services to people who currently have little or no access to them. For example, small-scale farmers and agribusinesses will benefit from socalled agri-tech solutions. The guarantee will also help people working in the so-called informal economy. This includes activities such as bartering, odd jobs, and street trading, which aren t recorded for tax purposes. Services which these start-ups could provide include digital payments and off-grid electricity for street vendors. A thriving local venture ecosystem will help to create jobs, improve people s career prospects, raise wages and expand economies.
EFSD Guarantee Priority Area Local currency financing
Local Currency Lending in Unlocking investment for local banks, small businesses, and sustainable energy, and developing capital markets Lead financial institution / KfW Group (Germany) / Up to 15 m African Development Bank (AfDB) / Up to 12.5 m Total Up to 27.5 Up to 2 m Total investments expected: Up to 306 m Region covered: These two guarantee tools will address the risks associated with currency depreciation, and boost lending in local currency for projects which are otherwise sustainable. They will help to lower the cost of funding, and enable many more local banks, project developers, and small companies to access it than can at present. By providing greater protection from changes in the exchange rate, the tools will help local businesses and governments to: create jobs promote entrepreneurship foster green economic growth that benefits all sections of society help develop sustainable capital markets - crucial for economic growth. The AfDB estimates that the guarantee tool for which it is the lead financial institution will create up to 20,000 jobs. Communities and businesses will also benefit from a further 600 megawatts in power generation from renewable sources. This will help to meet countries growing energy needs and ensure more affordable and stable energy prices.
FOR MORE INFORMATION: Secretariat of the External European Commission 41, rue de la Loi/Wetstraat, 1040 Bruxelles/Brussels, Belgium EC-EIP-EFSD-SECRETARIAT@ec.europa.eu https://ec.europa.eu/external-investment-plan