The European Investment Bank (EIB): Lending to Financial Institutions for SME Financing Association of Development Financing Institutions in the Pacific (ADFIP) 30th Annual Meeting Nadi, 23 November 2016 Katrin Bock, Business Analyst - EIB Pacific Regional Office European Investment Bank

EIB: the Bank of the European Union Established in 1958 by the Treaty of Rome. The shareholders of the Bank are the EU's Member States. The largest multilateral lender and borrower in the world (Balance sheet total of EUR 570bn). The Bank raises its resources by borrowing on the capital markets. It passes on its favourable borrowing terms (thanks to its AAA rating) to its customers. Some 440 projects are financed each year, in over 160 countries, with a EUR 77.5bn in new loans signed in 2015 (of which EUR 7.8bn were outside of the EU). The EIB's headquarters are in Luxembourg and it has around 40 local offices. The Bank has around 2,800 financial specialists, engineers, sector economists and social and environmental experts. European Investment Bank

EIB lending priorities in Africa, Caribbean and Pacific Focus on the private sector Supporting the EU’s development agenda, contributing to poverty reduction and the achievement of the UN Sustainable Development Goals. Specific focus will be made on local private sector development - by promoting access to finance for the private sector and funding critical social and economic infrastructure. Climate action (renewable energy, energy efficiency as well as climate adaptation and mitigation) and projects with high social and environmental impact. European Investment Bank

How does the EIB support Private Sector Funding? SMEs + microfinance Mid-cap enterprises Large corporates SPVs & project finance Direct loans 1 Loans intermediated by a bank 2 Loans guaranteed by a bank 3 Microfinance, SME and Mid-cap credit lines to local banks Guarantee provided by the EIB to a local bank (only in specific cases) Equity investments mostly through Private Equity funds European Investment Bank

Specific products for in Africa, Caribbean & Pacific In the ACP countries, the EIB can offer special financing products tailored to meet local market needs: Interest rate subsidies: for projects with high social or environmental impact Technical assistance grants for project preparation and implementation Financing for high risk, low return projects that will have a high social impact Guarantees Junior and subordinated loans, on an exceptional basis Local currency loans in some countries European Investment Bank

European Investment Bank C EIB Activities in the Pacific Project Example: Environmental Lines of Credit in New Caledonia and French Polynesia EIB Financing EUR 8 m Banque de Tahiti EUR 10 m SOCREDO EUR 5 m BCI Helios Bay, New Caledonia – 2.1 MWp grid-connected solar photovoltaic plant Description Provision of subsidised financing resources for investments in renewable energy & energy efficiency Objectives Supports Small and Medium-sized Enterprises (SMEs) in pursuing environmentally sustainable businesses European Investment Bank

Risk-sharing Instruments Loans to Financial Intermediaries IFE Instruments Social Impact Funds Risk-sharing Instruments venture capital / private equity / social impact funds managers explicitly pursue social impact goals focus on employment, working conditions, vulnerable populations, access to healthcare, energy, education, etc. first loss guarantees to facilitate risk-sharing operations with local financial intermediaries supporting SMEs and small projects help leverage senior guarantee tranches from EIB and other IFIs / DFIs Loans to Financial Intermediaries Direct Financing local currency loans in economically deprived countries beneficiaries: smallholder farmers, micro-enterprises and SMEs intermediaries: commercial banks, credit cooperatives, microfinance institutions etc. strengthened with technical assistance and advisory services debt (and possibly equity) instruments with high developmental impact promoted by sound, experienced investors focus on underserved sectors such as agriculture, private health and education European Investment Bank

The Caribbean and Pacific Impact Finance Facility (CPIFF) LENDING FACILITY 40 m EUR Senior debt 3- 7 years with 1-2 year grace period Unsecured Local currency, EUR and USD Fixed interest rate Financial intermediaries Microfinance institutions Downscaling banks Wholesale funder of MFIs Tailored capacity building TECHNICAL ASSISTANCE FACILITY Eligible clients with loans < EUR 50,000: Micro and small enterprises Low income households with small scale impact projects Financial education Mentoring European Investment Bank

Example: ACP Smallholder Farming A joint initiative of EIB and IFAD to support smallholder farming activities in ACP countries Building on pilot projects carried out by IFAD, with the objective of providing medium to long-term local and foreign currency funding (currently very scarce) 5-8 countries targeted, including Malawi, Mozambique, Ethiopia, Nigeria, Rwanda Amount: up to EUR 50m Support to up to 100,000 smallholder farmers over 2014-20. European Investment Bank

Recommendations SME Financing Study Partnerships with smaller, locally or indigenously owned banks Simplified processes and procedures for EIB facilities Continuing technical assistance to ADFIP More risk share options across the Pacific (e.g. a regional credit guarantee) Provision of post-disaster relief funding regionally Increased support to microfinance regionally Support for deeper access to finance using mobile banking, internet banking, or agency banking models Use of EIB's ACP Smallholder Finance Facility on a Pacific regional basis Support programmes or incentives for lending to: rural or remote areas agricultural or agri-processing sector micro or small businesses Indigenously-owned businesses European Investment Bank

Contacts: European Investment Bank Pacific Regional Office Level 25, 88 Phillip Street SYDNEY NSW 2000 Australia Adam Bruun Head of Regional Office tel +(61 2) 8211 0536 email: a.bruun@eib.org Katrin Bock Business Analyst tel +(61 2) 8211 0532 email: k.bock@eib.org Thank you very much for listening – if the moderator will allow it then I’d be very happy to take any questions from the floor.