EU External Investment Plan

How it works - finance

Through the EU External Investment Plan we aim to help attract much more investment in countries neighbouring the EU and in Africa than in the past.

We're supporing projects that deliver:

  • benefits for individuals, communities and small businesses, such as better access to electricity
  • a financial return for investors, giving them an incentive to invest. 

We've also refocused the Plan to help countries respond to the coronavirus (COVID-19) pandemic.

To do all this we're using the financial arm of the Plan - the European Fund for Sustainable Development (EFSD), worth €5.1 billion.

Progress so far

Guarantees

Shared risk, more investment

One way we're using this money is through the Plan's innovative guarantees.

Sharing risk

Investing in developing countries can carry risks:

  • customers might struggle to pay
  • local currencies could lose value (depreciate)
  • laws might change unexpectedly
  • the political situation could be unstable.

With the Plan, we share these risks with investors and private lenders in our partner countries.

That means they can get part of their money back if a loss occurs for one of these reasons.

More investment

As a result, we help to generate much more investment than would happen otherwise.

The guarantees also encourage investors to invest in areas of the economy which:

  • they would not have considered before
  • have a positive impact on people’s lives
  • allow them to target people like refugees or women entrepreneurs that would normally be excluded from services like loans to small businesses.

Responding to COVID-19

In 2020 we've refocused the Plan's guarantees to help countries respond to the coronavirus (COVID-19) pandemic.

We're targeting in particular small business owners, women and young people. And we're devoting more of the available financing to:

  • small businesses - helping them stay afloat by:
    • encouraging local banks to lend more to them
    • making it more affordable for them to borrow - in many cases they'll be able to pay less in interest, or repay the loan over a longer period, than they would otherwise
    • increasing their access to financial instruments, such as lines of credit, which lower the risks of exporting their goods
  • healthcare - and in particular testing labs.  

Blending

Using grants to get projects off the ground

Blending is another way of financing projects that help developing countries grow. We're already financing over 180 blending projects through the EU External Investment Plan - with more still to come.

A blending project combines:

  • mostly grants from the EU with
  • loans or cash for a stake in a project (equity) from:
    • public financiers, such as governments or development banks
    • private investors, such as commercial banks or pension funds.

These grants help get a project off the ground. Without them:

  • the investment wouldn't be possible or
  • it wouldn’t have the same positive impact on people’s lives.

And some projects are simply too expensive for the private sector to finance on its own.

Our grants lower these investment costs.

And as a result, individuals - especially women and young people - and small businesses and local communities benefit directly from the project.

We finance blending projects in several sectors, including:

  • transport
  • sustainable energy
  • private sector development
  • sustainable agriculture.