The European Investment Bank (EIB) signed three finance contracts totalling EUR 54.6 million on 10 December in Dakar with BOAD, the West African Development Bank, in Dakar, where it was holding its Board of Directors meeting.
The EIB, the European Union's long-term lending institution, is supporting BOAD through (1) a EUR 25 million global loan from its own resources, (2) a EUR 25 million guarantee facility and (3) a EUR 4.6 million equity participation under the Cotonou Agreement's Investment Facility. The guarantee facility is the first operation of this kind under the Investment Facility.
The global loan granted to BOAD will provide it with better access to stable long-term sources of finance. The final beneficiaries will be small and medium-sized enterprises in the private sector, particularly those engaged in activities that generate foreign currency.
The objective of the guarantee facility is to increase the number and range of financial instruments available in the region and to strengthen local capital markets. This facility will enable the EIB to provide guarantees for loans or counter-guarantees for capital market transactions (public and private issues) in its geographical zone .
The EIB will also increase its equity participation in BOAD under the BOAD's general capital increase foreseen for the coming months. By enlarging its shareholding in BOAD from 0.5% to 1%, the EIB reaffirms its support as a strategic partner for the West African regional development banking institution.
By way of a fourth global loan, and the equity participation and guarantee instruments granted to BOAD at the same time, the EIB demonstrates the importance it attaches to regional integration and the quality of BOAD's operations.
The principal aim of the Investment Facility is to improve the access of private sector promoters to medium and long-term finance on competitive terms and to support the development of the financial sector in the ACP countries. Global loan credit lines strengthen the ability of banks to finance initiatives of relatively modest size and SME investment projects by providing funding that would not be available to them from other sources. The intermediary banks and institutions - in this instance the West African Development Bank - act completely independently and use their own decision-making criteria and pricing.
The EIB, established in 1958 by the Treaty of Rome, finances capital projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's cooperation policy towards third countries that have entered into cooperation or association agreements with the Union.
Currently, EIB loans in the African, Caribbean and Pacific (ACP) countries are granted under the Investment Facility, a mechanism set up by the ACP-EU Partnership Agreement signed in Cotonou in June 2000. The total financial aid available under the Cotonou Agreement amounts to EUR 15.2 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU Member States, EUR 2.2 billion is managed by the EIB under the Investment Facility and up to EUR 1.7 billion is to be granted in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (the proceeds of loan repayments will be invested in new operations) aimed at supporting technically, environmentally, financially and economically sound projects in the private or commercially run public sector.