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The project concerns a guarantee for an existing portfolio of loans to small and medium-sized enterprises (SMEs) and mid-caps by the EIB Group to support ProCredit Bank Bulgaria's lending expansion in SMEs and mid-caps sector.
The aim is to increase availability of finance for projects carried out by SMEs and mid-caps operating in the industry and services sector.
The operation contributes to the Bank's lending priority objectives related to SMEs and MidCaps financing and strengthening of the EU's economic, social and territorial cohesion. In addition, 33% of the financing will provide support to innovative SMEs and MidCap companies, hence the the project will partially contribute to TechEU ("Innovation, Digital and Human Capital"), a core strategic priority within the Bank's Strategic Roadmap.
The intermediary is a repeat EIB counterpart with positive track record and significant experience in deploying EIB funds. The operation addresses a number of market failures: (i) failure in financial markets arising from limited access and/or high cost of financing charged by creditors as a result of information asymmetries, lack of collateral and imperfect screening and monitoring, (ii) strengthening EU's economic, social and territorial cohesion.
Through the EIB's involvement, the transaction will free up capital in the guaranteed portfolio, giving the Financial Intermediary new lending capacity. The operation will also encourage the use of Significant Risk Transfer (SRT) transactions and, as a synthetic securitisation, further the objectives of the Savings and Investments union (SIU). The operation have a strong signalling effect for the Bulgarian market - it will be the 2nd synthetic securitisation with this counterpart, demonstrating EIBs commitment to support SMEs and Midcaps and their innovative projects.
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.