European Investment Fund and Siauliu Bankas sign a EUR 40 million agreement for financing Lithuanian SMEs
European Investment Fund (EIF) and AB Siauliu Bankas today signed an agreement under which Siauliu Bankas will provide loans worth EUR 40 million (over LTL 138 million to) Small and medium sized enterprises SMEs in Lithuania.
Siauliu Bankas will manage the newly created Funded Risk Sharing product under the JEREMIE initiative, designed to stimulate lending from banks to SMEs over a defined two year period. The EIF will provide EUR 20 million to Siauliu Bankas, which will be matched by an equal amount from the bank, therefore totalling EUR 40 million. This transaction enables Siauliu Bankas to accelerate lending to Lithuanian SMEs during the current economic recession.
Richard Pelly, Chief Executive of the European Investment Fund stated, “This agreement is very good news for Lithuanian SMEs and will enable increased lending to this important sector of the economy.
Siauliu Bankas was chosen to implement this initiative following a detailed selection process. It is the only local bank in Lithuania to be selected for this purpose which reflects the strength of its management and its ability to provide enhanced access to finance for SMEs.”
Siauliu bankas will begin lending to Lithuanian enterprises in the first quarter of 2010 with an expectation that the full amount is lent within a two year period.
„New funding resources offered by the European Investment Fund are important to the bank and, at the same time, they are very essential to business. Collaboration with the Fund will allow granting risk sharing credits, which means the better lending conditions and lower value of the required collateral. Business people will be able using the funds that are planned to be flexibly administrated to finance the start of their activities, to develop their business or to optimize the possibilities adjusting them to business environment improvements. All the mentioned factors have to increase the pace of the recovery of small and medium-sized business in the country as well as its growth”, - said Mr. Algirdas Butkus, Chairman of the Board of Šiaulių bankas.
The Funded Risk Sharing instrument is structured to combine capital from the Holding Fund with capital provided from the bank on an equal basis. The product has been designed and developed by the EIF in response to the credit crisis and the EIF is implementing this product in several Member States. Lithuania is the first country to benefit from this initiative.
The EIF is also implementing a number of other financial engineering instruments using the Holding Fund Structure in Lithuania and further announcements are expected in the coming months.
This transaction results from a ‘call for expression of interest’ which attracted 8 banks operating in Lithuania. The EIF conducted a thorough analysis to select the applicants against set criteria and using the EIF’s expertise built up through providing guarantees to financial institutions across Europe over the past 15 years.
The EIF expects to sign a total of four similar contracts with banks in Lithuania that will stimulate further SME lending up to a total of EUR 344 million. These transactions are a key part of the EIF’s implementation activities in managing the JEREMIE Holding Fund which mobilises European Regional Development Funds.
JEREMIE (Joint European Resources for Micro to Medium Enterprises) is a joint initiative launched by the European Commission (DG Regional Policy) and the European Investment Bank group to improve access to finance for SMEs in the EU within the Structural Funds framework for the period 2007 - 2013. JEREMIE enables the EU Member States and Regions to put money from the structural funds and also national resources into holding funds that can finance SMEs in a flexible and innovative way. Since the products will be provided on a repayment basis, funding will be reinvested and hence more SMEs will benefit from the EU resources.
EIF has currently signed 7 National (Greece, Romania, Slovakia, Latvia, Lithuania, Cyprus and Bulgaria) and 3 Regional (in France - Languedoc Roussillon, Italy - Campania and Sicily) Holding Fund agreements.
The new initiative aims at developing and fostering the role of entrepreneurship within the EU in order to meet the objectives of the Lisbon agenda and help structural funds to deliver greater benefits to the market.
In Lithuania JEREMIE Holding Fund is financed from the EU Structural Funds under 2007-2013 Economic Growth Operational Programme of Lithuania.
EIF's central mission is to support Europe's small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture capital and guarantees instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. The EIF total net commitments to private equity funds amounted to over EUR 3.7bn at 30th June 2009. With investments in over 300 funds, the EIF is a leading player in European venture due to the scale and the scope of its investments, especially in high-tech and early-stage segments. The EIF commitment in guarantees totaled over EUR 13.3bn in close to 190 operations, positioning it as a major European SME guarantees actor and a leading micro-finance guarantor.
About Siauliu Bankas:
Šiaulių bankas is one of the banks in Lithuania with the biggest share of Lithuanian capital. The bank’s top priority is focused on small and medium-sized business, funding of regional projects and rapid expansion of the sector of its retail banking. Šiaulių bankas has 53 territorial outlets operating in 33 towns and rendering the banking service to its clientele all over Lithuania. The entire bank’s outlets work on real time on-line regime, pay much attention to the qualified servicing of the clients. The most important trend of the bank’s activity is lending. The long-term collaboration relates Šiaulių bankas with the European Bank for Reconstruction and Development (EBRD), the Council of the Europe Development Bank (CEB), Nordic Investment Bank (NIB) and other financial partners.