EU and German development bank boost alternative finance for vulnerable businesses in Eastern Neighbourhood

On 29 January, the European Commission and KfW, the German development bank, announced the signature of a guarantee agreement worth up to €135 million to expand access to finance through alternative channels for Micro, Small and Medium-Sized Enterprises (MSMEs) in the Eastern Neighbourhood, the Western Balkans, North Africa and the Middle East, and Türkiye. 

Supported by the European Fund for Sustainable Development Plus (EFSD+), the guarantee will focus on MSMEs that face the greatest barriers to finance. This may include innovative start-ups and businesses led by persons and groups in vulnerable situations and/or exposed to discrimination, such as women-led enterprises, as these segments are likely to explore alternative financing options.

Support will be channelled through the Scaling Alternative Finance for Entrepreneurs (SAFE) fund, which provides guarantees to alternative financial intermediaries including crowdfunding platforms, microfinance institutions, leasing companies and venture capital funds. 

“By widening access to alternative sources of finance for underserved firms, the initiative aims to strengthen innovation, inclusiveness and competitiveness across the MSME ecosystem in the regions concerned,” the Directorate-General for Enlargement and Eastern Neighbourhood said in a press release.

EU Enlargement Commissioner Marta Kos said: “We are increasing our support to start-ups and entrepreneurs in candidate countries, especially to companies run by women and those facing discrimination. To make sure that as our Union expands, no one is left on the margins.”

The European Fund for Sustainable Development Plus (EFSD+) was established in June 2021 to support public and private sustainable investment in the EU’s partner countries, and as a key tool of the EU’s Global Gateway initiative. EFSD+ makes available grants and guarantees for investment projects through International Financial Institutions (IFIs) and has €39.8 billion in guarantee capacity globally for the period 2021 to 2027.