European Investment Fund met HRH Prince of Wales

A delegation of the European Investment Fund (EIF), led by Chief Executive Walter Cernoia met HRH the Prince of Wales on 31 October in London.

This meeting took place in the context of the signature with Prince's Trust of the first ever micro-credit operation concluded by the EIF. It is recalled that the EIF has concluded a guarantee operation to support more than GBP 18 m (approx EUR 31 m) of lending by the Prince's Trust; the guarantee offered by the EIF has enabled the Trust to expand one of its existing programmes designed to help young people, who are unable to raise finance from other sources, to set up their own small enterprise. The resources mobilised by the EIF for this operation stem from the EU-Budget and the so-called SME Guarantee Facility, created by the EU in the context of the Growth and Employment Initiative and managed by the EIF. This meeting gave the opportunity to HRH the Prince of Wales to discuss present and future European Union policy for entrepreneurship and small and medium sized enterprises.

After the meeting, Mr Cernoia, expressed how pleased and honoured he was to be able to personally inform HRH the Prince of Wales about the role of the EIF in support of Community objectives and especially employment. Mr Cernoia noted that the support of micro-credit through guarantees is a new possibility for the EIF and that the operation concluded with Prince's Trust was its first ever in this field. This agreement reflects the leading role played by Prince's Trust, a model that could be replicated elsewhere in Europe.

The EIF was created in 1994. It is the specialized financial institution of the European Union for the support of the creation, growth and development of Small and Medium-sized Enterprises (SMEs). The EIF shareholding has a tripartite structure that comprises the European Investment Bank (EIB, 60%), the European Commission (30%) and several European banks and financial institutions (10%).

The EIF intervenes through venture capital and guarantee instruments. It does not finance directly SMEs, but always acts through financial intermediaries. As far as venture capital is concerned, the EIF expects to invest in 2001 about EUR 900 million in 65 venture capital funds, mainly with technological focus. The EIF is thus a major European investor in venture capital, mainly in early stage.

The EIF guarantee instruments facilitate access to debt finance by 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. This activity has therefore an important leverage effect for the financing of SMEs.

More than 70 000 European SMEs have so far benefited from an EIF guarantee or venture capital support.