IFC Backs Entrepreneurial Development in Southeast Europe
Washington, DC, December 20, 2005—The International Finance Corporation, the private sector arm of the World Bank Group, today announced it will participate in the creation of the European Fund for Southeast Europe, which is designed to spur lending to micro and small businesses in the region.
The European Fund for Southeast Europe, promoted by Germany’s development bank, KfW, is a collective investment vehicle that will channel long-term resources to micro and small enterprises through partner lending institutions such as banks, specialized microfinance institutions, and microfinance nonprofit organizations in the region.
In parallel to the fund, a development facility is being established to provide the partner lending institutions with technical assistance to strengthen their operations.
Jyrki Koskelo, IFC’s Director for Global Financial Markets, said, “The European Fund for Southeast Europe presents a rare opportunity to create a public-private partnership that leverages private capital to support the types of micro and small businesses that are such vital engines of economic growth and job creation.”
The fund has been incorporated in Luxembourg for an unlimited duration, with a tiered risk-sharing structure, under the management of Luxembourg-based Oppenheim Pramerica Asset Management S.à.r.l. in a consortium with Bankakademie e.V. as the microfinance Adviser.
Dr. Klaus Glaubitt, Vice President at KfW, said, “IFC’s participation in the fund, through debt mobilization to achieve scale, fits our strategy of supporting well-managed and financially sustainable microfinance institutions by providing them with financing to help increase their lending to microenterprises.”
Shahbaz Mavaddat, IFC’s Acting Director for Southeast Europe and Central Asia region, added, “The fund’s tiered risk sharing structure aims to attract significant private sector investment flows.”
While the fund plans to attract commercial capital from multilateral and private institutional investors, via multiple closings, to reach the initial target of EUR 500 million (about $600 million) in five years, its size at first closing amounts to nearly EUR 142 million ($170.4 million).
IFC’s participation consists of up to EUR 20 million ($24 million) in mezzanine “B” shares with 10-year maturity and up to EUR 10 million ($12 million) in senior “A” shares with seven-year maturity. This represents nearly 21 percent of the total capitalization of the fund. Other investors, participating in this first closing, include KfW, the Netherlands Development Finance Company, the German and Swiss governments, and Bankakademie.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.
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