Financial instruments
The EIB Group provides funding to microfinance institutions (MFIs) in the form of loans, guarantees and equity participations. We can either be a direct investor in or lender to microfinance institutions or indirectly finance MFIs through specialised intermediaries, such as microfinance investment vehicles (MIVs) or microfinance holding groups.
The EIB Group's financial instruments consist of:
- direct loans and intermediated loans: direct loans are credit facilities provided to MFIs at commercial rates. Intermediated Loans take the form of credit lines or indirect loans to banks and other financial institutions that in turn on-lend to MFIs. In a number of eligible countries, loans are also available in local currency;
- private equity and debt participations in intermediaries: this includes equity or quasi-equity instruments, as well as senior and subordinated debt. A significant share of the EIB Group's investments in microfinance is allocated through specialised intermediaries or MIVs. In turn MIVs provide debt, equity and guarantees to microfinance institutions which offer a wide range of financial services to micro, small and medium-sized enterprises, such as savings, loans, transfers and insurance;
- direct and counter-guarantees: direct guarantees to microfinance institutions and other financial institutions facilitate access to local currency financing solutions for the local banking sector. Counter-guarantees are provided to guarantee schemes underwriting micro-credits extended by microfinance institutions and other financial institutions.
Outside Europe, about 75% of EIB financing is sourced through microfinance investment vehicles and microfinance holding companies. Within Europe, guarantees and securitisations account for the lion's share of the amounts committed.
Non-Financial Instruments:
The EIB Group provides technical assistance via grants to enhance the development impact of its projects and strengthen the capacity of its financial counterparties and final beneficiaries. Funds are intended mainly to address weaknesses in human resources management and operations, management information systems (MIS) and technology, governance, internal audit and risk management procedures.
Over three quarters of technical assistance grants are channelled to microfinance institutions in the African, Caribbean and Pacific countries, on the budget of the Investment Facility. At the beginning of 2012, the EIB Technical Assistance commitments in the ACP region stand at EUR 23.0m granted to 11 Microfinance Investment Intermediaries. EIB's grants are funding capacity building activities towards microfinance providers. As of Q1 2012, about half of the commitments have been effectively deployed towards 39 MFIs with an average allocation of EUR 300,000 and covering 18 countries, among which Nigeria, Liberia, Madagascar and Kenya are the largest recipients.
Mid-2011, the EIB signed a third memorandum of understanding with the Grand Duchy of Luxembourg on funding technical assistance programs related to the promotion of microfinance activities in African, Caribbean and Pacific Countries. Under two previous MoUs, the EIB provided just over EUR 5m of Luxembourg-funded TA grants for capacity building purposes for greenfield and early stage microfinance institutions in a number of ACP countries, including Namibia, Tanzania and Chad.
In Europe, most of the technical assistance is granted through the programme Jasmine, on the budget of DG Regio. Around 25 financial institutions have benefited from an independent institutional assessment by a recognized microfinance rating agency and/ or tailor-made trainings to staff and management.
