The European Investment Bank (EIB) is the European Union's bank, with member states contributing jointly to its capital in accordance to their economic weight and has its headquarters in Luxembourg.
EIB provides long-term finance for sound, sustainable investment projects to foster EU policy goals in Europe and beyond. EIB targets four priority areas in support of growth and job creation: innovation and skills, SMEs, climate action and strategic infrastructure across the EU.
EIB is one of the largest multilateral and credible borrowers on global markets. Drawing from its excellent credit rating (AAA), EIB is able to raise funds at advantageous interest rates from international capital markets through bond issues with the benefits passed on to its clients.
Cooperation between Cyprus-EIB
EIB has long standing ties with Cyprus dating back in the early 1980’s. Since then, EIB has been a solid and reliable partner of Cyprus by financing projects in all sectors of the economy with exceptional favourable terms, offering added value, expertise and experience mainly in public investments.
Since the inauguration of our cooperation with the EIB in 1981 loan agreements of more than 4.2 billion euros have been signed, focusing on various sectors such as energy 18%, water supply and sewerage 16%, SMEs and Mid-cap 29%, health and education 14%, composite infrastructure 12%, transport 6%, urban infrastructure 3%, services 2%.
Cyprus is in cooperation with EIB for new innovative schemes and so far three schemes have been launched for the support of SMEs in Cyprus, given that SMEs are considered to be the backbone of the Cyprus economy contributing to sustainable development and employment:
1. EIB Direct Lending/Government Guarantee Scheme for SMEs and Mid-caps:
Following relevant Council of Ministers Decisions, €1bn in total has been approved so far for financing the above Scheme, in an attempt to further reinforce the Cyprus economy and in particular the private sector. Under this Scheme, 14 different Loan Agreements have been signed between EIB and ten out of the 12 Cypriot Banks, amounting to €680 mln in total. Out of these €680mln, around €400mln have already been allocated to more than 240 SMEs and MidCaps, promoting more than 350 investments in Cyprus.
The Scheme is accomplishing its primary target by offering to SMEs alternative medium and long term funding to sustain their activity and growth. In addition, the beneficial EIB funding and increased long-term lending capacity resulted in lower financing costs and improved terms for final beneficiaries.
2. Cyprus Entrepreneurship Scheme (CES)
The establishment of CES constitutes a common instrument by the EIB Group and the Republic of Cyprus with the purpose to facilitate access to finance for Cypriot SMEs through financial instruments in the form of risk sharing loans with favourable financing terms.
The initial capital of €70 mln, acquired by the Government through a loan from EIB has been matched by equal contributions from the Bank of Cyprus (total portfolio of €60mln) and from Ancoria Bank (total portfolio of €10mln), raising the total amount available to SMEs to €140 mln.
The establishment of CES will contribute to sustainable growth and employment in Cyprus ultimately benefiting SMEs, facing acute shortage of liquidity and limited alternative medium and long term funding.
3. European Fund for Strategic Investments (EFSI):
Two Loan Agreements have been signed with the European Investment Fund (EIF)[1]: the first one with RCB Bank of a total amount of €10mln and the second one with the Bank of Cyprus of a total amount of €10mln. Both Agreements have been signed in the context of the European Fund for Strategic Investments (EFSI), under the programme "InnovFin" in the framework of the programme "Horizon 2020".
The purpose of the financing Agreements mentioned above is to facilitate the access of Mid-Caps and small and medium-sized enterprises in risk financing projects for research and innovation and to provide support in such activities for the next two years in Cyprus. Those projects pose by their nature a higher risk profile and their assessment is substantially more challenging compared to traditional investments, hence they often face difficulties in access to finance.
In addition, in 2017 a loan Agreement amounting to €35mln has been signed between EIB and KODAP for the construction of KODAP’s infrastructure at the Vasiliko Energy Center. This project is being financed under EFSI and is regarded as the first EFSI infrastructure project in Cyprus.
[1] It is part of EIB and specializes in the area of venture capital to support SMEs and mid-caps throughout Europe.
