A message from the board and portfolio manager 2025
Message from our Board and Portfolio Manager
In 2025, EFSE celebrates 20 years of driving inclusive growth across Southeast Europe and the Caucasus. This milestone reflects two decades of resilience, long-term innovative partnerships, and sustained commitment to catalyzing impact, even in times of crises.
As a pioneering blended finance fund, EFSE has mobilized significant public and private capital, with the European Commission being a key investor to the Fund, alongside the German Federal Ministry for Economic Cooperation and Development (BMZ).
Launched in 2005, EFSE was a true innovation in public-private partnership, the first blended finance impact fund for micro, small, and medium enterprises (MSMEs) – the economic backbone of this fast-growing region - and remains one of the largest of its kind today. Supported by its Development Facility, its advisory and capacity-building arm, EFSE delivers combined impact across financing and capacity development.
The operating environment remains complex
The operating environment remains complex
Russia’s war of aggression against Ukraine entered its fourth year, with elevated uncertainty and economic spillovers expected to persist into 2026.
Despite these headwinds, EFSE’s target markets proved resilient, maintaining moderate growth driven by strong domestic demand, rising wages, credit expansion, and ongoing EU integration.
Against this backdrop, accelerating the digital and sustainable transition of MSMEs, and unlocking the untapped potential of women and other underserved groups, will be key to sustaining growth and productivity in 2026 and beyond.
In 2025, EFSE continued to deliver on its mandate, growing by 7.3% to an umbrella portfolio of EUR 1,458m. Growth was driven by a substantial portfolio build-up in Ukraine through the Ukraine Sub-Fund, supporting recovery and reconstruction efforts. Total disbursements reached EUR 465m, including EUR 83m in Ukraine.
At the same time, mobilizing private sector capital remained central to EFSE’s model. Supported by strong shareholder commitment, nearly EUR 200m in new private capital was subscribed in 2025, underscoring the Fund’s continued relevance for investors.
This builds on sustained momentum over recent years: since 2021, private capital has increased by around 190%, raising investor participation to its highest level since inception (38%).
We also approved 61 new Advisory & Capacity Building projects on inclusive development, sustainability, and competitiveness, leveraging EU integration dynamics, and Ukraine-specific grant support totaling EUR 7.6 million.
In 2025, we continued deepening our engagement in strategic priority areas for inclusive and resilient growth, including:
- Stepping up the recovery efforts in Ukraine
- Advancing agricultural resilience, sustainability, and ESG integration
- Women’s economic empowerment as a driver for inclusive growth
Stepping up the recovery of Ukraine
Stepping up the recovery of Ukraine
One year of EFSE USF
Following the launch of the Ukraine Sub-Fund (USF) in 2024, in 2025 EFSE substantially stepped up its support for Ukraine’s inclusive recovery and reconstruction.
USF provides long-term, local currency financing and advisory support, helping financial institutions and MSMEs sustain operations, rebuild, and adapt to an increasingly unpredictable operating landscape. Supported by first‑loss capital from the German Government and the European Commission, the USF takes a targeted risk approach, acts flexibly, and scales its support in response to the evolving negative impacts of the War.
Within a year of its launch, the USF has demonstrated its tangible contribution to joint recovery efforts: the sub-fund has successfully scaled donor capital mobilization, cumulatively reaching EUR 171m – incl. EUR 55m from the EU Commission in early 2026.
It has also significantly increased its investment portfolio from EUR 20m to EUR 103m by the end of 2025, deployed through 7 local financial institution investees. These investments are complemented by financing-linked grants to help end-borrower MSMEs secure business continuity, reconstruct assets, and reduce collateral constraints that restrict access to finance.
Access to finance is especially critical in the agricultural sector, given its role in sustaining food security, rural employment, and economic stability in Ukraine; discover in this report how EFSE and Agroprosperis Bank help sustain agribusiness resilience in wartime.
Delivering timely, flexible financing solutions in Ukraine requires coordinated international cooperation. In June 2025 we hosted a high‑level dialogue in Chișinău to mark one year since the launch of the USF, convening local financial institutions, the EU Commission, and development banks to discuss pathways for unlocking MSME lending through innovative funding and risk-sharing instruments, and supporting resilience and recovery in crisis conditions. We are committed to continuing this dialogue and mobilizing additional public, as well as institutional investors and development banks to further scale the recovery and reconstruction efforts in Ukraine.
Advancing agricultural resilience, sustainability, and ESG integration
Advancing agricultural resilience, sustainability, and ESG integration
Agriculture remains a major source of employment and income, and a core pillar of rural resilience in Southeast Europe and the Caucasus. However, the sector is highly exposed to climate risks, conventional and inefficient farming practices, productivity constraints, and gaps with EU standards and ESG alignment. Adopting sustainable, climate‑smart agricultural practices – e.g. soil conservation, efficient irrigation – unlocks growth, strengthens resilience, standards, and exports, with growing evidence of successful, albeit slow and uneven uptake across the region.
The sector, however, remains structurally underfunded; sustained investment and capacity-building is essential to achieve sustainable growth and to support improved ESG performance, enabling the sector to fully benefit from EU integration momentum.
This is where EFSE comes in. In 2025, we further advanced our sustainable agri-finance strategy. Building on initial investments in Romania, Armenia, Bosnia and Herzegovina, Kosovo, and North Macedonia in 2023-2024, we adjusted our bespoke eligibility criteria to 3 new markets: Albania, Moldova and Serbia. We also launched first-time partnerships with 10 financial institution investees across the region and scaled trainings – reaching hundreds of farmers – to spread awareness and encourage the adoption of sustainable, resilient and more ESG-aligned practices.
Women’s economic empowerment as a driver for inclusive growth
Women’s economic empowerment as a driver for inclusive growth
Closing gender gaps remains a critical lever to unlocking inclusive economic growth in the region. In line with our Gender Strategy, launched in 2024, EFSE continues to expand access to finance for women-owned / led businesses in the region, as well as to support partner institutions in embedding gender into their policies and operations. In 2025, we disbursed over EUR 120 million in new investments, with a portion of these funds earmarked for women entrepreneurs, to partner banks, MFIs and leasing companies in the region - from Azerbaijan to Moldova, the Western Balkans, and Türkiye.
Through our Advisory & Capacity Building, EFSE also continued strengthening women’s access to skills and networks and building more inclusive business ecosystems. With our partners in 2025 we provided mentorship and financing solutions for young women entrepreneurs in Bosnia and Herzegovina, explored gender-inclusive approaches in the business transfer ecosystem in Croatia, and strengthened women’s business innovation landscape in Armenia.
Looking ahead: driving impact in a changing world
As EFSE enters its third decade, its core mission to foster inclusive and sustainable growth in Southeast Europe and the Caucasus remains unchanged. While proud of its achievements, the Fund continues to adapt its instruments to navigate evolving risks, capture opportunities, and deepen impact.
As investors increasingly seek both financial returns and measurable impact, EFSE is well positioned to meet this demand. Its model, built on regional expertise, strong partnerships, and blended finance, provides a solid foundation for continued growth.
Together with its partners and investors, EFSE will build on its track record, expand its reach, deepen its impact, and continue to adapt its approach to evolving market conditions and investor expectations.
Information for potential investors
In respect of the United States of America, Canada, Japan or Australia or any other jurisdiction in which the distribution, offer, sale, transfer or resale would be prohibited by applicable law, no investment in notes/shares or other instruments of the Fund (or its sub-fund(s)) can be offered or made.