European Fund for Southeast Europe

Project Description

The European Fund for Southeast Europe (“EFSE”) will be a privately managed public/private investment fund which will provide financing for micro, small and medium-sized enterprises (“MSMEs”), as well as housing and rural finance, through financial intermediaries in a number of countries in Southeast Europe.

The EFSE will initially provide financing to Bosnia and Herzegovina, Serbia and Montenegro, and Kosovo, and may expand to other Southeast European countries.

EFSE will have equity funding from the existing donor funds from the European Commission, Bundesministerium fuer wirtschaftliche Zusammenarbeit und Entwicklung, Swiss Agency for Development and Cooperation and the Netherlands Development Finance Company. Mezzanine financing will be provided by EBRD, KfW, IFC and FMO. And the private sector will be providing financing at the senior debt level.

The fund will be managed by an experienced private investment manager.

The objectives of the fund are to:

• Provide development finance in Southeast Europe through the local financial sector, focusing primarily on the needs of MSMEs:
  
  Contribute to strengthening the financial sector
  
  Deliver MSME, rural and housing development products in Serbia & Montenegro, BiH and Kosovo
  
  Gradually expand its geographical reach in Southeast Europe and develop its products through co-financing and leveraging;
   
• Attract additional private sector investors to Southeast Europe through investment in the Fund.

Transition Impact

Transition impact: The transition impact of the proposed investment will arise mainly from the following two aspects:

 

(i) Supporting entrepreneurs: the Fund is another tool for further promoting the growth of the grass-roots sector in these countries.

(ii) Market deepening and broadening: within 1-2 years the Fund intends to finance around 20-30 financial intermediaries providing EUR 2-4 million to each one. This will enable commercial banks and MFIs to expand their product range, providing loans to MSMEs, for housing and in certain cases targeting clients in rural areas.

(iii) Demonstration effect: Commercial financing is rarely available to local institutions due to perceived high risks. Successful lending will attract other foreign investors to the region and the sector.

 

The Client

Commercial banks, microfinance institutions and other financial intermediaries.

The Fund will be managed by a private Investment Manager, selected through an international tender process.

 

 

EBRD Finance

Commercial banks, microfinance institutions and other financial intermediaries.

The Fund will be managed by a private Investment Manager, selected through an international tender process.

 

Project Cost

EUR 212.1-257.1 million for the first closing.

Environmental Impact

The fund will be required to adopt and implement environmental risk management procedures in accordance with the EBRD Environmental Procedures for Small and Micro Loans, which will include EBRD’s Environmental Exclusion and Referral List. Sub-borrowers will be required to comply, at a minimum, with national standards for environment, health, safety and labour.

Technical Cooperation

EUR 2 million out of the initial closing will be set aside for a development facility to provide borrowers with technical assistance as needed. The facility will be replenished annually from the net income of the Fund (up to 0.1% of annual net income).

Company Contact

Mike Taylor, Senior Banker, Group for Small Business

Telephone: 0044 207 338 7101
Email: taylorm@ebrd.com

 

 

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