AFD and Proparco, with the support of the European Union and the African, Caribbean and Pacific Group of States, are launching EURIZ, a new scheme enabling financial institutions to partially hedge their credit risk.

The objective is to offer local banks guarantees so that they can more easily provide loans to MSMEs in the ACP area. This new project is part of the Thematic Blending Framework of the EU’s Development Cooperation Instrument and European Development Fund.

It is also part of Choose Africa, a French initiative targeting African MSMEs. It will support the creation and development of SMEs with a high development impact and promote job creation.

The first facility that targets both companies with a high development impact and fragile states  

Small and medium-sized enterprises play an essential role in economic growth and job creation. In developing and emerging countries, they constitute 90% of formal enterprises and create 60% of formal jobs. These key players need financial resources to develop their business but their access to finance remains very limited, often because they are perceived as a risky clientele by banks. Today, only 20% of African MSMEs have access to bank loans, usually short-term financing.

To facilitate their access to credit and thus encourage their development, the AFD Group is launching, with the support of the European Union and the African, Caribbean and Pacific Group of States, a new guarantee mechanism called EURIZ. In concrete terms, partner financial institutions (public and private banks, specialised financial institutions), to which MSMEs will apply to obtain a loan in local currency, may call on Proparco or AFD to guarantee part of the risk associated with the loan. 

EURIZ will cover up to 70% of local bank loans granted to SMEs operating in sectors with a high social and societal impact. The scheme also includes a technical cooperation component that will support these partner institutions to best serve these companies" says Guillaume Barberousse, head of Proparco's Financial Institutions & Inclusion division.

EURIZ is in line with the ARIZ guarantee scheme developed by the AFD Group since 2008, but the new scheme goes further: it will focus on key sectors for sustainable development, in particular SMEs operating in the agricultural, health, education, digital, green economy or inclusive business sectors, but also young start-ups, companies owned by women or young people under 25 who are facing increased difficulties in accessing finance. 

The other particularity of EURIZ is that it is aimed at very small businesses and MSMEs located in the Caribbean, the Pacific and sub-Saharan Africa, particularly in fragile countries. 

Guarantees and tailor-made technical assistance 

EURIZ includes €181 million in guarantees that can be granted to local public banks, via AFD, or private banks, via Proparco, wishing to finance key players in their local economies. 

In addition to this financial support, EURIZ will also provide financial institutions with technical support tailored to their needs. This support will enable them to develop an offer adapted to the specificities of MSMEs in the targeted sectors. This support will make it possible to strengthen their internal organizational capacities, risk management, information systems and scoring tools. 

Similarly, technical assistance will be provided to support MSMEs in the financial structuring of their projects or the improvement of their business plans.  

A total of €6 million will be devoted to providing technical support to banks and MSMEs. 

EURIZ receives financial support from the European Union to the tune of €25.8 million. Thanks to funds from the European Union and the African, Caribbean and Pacific Group of States, which we will combine with our own financial resources, we will be able to go to riskier countries and sectors" says Guillaume Barberousse.

Thanks to EURIZ, more than 6,200 MSMEs are expected to benefit from loans in the coming years to create their projects or develop their activities, including 1,200 in fragile countries and 5,000 companies with a strong development impact.