Up to €100 million in new SME funding as Arion Bank gets European guarantee

• The European Investment Fund has signed a guarantee agreement with Arion Bank to support new lending to some 40 SMEs and Small Mid-Caps in Iceland.
• The guarantee is backed by the European Commission’s InvestEU initiative, notably focusing on sustainability, innovation and digitalisation, and the cultural and creative sectors.
• New lending from Arion Bank would come on more favourable terms and is aimed at aiding the green, digital, and sustainable transformations of the economy, as well as the cultural sector.

The European Investment Fund (EIF) has signed a guarantee agreement with Icelandic bank Arion Bank to support Icelandic small entrepreneurs. With backing from the InvestEU programme of the European Commission, the EIF-guarantee will enable Arion to award up to €100 million in new lending to local companies on more favourable conditions. The InvestEU-support targets three different fields; sustainability investments, lending for innovation and digitalisation, and Iceland’s cultural and creative sector.

At a signature ceremony in Reykjavík, CEO Benedikt Gíslason, commented: “It is particularly pleasing to continue to develop our successful relationship with the European Investment Fund. Our collaboration with the EIF eight years ago enabled Arion Bank to fund numerous innovative projects in fields as diverse as aquaculture, data centres, green fuels and product development in skin care. This time around our collaboration extends even further, with a focus on innovation, the digitalisation of society, culture and the creative industries, as well sustainability and environmental issues. This important partnership puts us in prime position to lend to projects in these fields as the EIF guarantee allows us to fund projects earlier in the process and at more favourable terms for borrowers meeting the eligibility criteria for each category.”

In terms of sustainability investments, the guarantee will enable Arion Bank to further support a green transformation of the economy by making available financing for environmentally friendly and inclusive investments by the final recipients. The part of the guarantee focused on innovation and digitalisation is expected to improve access to finance to R&I intensive SMEs and Small Mid-Caps, as well as supporting the uptake of digital technologies and digital transformation of enterprises. Lastly, Iceland has a very well-established film industry compared to the size of its economy. Arion Bank will enhance access to finance for this creative ecosystem, consolidating its resilience and allowing it to adapt to the challenges ahead.

“This is already our second operation in Iceland since the country joined the InvestEU initiative, and we are really looking to making an impact here,” said EIF Chief Executive Marjut Falkstedt. “Our relationship with Arion Bank goes back almost a decade and we’re glad to build on their strengths to fulfil our core mission of financing those SMEs that need it most. As part of the EIB Group, climate and sustainability are always key themes for us, as they are for Arion Bank as well. Next to this, we’re happy that, together, we can also target companies in the fields of innovation and digitalisation, and in Iceland’s cultural and creative sector.”

In terms of eligibility, Arion will target its sustainability lending to projects in a wide range of eligible categories, such as sustainable agriculture, renewable energy, energy efficiency, clean transportation, as well as pollution prevention and wastewater management. Inclusions for the digitalisation guarantee are expected to be mainly in fast-growing enterprises and innovative products/processes sectors such as marine aquaculture and fishing, natural science and engineering, biotechnology, and experimental development of natural sciences and engineering.

EU Ambassador to Iceland Clara Ganslandt commented: “For three decades now, Icelandic businesses, universities, research institutes and also cultural organisations have taken part in various EU programmes. They have achieved remarkably high success rates and are very much valued by their international partners. I look forward to seeing first-hand how the guarantee agreement signed today with Arion Bank will help Icelandic SMEs and Small Mid-Caps in the green, digital, as well as cultural sectors.”

This guarantee transaction is the second in partnership with Arion Bank, after a previous InnovFin SME Guarantee agreement signed in 2016, which supported innovative Icelandic small businesses with a portfolio of €107 million in loans.

Background information:

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. Since its first project in Norway, in 1974, the EIB Group has made available over €6 billion to support projects in the EFTA region, about €5 billion through the EIB and €1,1 billion through the EIF. On the whole, in Iceland alone the EIB Group has made available nearly €1.2 billion euros throughout the years between EIB and EIF financing.

The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable economy. It helps generate additional investments in line with EU policy priorities, such as the European Green Deal, the digital transition and support for small and medium-sized enterprises. InvestEU brings all EU financial instruments together under one roof, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub, and the InvestEU Portal. The InvestEU Fund is implemented through financial partners who invest in projects using the EU budget guarantee of €26.2 billion. This guarantee increases their risk-bearing capacity, thus mobilising at least €372 billion in additional investment.

Arion Bank is a leading Icelandic universal Bankng franchise. It operates in the Greater Reykjavík area as well as in the largest urban areas around the country. Arion provides services to households, corporates, institutions, and investors. It has three business segments: Retail Bankng, Corporate & Investment Bankng, and Markets.