We’ve invested €107 million into the €1.3 billion European Fund for Southeast Europe (EFSE), which provides access to finance for microfinance lenders and financial institutions in developing countries in the South East and East Europe.
By investing into the region’s financial infrastructure, it provides local businesses with the opportunity to thrive through the provision of financial products, technical assistance and access to finance for underserved communities.
EFSE is a blended finance vehicle, which has provided micro, small and medium enterprise funding to more than 50,000 female-owned enterprises, while circa 2.1 million jobs have been indirectly supported by financing received through partner lending institutions since 2005.
A look into blended finance
Donor capital provided by Development Finance Institutions (DFIs) and Multilateral Agencies is a scarce resource and using it to attract additional private sector capital can enhance the overall impact of a strategy.
A blended finance vehicle brings together junior capital provided by DFIs with capital provided by impact-focused private sector investors. This approach leverages the capital provided by DFIs to create effective scale and enable real impact, allowing a relatively small amount of donor capital to unlock significant amounts of private investment.
This structure also allows for a keenly priced blended cost of capital, enabling financial institutions to lend to end borrowers at competitive rates.
Why this investment?
We asked Eoin O’Shaughnessy, Co-Head of Structured Credit Research at M&G Investments, to tell us more:
“This investment isn’t just about seeking financial returns; it’s about helping to make a tangible difference in people’s lives.
By leveraging our expertise in PPP (public private partnership) models, we’re able to amplify the flow of private capital from a range of funds, including our purpose-led private assets strategy, Catalyst, to institutions that share our vision of fostering inclusive and sustainable economic growth.
The participation of DFIs provides a solid basis and additional expertise to our investment journey and we’re witnessing a growing interest from our investors who are seeking Article 8 and 9 assets – these investments aren’t just financially positive; they are making a positive impact.”
This is M&G’s second investment into an impact-driven PPP model following a $90 million investment into The Microfinance Enhancement Facility, which provides funding to more than 120 financial institutions in 44 countries globally.