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The European Union has launched an inaugural risk-sharing facility for the export credit industry, with an initial €300mn pilot aimed at boosting SME exports to buyers in war-torn Ukraine.

This week, the European Investment Fund (EIF) issued an expression of interest call for its Ukraine export credit facility and encouraged agencies in the EU, as well as Iceland and Norway, to apply.

The move comes after years of discussions in Brussels over a potential EU export credit facility with the Commission first floating the idea of such an instrument in 2021, citing “harsh competition” in key markets.

Earlier this year, EU officials confirmed the “complex new policy tool” would initially be deployed in Ukraine.

The facility will extend guarantees to export credit agencies (ECAs) for transactions involving European SMEs and small mid-caps looking to export goods and services to buyers in the Ukrainian market.

It is hoped the export credit facility will drive an uptick in European exports to Ukraine and support Kyiv’s reconstruction plan, forecast by the World Bank to cost US$486bn over the next decade.

“Export credit agencies as main public facilitators of trade are acting as our financial intermediaries under this pilot,” says the EIF, which is part of the European Investment Bank group.

“The initiative aims to reduce financial risks… encourage EU businesses to increase exports to Ukraine and revitalise trade, strengthen ties with the EU, and contribute to Ukraine’s economic recovery,” it says.

Guarantees will be supplied on a portfolio basis under the European bloc’s InvestEU programme.

“ECAs will have full autonomy to originate eligible transactions,” a European Investment Bank spokesperson tells GTR, adding: “The guarantee will be structured as a portfolio guarantee, allowing the EIF to cover guarantee calls without needing to approve each transaction in advance.”

Speaking last month, European Investment Bank group president Nadia Calviño said the facility will help forge closer economic ties between the EU and Ukraine, supporting Kyiv’s plans to join the 27-member bloc.

“This facility will remove risk for EU companies wanting to export to Ukraine and will provide essential services and goods supporting the country’s resilience and reconstruction, such as materials, machinery, technologies and vehicles,” she said.

The European Commission and European Investment Bank first announced plans for the Ukraine pilot in 2023, and for much of this year, were in discussions over the eventual structure of the facility.

Export credit providers from various countries including Finland, Belgium and the Netherlands have registered their interest in the scheme, which aims to boost market capacity even as war rages in Ukraine.

ECAs have collectively pledged hundreds of millions of euros towards Ukraine’s reconstruction, yet war risks are still limiting market capacity.

“It is quite a new thing for the EU to think of using the European Investment Fund in this way,” Eeva-Maija Pietikäinen, head of trade finance and country risk management at Finnvera, previously told GTR.

Last year, a study commissioned by the Commission urged greater cooperation between European ECAs to arrest double-digit declines in the share of EU contractors active in Africa, Asia and the Middle East.

The report’s authors also suggested the EU could develop a reinsurance facility for ECAs and state export-import banks.