- €50 million to support MSMEs across 15 countries, boost inclusive growth.
- 40 percent to be channeled to women-owned MSMEs.
Frankfurt, Germany, January 24, 2024—IFC announced a €50 million investment in the European Fund for Southeast Europe S.A. SICAV-SIF (EFSE), a structured debt fund that provides financing through financial institutions to micro, small, and medium enterprises (MSMEs) in Southeast and Eastern Europe and Türkiye.
The EFSE fund, advised by impact asset manager Finance in Motion, targets 15 countries: Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Romania, Serbia, Türkiye, and Ukraine.
IFC's investment will support the fund's on-lending to MSMEs in these countries, including 40 percent earmarked for women-owned MSMEs (WMSMEs), to accelerate growth and financial inclusion and strengthen job security amid a challenging economic environment. Through its collaboration with IFC, the fund will grow its gender finance and deepen related monitoring.
"The EFSE-IFC partnership further advances the Fund's longstanding strategy towards increasing economic empowerment and equal opportunities for women entrepreneurs," said EFSE Board Chairperson Andrea Hagmann. "Several factors make this a critical partnership for EFSE: impact potential, market opportunity, and investor requirements. Our collaboration on gender-focused A-shares investment further advances global impact investment standards and awareness of gender equity as a key ingredient for driving development and growth in investments with a gender-lens."
MSMEs are key drivers of growth, innovation, and job creation in EFSE's countries of operations, accounting for 45 percent of gross domestic product (GDP) and 55 percent of jobs. In the Western Balkans and Türkiye, MSMEs comprise 99.7 percent of all enterprises. Similarly, in Armenia, Azerbaijan, Georgia, Moldova, and Ukraine, they represent about 99 percent of all enterprises.
Yet data from the SME Finance Forum shows more than a quarter of formal MSMEs in the World Bank's Europe and Central Asia region, which includes these countries, have unmet financing needs, with the finance gap estimated as high as 20 percent of GDP. WMSMEs are particularly underserved, with 44 percent either fully or partly financially constrained.
"MSMEs are a key engine of growth, but many in the region are struggling to access the finance they need, especially in the current challenging financial landscape," said Vittorio Di Bello, IFC Regional Industry Director for the Financial Institutions Group in Latin America and the Caribbean and Europe. "IFC's funding aims to address that need by crowding in private sector resources to boost their growth, while also building the capacity of lenders to support them."
IFC has been a long-standing partner to EFSE since its inception in 2005 and has supported the fund over several projects. Since its establishment, EFSE has enabled more than 1,175,000 sub-loans, directly contributing to reducing the MSME financing gap in the region.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2023, IFC committed a record $43.7 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
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About EFSE
The European Fund for Southeast Europe (EFSE), advised by impact asset manager Finance in Motion, is an impact fund that takes a comprehensive approach to fostering economic development and prosperity in Southeast Europe and the EU Eastern Neighbourhood Region. By investing in local financial infrastructure that provides dedicated financing to micro, small and medium enterprises, the Fund supports the backbone of these regions' economy. As one of the largest MSME funds worldwide, it has a long and successful track record in building strategic partnerships with local financial players, providing tailored debt financing solutions, including local currency loans and targeted agri-financing. The Fund's investment activities are complemented by the nonfinancial support of the EFSE Development Facility, which builds capacities, facilitates knowledge exchange, and nourishes an environment for entrepreneurs to grow. EFSE was initiated in 2005 by KfW Development Bank with the financial support of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Commission. As the first public-private partnership of its kind, EFSE draws its capital from donor agencies, international financial institutions, and private institutional investors. For more information, visit www.efse.lu.
About Finance in Motion
Finance in Motion, Germany serves as EFSE's advisor and is a global impact asset manager focused exclusively on sustainable development in emerging markets and developing economies. The company structures, manages, and advises impact investment funds that bring together public and private investors to address climate change, strengthen biodiversity conservation, foster the sustainable use of natural resources, improve livelihoods, and promote economic opportunities. EFSE's impact is managed in line with the industry standard Operating Principles for Impact Management, also demonstrated by the strong results of the latest independent verification of the advisor's impact management practices in 2023. For more information, visit: www.finance-in-motion.com.
