Following the COVID-19 pandemic, developing countries are facing an economic downturn leading to a possible close of businesses and loss of millions of jobs. To counter this alarmingly negative impact, eleven members of EDFI, the Association of European Development Finance Institutions, are partnering with the European Investment Bank (EIB) to create a new, dedicated COVID-19 financing initiative at EUR 280 million.
– For several years, many developing countries have been experiencing solid economic growth and improving living conditions. With COVID-19 we risk losing this progress, and therefore we need to act decisively and fast to secure financing for sustainable companies to survive the current crisis, said Torben Huss, CEO of IFU.
Ready to deploy funding
The new initiative will support financial institutions and businesses in developing countries affected by the COVID-19 by offering funding to mitigate liquidity constraints or shortfall of funding from commercial banks, for example. The funding can be provided as short-term as well as medium to long-term.
The arrangement is based on European Financing Partners (EFP), which is an existing co-financing facility established by the members of EDFI. As EFP is fully operational and applies the due diligence and legal procedures conducted by individual DFIs, the allocated funds can be deployed swiftly and effectively with low administrative overhead.
“Increasing targeted support for private sector investment around the world is crucial to strengthen the resilience of companies and communities most impacted by COVID-19. The European Investment Bank is pleased to join forces with development finance partners from across Europe to build on the successful track record of European Financing Partners.”
Ambroise Fayolle, Vice-President of the European Investment Bank.
Focus on the financial sector
The financial sector plays a crucial role for local businesses to survive the crisis, and as effective recovery solutions cannot be achieved without a well-functioning financial sector, it is anticipated that a substantial part of the EUR 280 million will be allocated to local financial intermediaries in the developing countries. However, the new COVID-19 initiative will also support other crucial sectors like energy, infrastructure, manufacturing, agribusiness and services.
IFU contributes EUR 15 million
IFU has committed EUR 15m to the joint initiative. This is part of IFU’s overall COVID-19 response, which also includes temporary financial support for impacted project companies in IFU’s own portfolio, support for purchase of protective equipment and grants for training of staff, for example.