A message from the board and portfolio manager
Unlocking shared success: Where growth meets inclusion
Message from our Board and Portfolio Manager
Southeast Europe and the Caucasus have delivered encouraging economic growth in 2024. Yet the region continues to face deep-rooted socio-economic challenges, such as the slowing pace of poverty reduction and lingering gender inequalities.
Many factors have contributed to a difficult operating environment for businesses in the region. These include persistent inflation, disrupted supply chains, weakened EU and global demand, labour shortages, and shifts in global trade policy.
The war in Ukraine continued to cast a shadow across the region in 2024, with few signs of that changing in 2025. Geopolitical and economic risks remain elevated.
Against this backdrop, our commitment has only grown. In 2024, EFSE achieved 9% year-on-year portfolio growth, supported by record private-capital mobilization of €220 million, mainly from M&G Investments, Deutsche Bank, and GLS Bank.
The total portfolio reached €1.36 billion, with over €470 million disbursed across all regions. We also approved 64 Advisory & Capacity Building projects and grants worth €11.4 million – supporting inclusive entrepreneurship, sustainability, and innovation in the region, helping local businesses capitalize on EU integration momentum.
During the year, we sharpened our focus on laying the foundation for inclusive recovery in Ukraine, rural sustainability and resilience and women’s economic empowerment. These are the foundations of long-term stability in the region. Our financing and Advisory & Capacity Building activities serve as a countercyclical force, help local financial institutions and MSMEs grow, innovate and adapt to evolving realities to build lasting resilience.
Catalysts for inclusive growth: Where we focused in 2024
From sustainable agriculture to support for Ukraine and female entrepreneurship, our 2024 efforts were centered on equipping small businesses with the tools to thrive in a complex environment.
We also changed the Fund’s structure to attract more private capital and deepen our impact further.
Launching a dedicated vehicle for Ukraine’s recovery
Launching a dedicated vehicle for Ukraine’s recovery
MSMEs in Ukraine are the backbone of their economy. Three years into a devastating war, they need finance and support more than ever. We know these resilient businesses can make it through the uncertainty of conflict and thrive in the long-term.
But they need stable financing and technical support to recover and rebuild. Economic losses are immense, with total recovery and reconstruction needs estimated at several hundred billion euros.* Russia has, for example, damaged more than 20% of the total agricultural machinery and equipment stock** and millions of jobs have been lost.
To support Ukraine’s recovery and reconstruction, we launched the Ukraine Sub-Fund (USF), a ring-fenced vehicle under the EFSE umbrella. From now on, all EFSE investment activities supporting Ukraine’s recovery and reconstruction will be channeled through the USF. In line with EFSE’s mission, the USF promotes food security, and sustainable and inclusive growth, reinforcing our long-term commitment to Ukraine beyond crisis response.
The fund adopts a blended finance approach, combining long-term local currency loans with targeted grants and tailored Advisory & Capacity Building. It supports financial institutions and MSMEs to recover, relocate and rebuild – preserving jobs and strengthening resilience.
As of 31 December 2024, the sub-fund had secured just under €100 million from BMZ. We are also in discussions with the European Commission as more donors seek efficient, high-impact ways to support Ukraine. But we aim to go beyond public investment - the sub-fund is an excellent platform to attract additional institutional investors and development banks interested in facilitating Ukraine’s inclusive recovery and reconstruction.
Building climate resilience through sustainable agriculture
Building climate resilience through sustainable agriculture
Agriculture is a key source of employment and income in Southeast Europe. However, outdated practices and rising climate hazards, like droughts and floods, put farm yields and livelihoods at risk. Without a shift to more sustainable and efficient practices, farmers will struggle to adapt to climate change, increase efficiency and productivity, and meet tightening trade and regulatory requirements.
In 2024, we rolled out our sustainable agri-finance strategy, following a successful pilot in Romania. Working through seven partner financial institutions, we developed locally adjusted eligibility criteria in four new markets – Armenia, Kosovo, Bosnia and Herzegovina, and North Macedonia. We also provided sustainable agriculture loans and training to local farmers, supporting their adoption of sustainable practices and ensuring their long-term relevance.
Turning gender gaps into growth opportunities
Turning gender gaps into growth opportunities
We launched EFSE’s first gender strategy in 2024 to align with global frameworks and the expectations of our shareholders and investors. It positions us to better address the needs of women entrepreneurs.
Our focus:
• Expand access to finance and support for women-owned/led MSMEs
• Encourage partner financial institutions to embed gender priorities into
their business and policy
• Increase female representation in EFSE’s governance
We aim to achieve these goals with targeted financing and Advisory & Capacity Building. Since 2022, EFSE has provided 16 partner financial institutions with dedicated financing for women-owned/led businesses. We aim to grow the number of partnerships we build, loans we facilitate, and doors we open for women entrepreneurs, so they can lead, innovate and transform their businesses.
Aligning with a recognised governance structure for greater impact
Aligning with a recognised governance structure for greater impact
EFSE’s transition into an in-scope alternative investment fund (AIF) under the AIFM Law was a key milestone in 2024. The new structure brings the Fund fully in line with international standards, making it more transparent and accessible to institutional investors.
Now externally managed, EFSE operates under a stronger governance framework, with Hauck & Aufhäuser Fund Services as AIFM and Finance in Motion as Portfolio Manager. This lays the groundwork for further innovation and scale.
In a fast-evolving market, this transition enhances EFSE’s ability to mobilize private capital, remain competitive and deepen its impact.
Looking ahead: Impact that stands the test of time
Investors are increasingly seeking strategies that deliver societal value and strong returns. EFSE’s model – rooted in financial inclusion and regional expertise – offers both, along with diversified access to fast-growing MSMEs – the beating heart of emerging Europe.
In a year of challenges, our results highlight the enduring relevance of our mission and the strength of our model. As we look to the future, we remain committed to shaping a more inclusive, resilient and opportunity-rich economy – together with our investors.
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.