EURIZ Guarantee is at its second year of operations. It was launched in 2019 by AFD and Proparco, with the support of the European Union and the Organisation of African, Caribbean and Pacific States (OACPS), offering local banks guarantees so that they can finance sectors with a high social and societal impact. The facility is part of the Thematic Blending Framework of the EU’s Development Cooperation Instrument and European Development Fund.
Targeting companies with a high development impact and fragile states
In 2020, EURIZ Guarantee implementation was maintained despite the COVID-19 crisis and has generated good volume of transaction mainly in Africa, but also aims at expanding its footprint in the Caribbean and the Pacific for the future. The pipeline of guarantees issuance for 2021 might reach up to 100 million euros for ACP regions, while the overall 5-year programme mobilised volume is estimated at around 800 million euros.
EURIZ covers agriculture & agri-business, health, education, digital, microfinance, for companies owned by women or young people who are facing increased difficulties in accessing finance.
In terms of expected outcome and development results, EURIZ aims at serving around 6,000 MSMEs, thereof 1,200 in fragile states, generating more than 500 million euros financing and creating more than 25,000 jobs in the ACP regions.
Micro, Small and Medium Enterprises (MSMEs) play a major role in the sustainable development process everywhere and in particular in developing countries. They give communities greater access to essential needs, reduce poverty through job creation and revenue generation.
However, in emerging markets, access to financial services for MSMEs remains severely constrained due to the high level of financing risks perceived by the banking sector. The International Finance Corporation (IFC)* recently estimated that Africa’s finance gap for MSMEs stands at $331bn. They form the backbone of most African economies and investment in this sector will significantly enhance job creation and wealth development. More than 85% of MSMEs in the developing countries do not have access to finance and are therefore unserved or underserved. This figure is even bigger regarding women-owned MSMEs.
Around 60% of loans in Sub Saharan Africa have a maturity of less than one year. MSMEs in the region need alternatives to the current short-term debt financing options being offered. Therefore, there is a significant need for more specialised and adequate investments vehicles responding to MSMEs effective financial needs.
EURIZ and other so-called «blending» instruments being implemented to support access to finance for MSMEs are guarantee instruments which allow «mixing» intra-ACP funds with private funding to help «de- risk» projects in ACP countries, so that the national and international private sector can invest more. EURIZ will continue to provide both guarantees to cover loans and technical assistance to build the capacity of development financial institutions in the long run in terms of provision of financial and non-financial services.
* MSME FINANCE GAP Report 2018, IFC-WB- SME Forum.