EIF signs new pilot guarantee instrument with three banks in Bulgaria

• Guarantee agreements will help channel €200m to Bulgarian SMEs and small mid-caps to support 4 500 businesses in Bulgaria
• Some 10 000 Bulgarian businesses have benefited from EIB Group operations over the last 10 years

The European Investment Fund (EIF) has signed three new guarantee agreements with Unicredit Bulbank, United Bulgarian Bank and ProCredit Bank (Bulgaria) to support the fastly-growing documentary finance activity in Bulgaria.

Following these agreements, the three EIF partner banks will finance Bulgarian small enterprises and small mid-caps with documentary credit lines such as letters of credit, payment guarantees, advance payment guarantees, performance bonds and other. The total credit portfolio of Unicredit Bulbank, United Bulgarian Bank and ProCredit Bank (Bulgaria) under this instrument is expected to reach €200m. The EIF guarantee will cover 50% of the credit risk in each credit line free of charge up to a cap of 25% losses in the portfolio.

Bulgaria’s Ministry of Economy and the EIF have decided to launch this pilot guarantee product using reflows under the Joint European Resources for Micro to Medium Enterprises (JEREMIE) initiative in Bulgaria. The new instrument will address financing needs not covered by other existing guarantee facilities on the Bulgarian credit market.

The three guarantee agreements signed today are expected to help around 4 500 Bulgarian enterprises obtain new credit products at a reduced price, with lower collateral and longer maturities.

European Investment Bank Vice-President Lilyana Pavlova commented: “The EIB Group’s cooperation with the banking sector in Bulgaria has proved extremely positive over the last 10 years. It covers a wide spectrum of risk-sharing and lending products that have been successfully implemented for the benefit of more than 10 000 Bulgarian small enterprises to date. Using repayments from earlier risk-sharing and equity financial instruments under the JEREMIE programme in Bulgaria, we are now able to extend a new guarantee facility that will provide small companies with access to more complex and efficient financing products.”

EIF Chief Executive Alain Godard stated: “Supporting SME growth is the core business of the European Investment Fund. We are delighted to work jointly with the Bulgarian Government to introduce on the market this new guarantee product that will expand financing opportunities for smaller businesses. UniCredit Bulbank, United Bulgarian Bank and ProCredit Bank have built up strong expertise in the implementation of complex guarantee instruments and we are very happy to be working with them in the documentary credit space.”

Background information

JEREMIE (Joint European Resources for Micro to Medium Enterprises) is a joint initiative launched by the European Commission (Directorate-General for Regional and Urban Policy) and the European Investment Bank Group to improve access to finance for SMEs in the European Union (EU) within the Structural Funds framework for the period 2007-2013. JEREMIE enables the EU Member States and Regions to put money from the Structural Funds and national resources into holding funds that can finance SMEs in a flexible and innovative way.

The JEREMIE Initiative in Bulgaria has so far financed some 10 000 small businesses in Bulgaria with loans and equity investments totalling approximately €900m. Reflows from these operations are currently being reinvested in new guarantee and equity instruments.

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its main remit is to support Europe's micro, small and medium-sized businesses by helping them to access finance. The EIF designs and develops both venture and growth capital, guarantees and microfinance instruments, which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.

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