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EIB signs EUR 54.6 million facility for smes in West Africa

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Wednesday, 15 December 2004

EIB signs EUR 54.6 million facility for smes in West Africa

Three facilities totalling EUR 54.6 million for West African small and medium-sized enterprises were signed today in Dakar with BOAD,[1] the West African Development Bank. The EIB, the European Union’s long-term lending institution, is to provide support for BOAD with an EUR 25 million global loan from the Bank’s own resources, and a EUR 25 million guarantee facility and EUR 4.6 million equity participation under the Cotonou Agreement’s Investment Facility. The guarantee facility is the first operation of this type under the Investment Facility.

The objective of the EIB's support for SMEs in West Africa is to increase the number and diversity of financial instruments and to strengthen the financial markets. The guarantee facility will allow BOAD to guarantee loans or counterguarantee capital market operations in the BOAD region (public and private issues). This facility will enable BOAD to increase the volume, number and diversity of its operations.

The EIB will also increase its equity participation in BOAD and take part in the general capital increase proposed by BOAD in the coming months. The EIB’s increased participation from 0.5% to 1% of the capital indicates continued support for the West African regional development banking institution.

The global loan will give BOAD greater access to stable sources of long-term finance. The final beneficiaries of the global loan will be small and medium-sized companies in the productive and human capital sectors engaged in foreign exchange and/or export-oriented activities.

The loan agreement was signed with the West African Development Bank in Dakar, where the BOAD Board of Directors held its meeting this month.

The global loan operation signed is the fourth such loan with BOAD and, together with the equity participation and guarantee operations, underlines the importance the EIB attaches to the regional diversity and quality of BOAD’s operations

The Investment Facility focuses on the private sector and thus aims to improve the access of SMEs to long-term finance on competitive terms and to strengthen the financial sector in the ACP countries. Global loan credit lines strengthen the ability of banks to finance smaller-scale and SME investment projects by providing funding that would otherwise not be available for the targeted projects. The intermediary banks and institutions – in this instance the West African Development Bank – act independently and use their own decision-making criteria and pricing.