Patrice LIAUZU EIF Brussels office EIF’s role in Microcredit Porto, 7 December This presentation was prepared by EIF. The information included in this presentation is based on figures available for August Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct. SMEs and Entrepreneurship – successful local strategies

EIF at a glance 2/15 Aaa-rated European institution with MDB status Established 1994 EU specialised financial institution for SMEs, acting through: Venture Capital (Fund-of-Funds), Guarantees for SME portfolios and financial engineering Rating Standard & Poor’s: AAA Moody’s:Aaa Fitch:AAA MDB status 0% weighting Shareholders EIB, EU, Financial institutions Subscribed capital EUR 3bn

Resources and objectives and generate good return on equity To be committed to venture capital funds and guarantees in the EU and Candidate Countries EUR 4bn Revolving EUR 1.1bn (CIP) Up to EUR 1bn BMWA - ERP Dahlia SICAR S.R. EUR 955m At 31 Oct / 41

Demand for microcredit is sustained by three major trends 3/15 Growing importance of small enterprises Unemployment and exclusion The role of the informal sector

Microfinance institutions in some countries are not allowed to borrow and to on-lend Interest rates are capped, making it impossible to cover the additional cost of distributing small loans Need to also “ think sustainability ” And more.. 4/15 Institutional barriers to the development of microfinance

EIF microcredit operations across Europe 5/15 EIF microfinance guarantees EIF microfinance securitisations France (Adie) Germany (KfW) Ireland (First Step) United Kingdom (The Prince’s Trust + The Enterprise Fund) Norway (Cultura Sparebank) Belgium (FdP) Spain (La Caixa) Western Balkans, South-East Europe and Bulgaria

Microcredit guarantees Microcredit guarantees under the Multiannual Programme (MAP 2001/2006), in 7 different countries Designed to encourage micro-lending by banks/institutions in the EU Guarantees for microcredit Financial institutions cooperating with NGOs and grassroots organisations to provide appropriate « mentoring » Guarantee rate of 75% As at end of June 2007, some 35,503 SMEs had benefited from over 38,323 loans 6/15 EUR 259.3m outstanding microfinance guarantee volume (as at 30 June 2007) makes EIF the leading microfinance guarantor in Europe

Bridging a gap in commercial lending: EIF microcredit securitisation 7/15 Historically, Microfinance Institutions (MFIs) rely on donor/development bank funding 2005: Pioneer securitisation of loans to MFIs in Western Balkans and South-East Europe 2006: First securitisation of a loan portfolio of an MFI in Bulgaria Supporting MFIs  securing long-term funding  continued growth in micro-lending activity Such transactions are an interesting new funding source for MFIs

The way forward 9/15

Joint initiative of the European Commission and EIB Group An option for each Member State and/or region Objective: use Structural Funds for enhancing the access to finance to SMEs through sustainable and “revolving” financial instruments Tool Kit approach Evaluation of demand/supply : 2007/2008 Implementation: 2008 onwards Microcredit through JEREMIE 11/15 A targeted regional/national support tailored to needs and address market failures

The EU microcredit initiative Adopted by European Commission November main measures : a) Improving legal and institutional environment in EU Member States; b) Further changing the climate in favour of Entrepreneurship; c) Promoting the spread of best market practices; d) Providing additional capital for microfinance institutions ( MicroFund ). The MicroFund Target: non banking MFIs Instruments: equity, quasi-equity, subordinated debt, technical assistance etc. 13/15

The Micro fund 14/15 MicroFund An independent fund, managed by the EIF Investors/Support Institutions (European Commission, EIB, EP…) Private investors (Eurofi, banks, financial institutions…etc) Investments Direct funding of MFIs Indirect funding of MFIs via national/regional funds specialised in microfinance EIF shall be in charge of the setting up and the management of the MicroFund.

Contact European Investment Fund JEREMIE 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (+352) Fax: (+352) Patrice Liauzu EIF Brussels Office Tel.: (0032 2) /15