Icelandic small businesses to get €21 million European financing boost

    Date: 06 June 2024
  • European Investment Fund signs a guarantee agreement with Byggðastofnun to support over 50 small businesses in rural areas of Iceland.
  • Guarantee is backed by the portfolio guarantee programme of the European Commission’s InvestEU initiative.
  • New Byggðastofnun lending on more favourable terms aimed at aiding young farmers, fragile communities and female-led start-ups.

The European Investment Fund (EIF) has signed a guarantee agreement with Icelandic regional development agency Byggðastofnun, to support Icelandic small entrepreneurs outside the capital region. Supported under the European Commission’s InvestEU initiative, the EIF guarantee will enable Byggðastofnun to make available up to €21 million in new lending with more favourable conditions. The new financing is aimed in particular at supporting young farmers, fragile communities and female-led start-ups and is expected to support at least 50 SMEs around Iceland – one of the least densely populated countries in the world.

At a signature ceremony in Sauðárkrókur Byggðastofnun CEO Arnar Már Elíasson, commented: “Iceland is one of the least densely populated country in the world, with only 4 inhabitants per sq. km2. Additionally, 80% of the population lives in the capital area resulting in vast areas with little to no population. As a result, rural infrastructure in Iceland is challenging and expensive. The Invest EU program provides Byggðastofnun, the rural development institution in Iceland, with the necessary means to provide invaluable, affordable lending opportunities to rural parts of Iceland to equalise living standards around the island.”

EIB Group Vice-President Thomas Östros echoed the point: “One of the public policy goals of the EIB Group is the support to SMEs. The broadening of the European Commission’s InvestEU initiative to EFTA-countries, enables the EIF to extend this guarantee facility to Iceland. Entrepreneurs in rural Iceland face a though climate, both in atmospheric and financing terms, and we’re happy to support Byggðastofnun’s efforts to improve the financial part of the climate.”

The agreement with Byggðastofnun is the first-ever guarantee backed under the InvestEU Programme in Iceland.

EU Ambassador to Iceland Lucie Samcová - Hall Allen commented: “For three decades now, Icelandic businesses, universities, research institutes and other organisations have taken part in various EU programmes. They have achieved remarkably high success rates, and are extremely valued by their international partners. The guarantee agreement we are signing with Byggðastofnun today is the first-ever guarantee backed by the InvestEU Programme in Iceland. I look forward to seeing first-hand how this agreement helps small businesses in rural areas grow and thrive. “

This guarantee transaction is the second in partnership with Byggðastofnun, after a previous guarantee (COSME Loan Guarantee Facility) that supported Icelandic small businesses with insufficient access to finance with around 100 loans amounting to about €25 million between 2021 and 2023.

Background information:

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. Since its first project in Norway, in 1974, the EIB Group has made available over €6 billion to support projects in the EFTA region, about €5 billion through the EIB and €1,1 billion through the EIF. On the whole, in Iceland alone the EIB Group has made available nearly €1.2 billion euros throughout the years between EIB and EIF financing.

The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable economy. It helps generate additional investments in line with EU policy priorities, such as the European Green Deal, the digital transition and support for small and medium-sized enterprises. InvestEU brings all EU financial instruments together under one roof, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub, and the InvestEU Portal. The InvestEU Fund is implemented through financial partners who invest in projects using the EU budget guarantee of €26.2 billion. This guarantee increases their risk-bearing capacity, thus mobilising at least €372 billion in additional investment.

Byggðastofnun is an independent investment agency owned by the Icelandic state. Byggðastofnun prepares, organizes and funds projects and provides loans with the aim of bolstering regional settlement, boosting employment and encouraging innovation in business and industry.

Press contact:

EIB Group: Tim Smit | +352 691 286 423 |

Byggðastofnun: Hrund Pétursdóttir | +354 455 5400 |

European Commission: Ignazio Cocchiere | +32 2 29 82261 |

EU Embassy to Iceland: Viktor V. Stefánsson | +354 864 3386 |
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