Merkur Andelskasse gets European support to increase social and SME lending

Business, Finances, Start Up

Danish cooperative bank Merkur Andelskasse has signed an increased allocation of its existing EGF guarantee with the European Investment Fund (EIF) to channel new financing to Danish companies. The Bank has received a doubling of an existing guarantee, which falls under the “European Guarantee Fund”, originally signed in August this year. This ensures that Danish SMEs will be able to benefit from an extra DKK 148,76 million (€20 million) in new lending on more favourable terms, bringing to total EGF-facility for Merkur to DKK 297.60 million (€40 million).

Next to this, a DKK 74.4 million (€10 million) sub-ordinated funding, made possible under the European Union Programme for Employment and Social Innovation (EaSI), will catalyse a further DKK 148,76 million (€20 million) in much needed financing to social enterprises across Denmark.

Merkur will provide new, more favourable, debt financing to these Danish SMEs and social enterprises ensuring that they have sufficient financing available to mitigate the economic impacts of the COVID-19 crisis and are able to continue their growth and development in the medium to long-term. The loans can be used for investments in i.a. new or existing buildings, energy retrofit and climate mitigation, equipment and machinery, but also working capital.

Charlotte Skovgaard, CEO of Merkur Andelskasse:

”We see the strengthening of our capital as an essential foundation for development and growth in the years to come. With the loan capital from EIF we obligate ourselves to an increase in lending to sustainable companies, thereby strengthening our own business as well as those of our customers. An increase in lending means reinforcing the development of sustainability and social responsibility – the core of our purpose.”

European Commissioner for Jobs and Social Rights, Nicolas Schmit, said:

“Social enterprises often face difficulties in accessing traditional finance. This agreement under the EaSI Funded Instrument, backed by the European Union, boosts the on-lending of Merkur Cooperative bank to social enterprises, creating and maintaining jobs in the social economy. It will contribute to mitigating the effects of the pandemic and strengthen Europe’s inclusive and fair recovery.”

EIF Chief Executive Alain Godard.

“The EaSI programme is one of the EU instruments that the EIF uses to target micro- and social companies. Next to this, the European Guarantee Fund allows us to make available the necessary funding for those European SMEs that are healthy, but struggle with the current conditions. Our guarantees will make available financing under favourable conditions, helping Danish companies on their way out of the crisis, and supporting Merkur in its bid to develop a more sustainable and socially responsible society.”

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.

The European Guarantee Fund (EGF) was set up by the EIB Group with contributions from Denmark and other EU Member States to shield companies suffering from the economic fallout of the COVID-19 crisis. Using nearly €25 billion in guarantees, the EGF allows the EIB and the EIF to quickly make loans, guarantees, asset-backed securities, equity and other financial instruments available to mostly small and medium-sized enterprises. The EGF is part of the European Union’s recovery package aiming to provide a total of €540 billion boost those parts of the EU economy that have been hit the worst. Up to the end of May, over €10.5 billion worth of projects under the EGF had been approved, expected to mobilise around €89,5 billion of the €200 billion financing target.

The European Union Programme for Employment and Social Innovation (“EaSI”) aims at supporting the EU’s objective of high level employment, adequate social protection, fighting against social exclusion and poverty and improving working conditions. The Microfinance and Social Entrepreneurship axis of the EaSI programme provides support to financial intermediaries that offer microloans to entrepreneurs and micro-enterprises or finance to social enterprises. The objective is to increase access to microfinance, which includes microcredit i.e. loans of up to EUR 25,000, in particular for vulnerable persons and micro-enterprises. In addition, the EU is supporting social enterprises through the provision of guarantees to financial intermediaries for granting loans of up to EUR 500,000. The microfinance and social entrepreneurship support is currently being implemented through the EaSI Guarantee financial instrument, which enables financial intermediaries to reach out to (potential) entrepreneurs that would not have been able to access  financing otherwise due to risk considerations. It is also being implemented through the EaSI Capacity Building financial instrument, aiming to reinforce the capacity of financial intermediaries in the areas of microfinance and social finance through equity investments; and the EaSI Funded Instrument, which provides senior and subordinated loans to microfinance institutions and social enterprise lenders to boost on-lending to micro-enterprises and social enterprises. The European Commission has selected the EIF to implement the EaSI financial instruments.

Merkur Andelskasse has been a forerunner of sustainable development and social responsibility in the Danish banking sector since 1982. Merkur, a cooperative bank, gives and facilitates financial advice and financing to both personal and business customers, including arranging mortgages and providing sustainable investment products. On the business side, Merkur finances profit making enterprises within sustainable production and not-for-profit institutions and associations within educational, cultural and social fields.