The European Commission and FMO, the Dutch Development Bank, have signed the first EU guarantee agreement under the European Sustainable Development Fund (EFSD), part of the EU’s External Investment Plan (EIP) for Sub-Saharan Africa and the European Neighbourhood. The historic signing took place on 18 December in Vienna at the High-Level Forum Africa-Europe.
This EU guarantee, the NASIRA Risk-Sharing Facility, is the first of its kind under the EIP. It will use €75 million of EU funds to leverage up to €750 million of investments for entrepreneurs in Sub-Saharan Africa and the EU Neighbourhood. This is expected to create or to support up to 800,000 jobs and benefit those who usually struggle to access affordable loans, such as internally displaced people, refugees, returnees, women and young people.
The €75 million guarantee will be complemented by €8 million in technical assistance to support financial intermediaries and end-borrowers.
Following the Commission's invitation to propose guarantees under the EIP Guarantee, partner financial institutions submitted over 40 high-quality proposals. Their combined value was over €3.5 billion. So the EU was able to choose the best ones to support. These included highly innovative approaches to attracting private investors to challenging markets in Sub-Saharan Africa and the EU Neighbourhood.
NASIRA is one of 28 guarantees which have been given the green light and the full EIP Guarantee has now been allocated. 17 financial institutions have partnered up with the EU to unlock investments.
Now it is time to implement the programmes on the ground, and NASIRA will be the first. It will boost financing for micro-, small and medium-sized enterprises – one of the EIP’s five priority areas – by addressing the high risks involved in lending to under-served entrepreneurs in partner countries. It will give them access to investment loans by offering local financial institutions, such as banks and microfinance institutions, portfolio guarantees containing loans to entrepreneurs. It focuses on people who have been forced to flee to other parts of their countries (internally displaced people) or leave their countries altogether (asylum seekers or refugees), those who had fled but have recently returned (returnees), and women and young people.
Small businesses will be able to access affordable loans through local banks, microfinance institutions and other non-banking financial institutions.
This is the first agreement to access the new €1.5 billion EFSD guarantee. The guarantee is expected to leverage €17.5 billion in investment by 2020 in partner countries in Sub-Saharan Africa and the European Neighbourhood. Guarantee agreements with other partner financial institutions are expected to be signed before the end of March 2019.
FMO is already a lead partner in several EIP blending operations in Sub-Saharan Africa, notably AgriFi, Climate Investor One and ElectriFi (more details here).
Investors, promoters and other potential partners interested in NASIRA may directly contact Mr David Kuijper at NASIRA@fmo.nl.
Latest milestones in implementing the EIP
The 28 EIP Guarantees: