EIB puts €11.65M into microfinance fund to spur growth in Africa

The Luxembourg-based European Investment Bank (EIB) is to provide €11.65M ($US15M) for microfinance in Africa as a leading investor in REGMIFA, a fund developed by donor finance institutions to improve access to finance in sub-Saharan Africa targeting small and enterprises, based on G8 recommendations. Investors have to date pledged a total of €116M ($US150M) to the fund which will target small enterprises.

The investment in micro-enterprises will enable them to grow, invest, expand into new markets and hire more people. REGMIFA is expected to provide direct funding for 50 microfinance institutions. In turn, they will lend to over 300,000 small businesses in local currencies.The key benefit will be the removal of currency risk, lowering the debt burden. A credit portfolio of $US200M is targeted by 2014.

"More work in Africa means less poverty. Only those who earn money are able to access a doctor and get medicine, education and care when needed. REGMIFA will support economic growth in Africa and strengthen opportunities for small businesses and poor populations increase to benefit from economic growth," said Dr.Norbert Kloppenburg, Member of the Board of KfW Banking, an investor in REGMIFA.

Female entrepreneurs

Research show that the vast majority of borrowers of microfinance are women, whose social position and income earning role as entrepreneurs will be strengthened. “The EIB is playing a leading role in supporting REGMIFA and its unique contribution to improving access to finance for entrepreneurs across Africa. Offering local currency loans, engaging a broad investor base and attracting private support will allow African companies to grow, create jobs and reduce poverty over the coming years.” said Plutarchos Sakellaris, EIB Vice President who is responsible for sub-Saharan Africa.

The fund was formally launched in Berlin, Germany on 5 May. The ceremony was attended by EIB representatives, Gudrun Kopp, Parliamentary State of Secretary at the Federal Ministry for Economic Cooperation and Development (BMZ), Dr. Norbert Kloppenburg, and representatives of the Spanish Development Bank (AECID), International Finance Corporation, and other development institutions participating in the fund.

The EIB is to provide a further USD$2M technical assistance grant for the the initiative and EIB officials say that their bank has helped design the fund since 2007, coperating with other donor finance institutions.

They add that this is the first time that a dedicated fund is providing microfinance institutions in sub-Saharan Africa with a range of key financing instruments, including long-term debt and equity financing as well as subordinated local currency loans. Currently, micro, small and medium-sized businesses have little chance to invest and finance growth using adequate debt instruments. Continent-wide, there is a clear shortage of long-term loans, say EIB officials. "This innovative fund provides microfinance institutions across sub-Saharan Africa with a range of financial instruments for the first time. These will be able to finance 300,000 companies over the next five years and create and secure 500,000 jobs. The creation of these jobs marks a significant contribution to both poverty reduction and alleviating the effects of the economic crisis in Africa," said Gudrun Kopp.

Investors in the fund alongside the EIB include the German Ministry for Economic Co-operation and Development (BMZ), KfW Development Bank, IFC, part of the World Bank Group, the Belgian Investment Company for Developing Countries (BIO), (OeEB) the Development Bank of the Netherlands (FMO), the European Commission, EuropeAid, French Development Agency (AFD), (PROPARCO), the Norwegian Microfinance Initiative (NMI), Spanish Agency for International Development Cooperation (AECID), Spanish Ministry of Foreign Affairs (MAEC) and African Development Bank (AfDB). The investment manager is Symbiotics.

To find out more: www.eib.org