The use of donor-funded resources is of particular importance when operating in developing countries, especially in fragile economic environments. In these countries, the EIB uses grants to enhance project development impact, for instance, by mobilising financing from partner financial institutions and the private sector. Such use of grants is referred to as blending.

Donor contributions can support specific development outcomes in a specific sector or region using different instruments:

• Investment grants help lower the total financing needs for the beneficiary. This is often necessary to unlock projects that have a low financial return or elevated risk, despite high socio-economic returns. They can also target certain aspects of a project that add specific social or economic value.
• Technical assistance can improve the quality, efficiency and sustainability of a project during the preparation or implementation phase. This can help raise standards and ensure environmental and social requirements. Technical assistance operations are subject to a tendering procedure. Information on the tendering procedure can be found on our procurement page.
• Interest rate subsidies bring down the overall cost of the investment by reducing the financing costs in cases where the beneficiary project promoter faces debt sustainability constraints.
• Financial instruments/impact financing instruments can unlock financing from private and public investors by addressing some of the risks that are holding back investments. They are typically used to support private sector operations and revenue-generating public and private sector projects, like public-private-partnerships with a positive economic impact. They can be used as:
  • Risk capital (equity and quasi-equity) can attract other financiers by taking on part of the risks of an investment. We work with private equity funds focusing on social or environmental issues and sustainability.
  • Local currency lending helps improve access to finance particularly for micro, small and medium-sized enterprises (MSMEs) and entrepreneurs. We especially want to help underserved groups, including women and young people.
  • Risk-sharing instruments such as first-loss guarantees, or first loss pieces, guarantees, subordinated debt, or junior equity tranches facilitate EIB risk-sharing with local banks to help underserved MSMEs.
  • Direct financing through debt or equity investments supports projects with high developmental impact, but which also entail higher expectations of losses. The EIB has a strict selection process for this instrument.