Cyprus Launches ...
Cyprus Launches €62.5 Million Guarantee Scheme to Boost SME & Startup Lending
In a bold move to support smaller businesses, the European Investment Fund (EIF) and Eurobank Cyprus have launched the island’s first InvestEU Guarantee transaction, which unlocks 62.5 million in new financing specifically for SMEs and startups. The program is intended to help firms that often struggle to meet traditional bank lending criteria, offering a partial guarantee structure to reduce the risk to lenders and stimulate lending activity.
The guarantee operates as a portfolio instrument: qualifying loans issued by Eurobank Cyprus to small companies will receive backing under the scheme, lowering the risk burden and encouraging banks to lend more aggressively to promising ventures. The initiative is positioned as a driver for entrepreneurship, business expansion, and job creation across Cyprus.
Simultaneously, the Central Bank of Cyprus (CBC) released its revised macroeconomic projections for 2025. Notably, the CBC upgraded its GDP growth forecast, expecting a 3.3 % expansion, with unemployment dipping to 4.6 % and inflation moderating to around 1 %. These projections represent slight upward revisions compared to previous forecasts, largely due to stronger-than-expected performance in tourism and related sectors.
Taken together, these developments send a dual signal: the public and private sectors anticipate resilient growth, and monetary / financial institutions are taking steps to ensure this growth is inclusive and broadly shared. The EIF / Eurobank guarantee instrument offers a financial lever to channel capital into innovation, scale-ups, and firms that might otherwise remain constrained by credit access.
Of course, challenges remain. SMEs in Cyprus still face structural issues: relatively high borrowing costs, cautious bank risk appetites, and seasonal volatility in revenues. The success of the guarantee scheme will depend on prudent loan underwriting, clear risk monitoring, and alignment with innovation strategy. But this is arguably one of the more proactive steps seen recently to bridge the funding gap for smaller enterprises.
On the broader front, Cyprus’ second quarter 2025 GDP growth (3.3 %) was supported by gains in wholesale & retail, ICT, and tourism sectors. That suggests the economy retains diverse drivers, not overly dependent on any single industry, which bolsters confidence in the sustainability of the growth path.
In summary, the new 62.5 million InvestEU guarantee scheme is a meaningful policy instrument to channel financing toward SMEs and startups, at a moment when macro projections point toward steady growth. If managed well, it may help catalyze greater innovation, business dynamism, and inclusive growth across Cyprus’s economy.
This scheme is a solid step in the right direction , Cyprus has long needed mechanisms to boost SME access to capital. But capital access is only part of the problem. Bureaucracy, market size, and fragmented innovation policy are also challenges. The government must pair this with entrepreneurial support, simplified regulations, and incentives for scaling, not just launching. Otherwise, startups might get funding but fail to grow or survive in the long term. If executed carefully, this could be a key building block in making Cyprus a competitive business environment for small firms
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