First three guarantee agreements under its new Micro-credit Facility

The European Investment Fund has just concluded three guarantee operations, totalling EUR 50 million, under the SME Guarantee Facility's special Window for Micro-credit. These are the first operations signed under this new Scheme, which is part of the Community-funded Multi-annual Programme for enterprise and entrepreneurship 2001-2005 (MAP). These 3 operations, in France, Spain and Germany, will contribute to increase the consideration of smaller credits by commercial banks.

For the first signature, EIF will provide a guarantee to the Association pour le Droit à l'Initiative Economique (ADIE), a non-profit organization based in France, which is very active in providing finance and mentoring to enable financially excluded unemployed people access to credit for setting up their own business and improving their living conditions. The EIF's Micro-credit Facility, will support the expansion of ADIE's activities, in connection with the French banking sector.

The second and third Micro-credit guarantee agreements signed by the EIF have been with Spain's Instituto de Crédito Oficial (ICO) and Germany's Deutsche Ausgleichsbank (DtA), both public institutions specialised in long-term finance, which are launching new micro-credit schemes with EIF support.

ICO will contract global loan agreements with different banks in Spain, which will in turn sign agreements with social institutions that will be responsible for evaluating the feasibility and introducing the projects to the banks. The social institutions will also provide mentoring to the final beneficiaries.

Using EIF's Micro-credit guarantee, DtA will offer a full package of mentoring services to the new entrepreneurs to help during the set-up phase and thereafter, including a virtual start-up centre, on-line advice, individual meetings and seminars, advice from consultants, etc.

Micro-credit as a Special Guarantee Window of the SME Guarantee Facility

Micro-credit (less than EUR 25.000) is now identified as an important factor of business development, job creation and self-employment. These reasons led to the creation by the Commission of a new dedicated window under the SME Guarantee Facility, allowing a guarantee or a counter-guarantee of micro-credit operations. Its objective is to encourage financial intermediaries to become more involved in this area by offering loans of a smaller amount, which have proportionally higher unit handling costs. The EIF manages the SME Guarantee Facility on behalf of the European Commission, within the framework of the Multiannual Programme for enterprise and entrepreneurship 2001-2005.

The EIF is the European Union's specialised financial institution for venture capital and guarantees for SMEs. Based in Luxembourg, the EIF was established in 1994 as a joint venture between the European Investment Bank (which became its majority shareholder in 2000), the European Commission and European banks and financial institutions. EIF guarantee activity facilitates access to debt finance for SMEs through the intermediation of a wide range of banks and financial institutions. The latter are allowed to allocate capital to those operations at a rate of 20% in accordance with EIF's status as a Multilateral Development Bank under the European Solvency Ratio Directive. Currently, EIF's guarantee portfolio totals EUR 3.967 billion in some 100 different operations. For its venture capital activity, the investment strategy of the EIF focuses primarily on the promotion of European technology through investments in venture capital funds located in the Union and the Accession Countries. The EIF has proven itself to be a major player in the European venture capital market, with a cumulative portfolio of EUR 2.3 billion comprising some 173 funds across the EU and Central and Eastern Europe.