News and Analysis

Another BGN 25.4 million in Micro-Financing channelled to Start-Ups and social enterprises

The Fund of Funds signed agreements with three financial intermediaries concerning the implementation of the financial micro-lending instrument with shared risk


Today, 27 June 2019, the Fund of Funds (FoF) signed agreements with First Investment Bank (FIB), Microfond and SIS Credit, the intermediaries selected to implement the financial micro-lending instrument with shared risk. The financing is provided under the Operational Programme Human Resource Development 2014–2020 (OPHRD) co-financed from the European Structural and Investment Funds.

FIB will manage public resources amounting to BGN 15 million. The bank has committed to leverage that with an additional BGN 4,825,000 in private financing. Thus the total amount to be extended to final recipients in the form of micro loans is expected to total BGN 19.30 million.

The FoF placed BGN 3 million for management with the micro-finance institution Microfond, and the total amount targeted at final recipients is expected to reach BGN 3.23 million, including a matching portion to be raised privately.

SIS Credit, which is also active in micro lending, will manage BGN 2.5 million, and with private co-financing, it will make a total of BGN 2.84 million available to borrowers.

Thus the total amount of both public and private financing to be placed on the market is BGN 25.4 million. It is expected that 850 start-ups and social enterprises will receive low-interest loans.

Microfond and SIS Credit have already been implementing a shared-risk micro lending instrument since 2017, when they were selected to operate as financial intermediaries for the same facility. As a result of the agreements signed as part of the first public procurement procedure, about 100 projects have been financed to-date, with a total project value of over BGN 1.5 million.

The resources provided by the Fund of Funds are zero-interest, while the financial intermediaries apply a market interest rate on the private co-financing. Thus final recipients will be charged a weighted average rate which is considerably more favourable than the market rate applicable to similar loans.

Micro loans range between BGN 5,000 and BGN 48,895 in size and can have a repayment term of up to 10 years and a grace period of up to 2 years for the loan principal.

The purpose of the facility is to improve access to financing aimed at speeding and business development of start-ups, including by individuals from certain vulnerable groups (unemployed for over 6 months, young people aged up to 29, including people with disabilities) and social enterprises.

The shared-risk micro finance facility will support activities relating to the acquisition of tangible and non-tangible assets; working capital in connection with business development/expansion of the enterprise or the self-employed person; development and upskilling of staff, or the entrepreneur, in case of self-employment.