EIF and Bank of Cyprus sign two guarantee agreements for new SME financing

The EIF has today signed two guarantee agreements with the Bank of Cyprus, allowing the bank to provide up to EUR 50 million of new loans to Cypriot Micro and Small enterprises (“MSEs”), of which EUR 35 million will support enterprises in their start-up or newly established phase, i.e. with up to 36 months business history.  

The agreements signed by the EIF and Bank of Cyprus bring a new instrument, the First Loss Portfolio Guarantee (“FLPG”) to the Cypriot market. The guarantees are implemented under the JEREMIE (Joint European Resources for Micro to Medium Enterprises) initiative, co-financed from EU Structural Funds.

This instrument offers a new opportunity to a broad range of SMEs across Cyprus looking to invest or expand their business. The bank will be in a position to finance enterprises with insufficient collateral, reduce loan interest rates and also provide for extended repayment and grace periods. The product will be available to SMEs from June this year.

Chief Executive of the European Investment Fund, Richard Pelly said, “The EIF is committed to supporting the creation and growth of small businesses across the EU and we are convinced that these two deals with the Bank of Cyprus will help to mobilise additional finance to support even more, small and micro-businesses in Cyprus. We are happy to see that the JEREMIE initiative is becoming a true supporter of the Cypriot economy during this period of economic crisis”.

George Georghiou, Permanent Secretary of the Planning Bureau, said that “Implementing the JEREMIE Initiative in Cyprus, with the co-financing of the EU Structural Funds, is expected to significantly contribute to the general objective of the Cypriot Government for enhancing the entrepreneurship and the business environment in the country, by covering part of the needs of the Cypriot SMEs as well as the gap observed in their financing, which have been considerably increased due to the effects of the global economic and financial crisis” .

Nicolas Karidas, Senior General Group Manager said:“These agreements with EIF  brings a new instrument, the First Loss Portfolio Guarantee (“FLPG”) to the Cyprus market. The agreement will contribute to financing SMEs and especially will support enterprises in their start-up or newly established phase. The activities of these companies will further support the Cypriot economy.”

These transactions are the result of a Call for Expression of Interest procedure initiated by the EIF, as the JEREMIE Holding Fund Manager appointed by the Republic of Cyprus, in which the Bank of Cyprus has been selected as a Financial Intermediary under the JEREMIE initiative.

These agreements complement the first Funded Risk Sharing agreement signed in the context of the implementation of the JEREMIE initiative in Cyprus with the Bank of Cyprus in September 2010. The three agreements together, are expected to create new SME lending in Cyprus of approximately EUR 70 million at particularly attractive financing terms, including reduced interest rates (3%), reduced collateral requirements (even 0% in certain cases), extended repayment (up to 10 years) and grace periods (up to 2 years).

T hese two new agreements mark the completion of the Investment Strategy designed for the first phase of JEREMIE in Cyprus and agreed between the EIF and the Cypriot Managing Authority.

JEREMIE (Joint European Resources for Micro to Medium Enterprises) is a joint initiative launched by the European Commission (DG Regional Policy) and the European Investment Bank group to improve access to finance for SMEs in the EU within the Structural Funds framework for the period 2007-2013. JEREMIE enables the EU Member States and Regions to put money from the structural funds and also national resources into holding funds that can finance SMEs in a flexible and innovative way. The initiative aims at developing and fostering the role of entrepreneurship within the EU in order to help structural funds to deliver greater benefits to the market.

To date, the EIF has signed 8 National and 3 Regional Holding Fund agreements.

In Cyprus the JEREMIE Holding Fund is co-financed by the European Regional Development Fund (ERDF) and the Republic of Cyprus, within the framework of the Operational Programme "Sustainable Development and Competitiveness,” 2007-2013. The Holding Fund amount currently under management by the EIF is equal to EUR 20 million.

About EIF

EIF's central mission is to support Europe's small and medium-sized businesses (SMEs) by helping them to access finance.  EIF designs and develops venture capital and guarantees 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. The EIF total net commitments to private equity funds amounted to over EUR 4.9bn at end 2010. With investments in over 300 funds, the EIF is a leading player in European venture due to the scale and the scope of its investments, especially in high-tech and early-stage segments. The EIF commitment in guarantees totaled over EUR 14.4bn in close to 160 operations at end 2010, positioning it as a major European SME guarantees actor and a leading micro-finance guarantor.

About the Bank of Cyprus

The B.O.C. Group offers a wide range of financial products and services, which include banking services, leasing, factoring, brokerage, fund management, investment banking, general and life insurance services. The Bank of Cyprus Group operates a total of 569 branches and employs 12.127 staff worldwide. The Group is the leading financial services organization in Cyprus, with a dynamic presence in Greece and Russia and operations in the United Kingdom, Australia, Romania, Ukraine and the Channel Islands. Bank of Cyprus also has eight representative offices in Russia, Romania, Ukraine, Canada and South Africa.

About the Managing Authority

The Planning Bureau is, amongst others, the National Authority for the implementation of the Cohesion Policy in Cyprus and the Managing Authority (MA) responsible for the management and implementation of the Operational Programmes (OPs), co-financed by the EU Funds, in accordance with the principle of sound financial management.

The funds allocated to Cyprus via the EU Cohesion Policy, for the current programming period 2007-2013, are utilized through the following programming documents:

• Operational Programme “Sustainable Development and Competitiveness” (ERDF, CF)
• Operational Programme “Employment, Human Capital and Social Cohesion” (ESF)

The JEREMIE Initiative is being implemented under the first OP with an allocation of EUR 20 m, co-financed by the ERDF, in an effort to support SMEs and enhance the productive environment in Cyprus. The JEREMIE operations of EIF in Cyprus, are monitored by a five-member Investment Board, appointed by the Republic of Cyprus and chaired by the Head of the Managing Authority.

 Contacts:    

• David Yormesor, EIF Communications Unit, tel +352 426 688 346, e-mail d.yormesor@eif.org
• Andreas Kythreotis, PA to General Manager Retail Banking Cyprus, tel. + 357 22 122188
• Agathie Charalambidou, Planning Officer, Managing Authority, tel. + 357 22 602866