OREANDA-NEWS. November 21, 2012.  In the course of the Russian-German Interstate Summit Consultations in the presence of Russian President Vladimir Putin and German Chancellor Angela Merkel, State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ and German State-Run Bank KfW entered into a Memorandum of Understanding to Establish an International Fund to Promote Entrepreneurial Activity.

On behalf of Vnesheconombank the Memorandum was signed by Vnesheconombank Chairman Vladimir Dmitriev and on behalf of KfW – by KfW Bankengruppe Board Member Gunter Braunig.

Under the Memorandum the Fund to Promote Entrepreneurial Activity would make it possible to expand the range of existing instruments for funding small and medium-sized enterprises (SMEs) in Russia through raising long-term foreign investments. Vnesheconombank and KfW intend to contribute 150 million US dollars each to the Fund. The Fund’s amount is expected to reach 900 million US dollars in the coming four years.

A decision to found an International Fund to Promote Entrepreneurial Activity was approved by Vnesheconombank’s Supervisory Board in October of 2012.

The Fund is to provide support for SMEs through target financing of Russian banks (taking into account a significant shortage of long-term liabilities in the banking system), as well as through direct financing of dynamically advancing small and medium-sized enterprises implementing investment projects in the nontrade sector with a financing volume from 150 million to 1 billion rubles.

The Fund’s capital structure is to be formed by several tranches with different risk and profitability levels. This would make it possible to share risks taking into account all investors’ claims and ensure attractive cost funds for financing recipients.

The parties believe that the Fund would make it possible to raise additional funds to finance small and medium-sized enterprises using advanced mechanisms for funding innovation projects and best foreign practice in this field. The Fund is scheduled to start operating within a year since the signing of the Memorandum.