The European Investment Fund (EIF) has signed a new funded risk-sharing agreement with Raiffeisenbank (Bulgaria) under the Joint European Resources for Micro to Medium Enterprises (JEREMIE) initiative in Bulgaria, allowing the bank to provide at least EUR 20 million of new loans to Bulgarian small and medium enterprises (SMEs) with more than 50% reduction in interest rates.
Following the agreement, a total budget of EUR 165 million for the latest JEREMIE low-interest loan product is now allocated to six credit institutions in Bulgaria. Allianz Bank Bulgaria, DSK Bank, Raiffeisenbank, First Investment Bank, ProCredit Bank, Societe Generale Expressbank and UniCredit Bulbank will double the JEREMIE resources, offering SME financing in the amount of EUR 330 million with preferential interest rates, reduced collateral requirements and reduced fees. Information on how to access loans from the JEREMIE instrument is available from the selected banks.
Commenting on the new operations, EIF Deputy Director Mr. Hubert Cottogni said: “We are pleased to be partnering with the Bulgarian government and Raiffeisenbank to support lending to Bulgarian small and medium businesses, which are facing numerous challenges in the current economic environment, especially difficulties in accessing finance. Through our agreements, SMEs will benefit from low-interest credit with better terms, which will help to stimulate business activity and job creation”.
The latest JEREMIE product, the so-called Portfolio Risk Sharing Facility (“PRSL”) instrument, provides lending to SMEs with interest rates reduced by at least 50% and an adequate risk sharing balance for the seven financial intermediaries. Since the beginning of 2013, the instrument has already provided over BGN 114 million (EUR 57 million) of loans at an average interest rate of 4%.
This is the second JEREMIE instrument facilitating SME lending through Bulgarian banks. The JEREMIE initiative has allocated EUR 60 million under a guarantee facility on the market since mid-2011 (“First Loss Portfolio Guarantee” instrument) mobilising five-times the amount committed providing credit risk protection for a total of EUR 300 million loan portfolio of five financial intermediaries (UniCredit Bulbank, United Bulgarian Bank, Raiffeisenbank, ProCredit Bank and CIBANK). Over the last 12 months, the credit institutions have utilised 66% of the instrument with over 3,200 loans for a total of BGN 390 million (EUR 200 million) extended with preferential terms to small entreprises, including new businesses without credit history.
In addition to supporting SME lending through local credit institutions, the JEREMIE initiative in Bulgaria also implements a variety of innovative risk capital instruments, dedicated to boosting equity investments made into Bulgarian enterprises with high-risk and high-growth profile. The Eleven Fund and LAUNCHub Fund, established in Q4 2012 with EUR 21 million capital allocation under the Entrepreneurship Acceleration & Seed Financing Instrument, has already invested EUR 4 million in 56 Bulgarian start-ups fostering the position of Sofia as a newborn entrepreneurship hub in the region of South East Europe. The NEVEQ II venture capital fund launched recently operations in Bulgaria with initial capital of EUR 20 million, of which 70% JEREMIE commitment and 30% contribution of private investors.