The EU and KfW promote alternative financing for vulnerable businesses

The European Commission and KfW, the German development bank, announced the signing of a guarantee agreement worth up to €135 million to expand access to finance through alternative channels for micro, small and medium-sized enterprises (MSMEs) in the Western Balkans, the Eastern Neighbourhood, North Africa and the Middle East, and Turkey. Supported by the European Fund for Sustainable Development and Climate Action (EFSD), the guarantee will focus on MSMEs facing the greatest financing barriers. This may include innovative start-ups and businesses led by people and groups in vulnerable situations or exposed to discrimination, such as women-led businesses, as these segments are likely to explore alternative financing options.

Support will be channelled through the Scaling Alternative Finance for Entrepreneurs (SAFE) fund, which provides guarantees to alternative financial intermediaries, such as crowdfunding platforms, microfinance institutions, leasing companies and venture capital funds. By expanding access to alternative sources of financing for underserved businesses, the initiative seeks to strengthen innovation, inclusion and competitiveness in the MSME ecosystem in the affected regions.

European Commissioner for Enlargement Marta Kos said:“We are increasing our support for start-ups and entrepreneurs in candidate countries, especially women-led businesses and those facing discrimination. To ensure that as our Union expands, no one is left behind.”

EU Commissioner for the Mediterranean,Dubravka Šuica, said:“This agreement addresses one of the main obstacles to financing small and medium-sized enterprises: providing guarantees to banks and microfinance institutions to serve customers they would not normally work with. This is an excellent way to boost economic development and achieve the goal of a more integrated Mediterranean region.”

Christiane Laibach, member of the KfW Group’s Executive Board, said:“We are pleased to join forces with the European Union to support this initiative, which represents a valuable addition to the financial landscape of the target region. The flexible approach to guarantees allows alternative financing providers to share part of the risk and thus play a greater role in improving access to capital for MSMEs in the EU’s neighbouring regions. This will address barriers to private investment and generate new growth prospects.”

Fund

The European Fund for Sustainable Development Plus (EFSD)was established in June 2021 to support sustainable public and private investment in the EU’s partner countries and as a key tool of the EU’s Global Gateway initiative. The ESDF provides grants and guarantees for investment projects through international financial institutions (IFIs) and has a guarantee capacity of €39.8 billion worldwide for the period 2021-2027.

More information: European Commission.