Supporting development
The European Investment Bank is the European Union's long term financing arm. While most of its operations are in the EU, it also contributes to the EU's development aid and cooperation policies in other regions and countries. The Bank is project-oriented, financing mainly the fixed-asset components of capital investments. Such projects have to be technically sound, financially viable, show an acceptable economic return and comply with environmental protection, procurement regulations and prevailing social legislation and norms. These criteria apply to all projects financed by the Bank, both within and outside the EU.
The Bank does not have a general mission outside the EU under its statute but operates within the framework of specific mandates decided by the EU Council of Ministers and the European Parliament. They decide on the basis of proposals made by the European Commission (EC) drawn up in close cooperation with the Bank. The specific mandates are based on a common vision of the objectives, eligibility criteria, financial instruments and resources. Such mandates generally give the EIB a role of financing projects that contribute to development objectives.
The EIB has been a development partner, supporting projects in developing and emerging countries, notably in the African, Caribbean and Pacific states (ACPs), for more than 40 years. Over these years, it has acquired an extensive knowledge of the countries in which it works, their investment climate and the reality of operating in them.
In particular, the Bank supports EU cooperation policies through:
- a wide range of financial products (loans, equity, guarantees or quasi-equity instruments);
- financing sound and productive investments mainly in sectors that generate revenues for the products and services provided.
The Bank's lending operations are complementary to those of the Commission which uses grant funding to finance - either through budget support or through specific programmes - non-revenue generating types of investments or investments tackling more basic social needs in the social, educational and small-holder agricultural sectors. This activity is carried out alongside the bilateral aid from the individual EU Member States.
The Bank's expertise and comparative advantage lie, in particular, in fields such as infrastructure, environment and Small and Medium-sized Enterprises (SMEs), where it seeks to pass to project promoters its technical and economic know-how. Other benefits of EIB operations in developing countries are related to the Bank offering very long maturities at interest rates closely following its borrowing on capital markets or an extended range of flexible risk bearing financial instruments. This offers particular advantages to borrowers in countries suffering from scarcity of long-term funding on the local capital markets and limited access to international capital markets.
Poverty reduction
Sustained high levels of economic growth are essential for poverty reduction. Meeting basic social needs through grant funding is indispensable to help populations survive. However, economic growth is required to break the vicious circle of poverty. The EIB, being a bank, provides the financial resources required to promote the investments that will generate growth, thereby contributing to sustainable poverty reduction and social improvement.
The above is reflected in the various mandates under which the Bank operates in emerging and developing countries:
African, Caribbean and Pacific states: Private sector development is considered as essential for economic growth. This is a central objective of the Cotonou Partnership Agreement between the EU and the ACP states, and under which the EIB operates in the region. The Cotonou Agreement has established the Investment Facility (IF), a revolving fund aimed at being financially sustainable whilst meeting the development objectives of the Agreement. It is managed and operated by the EIB and is focused on supporting private sector development.
The prime objective of the IF is to further the Cotonou Agreement's goal of reducing poverty in the ACPs, by contributing to sustained economic growth, private sector development, increased employment and improved access to productive resources. It aims to operate in all sectors and to support investments by private enterprises and commercially run public sector entities, including revenue-generating infrastructure critical for the private sector (Annex II, Chapter 1, Article 3, par. 1 of the Cotonou Agreement).
Mediterranean region: Developing an environment that is conducive to job creation is considered as one of the main targets of the EIB's Facility for Euro-Mediterranean Investment and Partnership (FEMIP). In the non-EU countries in the Mediterranean region, FEMIP therefore supports (directly or indirectly) the development of the private sector as well as financing environmental projects, human capital and social housing.
Asia and Latin America (ALA): In line with the EU Council Decision on the ALA mandate EIB finance is targeted at productive investment that contributes to economic development and growth and supports projects of mutual interest for the recipient countries and the EU. Projects in the ALA regions therefore involve a reciprocal flow of benefits between the EU and one or more beneficiary countries.
The Millennium Development Goals (MDGs)
| Goal | Targets | |
|---|---|---|
| Goal 1 | Eradicate extreme poverty and hunger | Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day |
| Goal 2 | Achieve universal primary education | Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling |
| Goal 3 | Promote gender equality and empower women | Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all level of education no later than 2015 |
| Goal 4 | Reduce child mortality | Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate |
| Goal 5 | Improve maternal health | Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio |
| Goal 6 | Combat HIV/AIDS, malaria and other diseases | Have halted by 2015 and begun to reverse the spread of HIV/AIDS and the incidence of malaria and other major diseases |
| Goal 7 | Ensure environment sustainability | Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources (access to safe drinking water and basic sanitation) |
| Goal 8 | Develop a global partnership for development | Address the special needs of the least developed countries, landlocked countries and small island developing States with regard to debt, employment, access to affordable essential drugs and new technologies, especially information and communications. |
There is no direct or explicit reference to the Millennium Development Goals (MDGs) in any of the Bank's mandates to operate in developing partner countries. However, in most cases, EIB-financed projects by encouraging growth have an indirect but quite substantial positive impact on the achievement of the MDGs, particularly Goal 1 (eradication of extreme poverty). Financially sustainable projects with a strong economic return are expected to have a favourable impact on economic growth and, eventually on income generation, and thus poverty reduction and other social benefits.
EIB projects may also have a direct effect on specific MDGs or related sub-targets, most obviously in the water sector - Goal 7. Some projects may also contribute to the achievement of better health and education (five of the 8 MDGs are concerned with health and education performance and status), either directly or indirectly. Examples include industrial projects with significant health and education component, such as the establishment of a school or hospital to serve the surrounding area, or when measures are introduced to improve health and safety at work.