Juncker Plan: EIB Group strengthens its support of MSMEs in Réunion
In September 2017, President of the Réunion Region Didier Robert and European Investment Bank (EIB) Vice-President Ambroise Fayolle officially launched “La Financière Région Réunion”, a EUR 50m fund of funds subscribed by the Réunion Region and the EU. The goal of this innovative partnership mobilising public and private sector funds is to strengthen support for micro, small and medium-sized enterprises (MSMEs) in Réunion with two financial instruments: a debt instrument and an equity instrument.
Another step forward was taken today with the signature of an initial agreement between the European Investment Fund (EIF), the EIB’s specialist enterprise support and microfinance subsidiary, and Banque Française Commerciale Océan Indien (BFCOI), the largest local credit institution, to join forces with the Region and the EU as part of “La Financière Région Réunion”.
This partnership with BFCOI is a first for the Region and will make it possible to provide EUR 62m over the next four years to finance around 850 MSMEs in Réunion on particularly attractive financial terms.
“We are proud to be joining forces with the Réunion Region and EU lenders to offer a solution to entrepreneurs in Réunion, fostering local innovation and job creation,” said BFCOI CEO Ridha Tekaïa. “As a fully fledged Réunion bank, BFC is reinforcing its regional connection with the “i-RUN” structured financing, which includes a guarantee component and EU funds.”
“This initial banking partnership with Banque Française Commerciale de l’Océan Indien is a key step in the operational implementation of “La Financière Région Réunion”. We are now in a position to expand access to finance for businesses in Réunion, while simultaneously promoting their growth and competitiveness,” said EIB Vice-President Ambroise Fayolle. “Support for entrepreneurs is a key facet of our activity. This is why the EIB Group is innovating with its partners to develop new financial tools to more closely meet the requirements of entrepreneurs in Réunion.”
“It is companies that create jobs, and we must together make available the necessary resources to enable project promoters to grow. The Region is positioning itself, together with the EIB, the EU and other partners, as the facilitator of entrepreneurship,” said the Region's President, Didier Robert. “The agreement signed by the Region and the EIB provides for a EUR 50m commitment to be used for loans and guarantees for MSMEs. This is a large amount of funding that is essential to boosting Réunion’s economic fabric. It is important to support growth sectors like sustainable development, renewable energy, agrifood and digital.”
The creation of the “La Financière Région Réunion” fund of funds – which is set to receive EUR 50m in public funding – represents a practical response to the financing needs of the island’s MSMEs. Its financing envelope includes EUR 30m in ERDF regional funds and EUR 20m in financial support from the EIB via the Region, provided under the Investment Plan for Europe (known as the Juncker Plan). This financing will make it possible to support around 1 000 MSMEs over the next five years, with an investment level of EUR 100m. In close partnership with the Region, the firms supported by this fund of funds will be able to benefit from two financial instruments developed by EIB subsidiary the European Investment Fund (EIF).
The first instrument will be a “risk-sharing loan” providing liquidity and credit risk protection to the selected financial intermediary (BFCOI) so that it can build up a portfolio of new MSME loans in Réunion. The companies will have easier access to bank financing, in particular thanks to a lower interest rate. In concrete terms, this will result in an annual interest rate of 1.25% for loans with a maturity of under five years and an annual rate of 1.5% for loans with a maturity of over five years.
The co-investment instrument will be geared towards supporting unlisted SMEs that have their registered office, a decision-making centre or a main or sufficiently important operating site in Réunion. Investment by “La Financière Région Réunion” will strengthen the equity and quasi-equity of eligible firms in an amount tailored to their life cycle and specific needs. The signature with the financial intermediary should take place by October 2018.
As a trusted partner of the Region for a number of years, the EIB Group has invested almost EUR 1.5bn in Réunion in support of private sector development, the upgrading of infrastructure, growth and employment. Thanks to the activity of the European Investment Fund (EIF), the EIB’s specialist SME support and microfinance subsidiary, more than 1 000 firms have been assisted all over the island via EU instruments such as Cosme, EaSI and Innovfin.
Since the launch of the Investment Plan for Europe (known as the Juncker Plan), 124 operations have been approved to finance projects with major economic and social impact for the island, generating EUR 42.7bn in additional investment for the French region.