The story of the EFSE begins with an idea: to support the reconstruction of regions in Southeast Europe battered by the Kosovo War of 1998 by bringing together public donors and private investors. The plan was to establish a microfinance investment fund with an innovative structure to combine development finance with financial performance goals. This plan was then put into practice through the "European Funds for Bosnia and Herzegovina, Kosovo, Montenegro and Serbia"
These initiatives provided long-term funds – in some cases technical assistance as well – to local financial institutions in the region for onward lending to micro and small enterprises and households. The Funds, supported by the European Union, various European governments and the Netherlands Development Finance Company (FMO), were managed by KfW Entwicklungsbank.
The successful merger of these refinancing programmes into a single new fund, the EFSE, in 2005 was a major milestone. With KfW Entwicklungsbank as the Initiator, the EFSE was incorporated under the laws of the Grand Duchy of Luxembourg as a SICAV together with a regional funding facility for Albania, Bulgaria, FYR Macedonia, Moldova and Romania. At the time, the EFSE’s primary funding base was comprised of donor contributions from the European Union and the German, Swiss and Austrian governments as the main sponsors of the preceding Funds.
Since its inception in 2005, the EFSE has played a key role in fostering economic development and prosperity in Southeast Europe region and, more recently, in the European Eastern Neighbourhood Region, in strengthening local financial sectors.
- EFSE investments have been instrumental in fostering the micro and small enterprise sector, enabling small businesses to grow, generate additional income and create as well as sustain employment.
- EFSE investments have also significantly contributed towards improving the quality housing for low-income families throughout Southeast Europe and, more recently, the European Eastern Neighbourhood Region.
- The EFSE has proved very effective in working with all relevant stakeholders to promote responsible finance practices.
- The EFSE has contributed to regional cooperation, among others through its Advisory Group composed of representatives of local central banks.
- The EFSE has helped to stabilise the local financial markets during the recent crises by providing stable and reliable funding to ensure access to much-needed credit.
- The EFSE Development Facility’s technical assistance and training projects played a key role in strengthening partner lending institutions and local financial sectors – particularly in times of financial and economic turmoil.