AGRICOVER LOAN FOR SMES III

The operation consists of a multiple beneficiary intermediated loan (MBIL) with a long-standing financial intermediary to support micro-enterprises in the agriculture sector in Romania.

The aim is to enhance access to finance for small-scale projects promoted by the target beneficiaries.

The Operation will support the InvestEU objective of promoting social investments, specifically in the form of microfinance. The scope is financing small scale projects promoted by micro SMEs (with fewer than 10 employees) operating in the agriculture & bio-economy sector in Romania. The Project is in line with the EIB Group's core strategic priority of supporting agriculture and bioeconomy.

The operation will be delivered via an intermediated loan to AGRICOVER CREDIT IFN SA ("Agricover"), an experienced and specialised non-bank financial institution and a repeat intermediary of the EIB, operating exclusively in Romania. Entire Romania, with the exception of the capital Bucharest and the surrounding Ilfov county are composed of less-developed regions. Considering the above, the operation falls under the EIB's vertical Public Policy Goal (PPG) of "SME and Midcap financing" and horizontal PPG of "Economic and Social Cohesion".

The operation will address market weaknesses and failures related to the availability of financing for micro SMEs operating in the agriculture & bio-economy sector in Romania. For such SMEs, this project will ease the financial constraints that arise from information asymmetries caused by the lack of track record, insufficient farm net asset value to collateralize, as well as high screening costs for small investments. In addition, these projects address financial market inefficiencies caused by the fact that the economic life of an investment project exceeds the tenor of loans that are typically available on domestic capital markets. Micro SME segment is often overlooked by large lenders who focus on financing larger, well-established corporate borrowers. Therefore the segment face significant barriers in accessing credit, which is in turn hinders their investment capacity.

By expanding Agricover's lending capacity at favourable terms, the operation is addressing this market gap, enabling investments and thus supporting micro-SME's employment, sustainability, competitiveness and potential future growth.

The EIB's involvement is crucial, delivering funding diversification for the Intermediary and a transfer of financial benefit to final beneficiaries in the form of interest rate reductions. Being a non-bank financial institution and hence not having access to deposits, the ability of Agricover to continue providing financing to its customers depends primarily on its access to bank and IFI loans. The InvestEU support not only enables the proposed project, but also has a signalling effect to other lenders.

The project would not have been carried out by the EIB without the InvestEU support.

The proposed operation falls within the scope of the EIB's Environmental and Social Standards - "Standard 11 Intermediated Finance". The Borrower / Financial Intermediary has adequate capacity, systems and processes in place for identifying, assessing, managing and monitoring environmental, climate and social (ECS) risks related to the potential sub-projects benefitting from EIB support. The Final beneficiaries will be required to comply with applicable national and EU legislation in respect of environmental and social matters, as appropriate.

Final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.