EU External Investment Plan

Deep and Comprehensive Freetrade Area Initiative East - Guarantee Facility - Phase II

Private sector development is an essential prerequisite for the creation of employment opportunities in the Eastern Neighbourhood countries. To unlock the growth potential of the private sector, it is necessary to improve access to finance for SMEs, which account for the vast majority of enterprises in the countries in question and generate a substantial proportion of jobs. Difficulties faced by SMEs in accessing external funding is hampering the development of the private sector, and limiting economic development and job creation.

Phase II of the Deep and Comprehensive Free Trade Area (DCFTA) Initiative East Guarantee Facility was developed jointly with European Commission in order to support the economic development of the Eastern Partnership countries Ukraine, Georgia and Moldova. The proposed programme will help improve access to finance for SMEs in these countries which will, in turn, foster the development of a dynamic and competitive private sector. 

One of the three pillars of the DCFTA Initiative East, along with a Risk Capital Facility and technical assistance, the Guarantee Facility aims to increase the number and volume of SME transactions. This Facility will transform the EU contribution into at least EUR 200 million in new debt instruments to SMEs and will add value through improved collateral requirements and/or lower interest rates and increased risk appetite by Financial Intermediaries.

The Guarantee Facility will help unlock business expansion in the SME segment by improving access to finance, in the form of enhanced lending terms and conditions. By providing first loss SME portfolio guarantees, the Facility will enable local intermediary banks to take on more risk and provide better terms for SMEs, including for transactions in local currency, which will further strengthen and deepen the local currency SME credit markets in the target countries.

During the coronavirus (COVID-19) pandemic in 2020, the EU increased the initial EU contribution of €41.6 million to €70 million. The programme was extended to all Eastern Neighbourhood countries.

Key Information
Location
  • Armenia
  • Azerbaijan
  • Belarus
  • Georgia
  • Moldova
  • Ukraine
Region
  • Eastern Neighbourhood
Year
2018
EU contribution
€70 million
Sector
  • Micro-, small and medium-sized enterprises (MSMEs)
Lead finance institution
European Investment Bank (EIB)