Vnesheconombank to establish International Fund to Support Entrepreneurship

State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank) and German state bank KfW signed a Memorandum of Understanding on the Establishment of an International Fund to Support Entrepreneurship. It is assumed that the volume of the Fund will reach $900M in the next four years.

This initiative is a part of Russian-German interstate consultations at the highest level in the presence of Russian President Vladimir Putin and German Chancellor Angela Merkel. The Agreement was signed by the the chairman Vladimir Dmitriev and KfW Bankengruppe board member G?nther Br?unig.

According to the Memorandum, the International Fund to Support Entrepreneurship will expand the range of existing financing instruments for small and medium enterprises (SMEs) in Russia by attracting long-term foreign investments. Vnesheconombank and KfW intend to deposit $150M to the Fund.

The fund will support SMEs both through targeted funding of Russian banks (including a significant shortage of long-term liabilities in the banking system) and through direct funding of fast growing small and medium enterprises that implement investment projects in non-trade sector with the funding from 150M RUR to 1B RUR.

The structure of the Fund will be established through several tranches with differing levels of risk and return. This will make it possible to share the risks with regard to the requirements of all investors and provide attractive cost of funds for the recipients of funding.

According to the parties, the establishment of the Fund will raise additional funds to finance small and medium enterprises using modern mechanisms of innovative projects' funding and best international experience in this field. It is planned that the fund will start operating within a year after signing the Memorandum.