Why we guarantee

Through guarantee programs the EC can share risks with investors and private lenders. That means investors and lenders can get part of their money back if a loss occurs. The programs encourage investors to invest in areas of the economy which they would not have considered before and have a positive impact on people’s lives. It enables them to target people like refugees or women entrepreneurs that would normally be excluded from services like loans to small businesses. Parplies: “And there is only so much ODA funding*, but there's almost an infinite need for investment. With our public money and guarantees, we can encourage more private investors to put their money into these markets. That can potentially have a huge impact, because there’s literally a couple of 1,000 trillion euros in investable funds out there. If from this giant pool of investable funds, we manage to divert even a small fraction into developing countries, the impact can be much bigger than anything we do with ODA grants. There's lots of capital out there, so our role is to encourage it to go to markets that private investors perhaps consider as too risky.” What works well for the EC, is that our guarantee programs are unfunded. Parplies: “That is why our legislators allowed us to fund with 50 percent. Which means that for every euro that we put in, we can provide two euros and guarantees. And generally, we're not losing that much money. We are pretty confident that, most of the time, we’re dealing with perceived risk. The actual risk, even in Africa, even in the most difficult markets, tends to be a lot lower than what investors think.”