BREAKING NEW GROUND
The EIF not only supports existing financing schemes. It helps to kick-start new ones. Our participation in pilot projects like payment-by-results (PBR) instruments, co-investments and incubators and accelerators attracts private capital into these new and innovative instruments, generating fresh social impact through new avenues.
Mass migration on an unprecedented scale is a feature of our times. Countries and societies unprepared for the migrant influx have been unable to tackle social tension. Meanwhile, host communities have been concerned about the pressure on public resources. Poor social integration is highly correlated with unemployment and increases in public healthcare costs.
The government of Finland hopes to address the causes of poor migrant integration before the consequences become a problem. Using a PBR scheme, they have entered into a social impact bond (SIB) with specialised fund manager and intervention programme manager Epiqus, to offer immigrants work-life oriented training that will support their future employment. This includes language, culture and professional skills studies.
The EIF and other investors in the structure provide the upfront financing for the social intervention. Once the social impact results of the intervention have been verified, investors are remunerated by the government of Finland for the risk they took in financing the intervention upfront. This signals to other private investors the attractiveness of investment in this space.
The aim? With up to EUR 10m from EFSI SMEW Equity Product Sub-Window 1 and a 5% co-investment from the EIF’s own resources, the SIB scheme will be able to guide up to 2,000 migrants and refugees to employment, while expecting to generate an equity type return of approximately 8% IRR for investors.
WHERE DO WE GO FROM HERE?
“From investing in microenterprises and providing technical help, the EIF has come a long way. We have expanded our focus to businesses that actively make the generation of positive impact their mission. As a result, we are able to encourage and incentivise the investment industry to actively manage a better social output. We believe in the coming years there will be more capital entering this space, and we have the demonstrable experience to ensure this capital is put to work for positive social impact.”
“Many groups in society still struggle to access financing – youth, gender, employment status, migratory background, lack of formal education and a criminal record are all barriers to getting the credit necessary to start a business. The importance of helping these individuals cannot be overstated, for when vulnerable groups succeed they lift everyone around them. Microfinance is not just about credit, it is about understanding the needs of micro enterprises and being able to provide accompanying services to maximise social outreach. “
“In a time where responsiveness to societal needs is becoming the most decisive factor for competitiveness of any business, social enterprises have become role models for future-proof businesses: they are seeking to bring lasting solutions to societal challenges with business models where impact and economic value are growing hand-in-hand. The EIF, with a portfolio of funding tools, is able to support these impact-centric enterprises at each stage of their life cycle.”
WHAT IS THE EIF?
The European Investment Fund (EIF) helps small and medium-sized enterprises (SMEs) grow and prosper in Europe, promoting innovation, supporting employment and improving the economy.
As part of the European Investment Bank (EIB) Group, we design and deploy financial instruments, which enable banks and funds (financial intermediaries) to better serve SMEs.
As a result, we attract more private capital into the SME space, we kick-start new financing markets and ecosystems, and ultimately make more financing available to SMEs across the EU and associated countries.
The EIF manages resources on behalf of the EIB, the European Commission (EC), national and regional authorities and other third parties.
The EIF is a public-private partnership whose tripartite shareholding structure includes the EIB, the EU represented by the European Commission and various public and private financial institutions.
OF TRANSACTIONS SIGNED ACROSS THE EU AND ASSOCIATED COUNTRIES IN 2018
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