Download Blending - Switch to Green

EU Blending
Framework
SWITCH to Green Coordination Meeting
27th September 2016, Brussels
Jose Manuel FERNANDEZ
Directorate General for Development and Cooperation





What is blending
Forms of blending
Some figures
The lead financial institution
Examples
Blending
The use of a limited amount of grants to
mobilise financing from partner FI's and private
sector to enhance the development impact of
investment projects
LEVERAGE
So far, blending takes one of 5 forms

Investment Grant

Interest Rate Subsidy

Technical Assistance Grant

Risk Capital

Guarantees
• Business Development Support
Technical
Assistance
• Pre-investment Project Analysis
• Feasibility
• ESIA
• Design
• Pre-investment project screening
• Investment phase services
• Project management
• Supervision
• Auditing, Verification
• EMP
5
July 2015
Africa Investment
Facility (AfIF)
6
2007-2014 Blending operations
Annual grant approvals
(in € million)
450
400
350
IFP
300
CIF
250
AIF
IFCA
200
LAIF
150
ITF
NIF
100
50
0
2007
2008
2009
2010
2011
2012
2013
2014
Approx. € 2 billion, supporting more than 230 projects (EUR 43 billion)
7
2007-2014 Blending operations
Grant approvals by type (in %)
interest rate
subsidy
11%
risk capital
6%
investment
grant
47%
guarantees
4%
technical
assistance
31%
2007-2014 Blending operations
Grant approvals by sector (in %)
energy
41%
transport
23%
water/sanitation
17%
private sector
11%
environment
4%
social
3%
mixed
1%
ICT
1%
0%
10%
20%
30%
40%
50%
9
Lead Financial Institution
EIBEBRDAFDKFWIDB
CEBAECIDCDPAFDB
CDBCOFIDESSOFID
CAFBIODEGOeEBIFC
ADBBCIEFMO …
Technical Assistance &
Investment Grant
FIRA
(Mexico)
• Project aims to improve climate change
adaptation in the agribusiness sector.
The investment grant will contribute to the
improvement of the financing offer to
promote sustainable practices in
agriculture (EUR 4 million).
The TA will assist FIRA to translate existing
strategy to mid-term action programmes
(EUR 1 million).
• The total project cost is estimated at EUR 100
million, of which EUR 5 million from the Latin
American Investment Facility (LAIF).
• AFD, Inter-American Development Bank.
11
Technical Assistance &
Investment Grant
FIRA
(Mexico)
• The investment grant will reduce the cost
of financing for projects leading to:
Reduced energy consumption and C02
emissions
Increased use of renewable energy
Reduced water use by introduction of new
practices
Better use of pesticides
Better management of toxic waste
Etc
12
Financial
Instruments
• Risk capital can help address the lack
of equity capital in some countries,
particularly for new sectors such as
renewable energy (e.g. GEEREF fund)
• Guarantees are particularly useful in
more liquid markets where the
perceived risk of certain activities is
high among local investors or banks
(e.g. SME Guarantee Facility)
13
Financial
Instruments
Guarantees
& Technical Assistance
SME Finance
Facility (NIF)
EU grant resources are used to finance a
combination of Technical Assistance to local
partner financial intermediaries (PFI) and/or credit
enhancement support for PFIs (under the form of
guarantee) to leverage new on-lending by PFIs to
SMEs. Accompanied by EBRD/KfW credit lines to
PFIs.
Up to €10 million for guaranteeing up to 50%
of individual loans and up to 10% of the loan
portfolio risk.
Total project volume: up to €100 million
Grant contribution: €10m (Guarantee) incl. up to
€1m (TA)
Involved EFIs: EBRD, KfW
14
Guarantees (for SME lending)
PFI
PFI
PFI
PFI
PFI
PFI
PFI
50% guarantee
provided to PFIs for
their lending to SMEs
(and 10% of SME
portfolio)
TA for PFIs
and SMEs
SME Borrowers
15
Financial
Instruments
Equity
& Technical Assistance
Eco.business
fund for SME in
Latin America
• The eco.business Fund is an investment fund
promoting sustainable business practices
contributing to biodiversity conservation and the
sustainable use of natural resources.
• Eco.business’ purpose is to promote the
development of green enterprises in
developing and transition countries, with an
initial focus on highly biodiverse countries such
as Peru, Columbia, Ecuador and Central
America.
• LAIF: € 13 m equity capital and € 3 m TA grant
16
Financial
Instruments
(Equity)
& Technical Assistance
• The Fund will offer:
Eco.business
fund for SME in
Latin America
• Medium to long term senior loans in USD and in
local currency.
• Subordinated debt.
• In particular cases, other instruments like
guarantees, term deposits, equity and quasi
equity.
• The TA Facility will offer:
• Capacity building for PFIs to better reach the
target group.
• Technical assistance for the target group:
 Advice mainly to SME on changing to more
biodiverse and resource efficient production
processes;
 Support with the loan request and support to
get access to eco.business financing.
17
Financial
Instruments
(Equity)
& Technical Assistance
Eco.business fund for SME
in Latin Anmerica
18
More information
http://ec.europa.eu/europeaid/policies/innovativefinancial-instruments-blending_en
Thank you!