KredEx — Estonia's funding revolution

In 2009 the Estonian public financing institution, Fund KredEx, became the first European financial institution to launch a revolving loan fund for improving energy efficiency in apartment buildings. Funded by the European Regional Development Fund (ERDF), the €49 million KredEx fund supported renovations in 18,281 apartments covering 1,189,398 m². Energy saving of 36% are expected.

In 2010 KredEx also launched a grant scheme, which allowed eligible apartment buildings to receive up to 35% of the cost of their buildings’ renovation.

The fund is administered to multi-apartment housing associations via two commercial banks,Swedbank and SEB Bank. Loan conditions include an average fixed interest rate of 4.01% for the first 10 years, with a maximum 20 year payback. In 2012 the average loan was €129,865. This fund is now depleted. 

In the meantime Swedbank and SEB are offering long-term payback loans for the renovation of multi-apartment buildings that have received a KredEx grant. Loan conditions are similar to KredEx conditions, but with slightly higher interest rates that are fixed for the first five years. Loans given by Swedbank and SEB banks are extended to apartment associations with the banks taking the lender’s risk. Most importantly, loans to end users are provided against cash flow, requiring no further collateral.

The idea of a revolving fund scheme to tackle energy inefficiency came from KredEx’s German equivalent, the federal bank, KfW. KredEx was keen to support the renovation of energy inefficient multi-apartment buildings in Estonia because 75% of the population live in such buildings. The most positive outcome of the KredEx model is the stimulation of the finance product market, says Mirja Adler, head of the KredEx housing and energy efficiency division.

The Estonian Ministry of Economic Affairs and Communications (MoEAC), with responsibility for housing, was involved in developing the loan scheme. Discussions also took place with the Council of Europe Development Bank (CEB), the European financial institution for financing and developing social projects, about the possibility of investing in KredEx.

At the time such funds were a new proposition, says Adler, but now institutions such as the European Investment Bank are “consulting with member states and helping them develop revolving funds.” The JESSICA initiative uses ERDF to fund urban development including energy efficiency measures through the use of revolving instruments.

In 2008, KredEx secured finance from the ERDF. However, the final fund of €49 million was made up of €17 million of ERDF equity, a €28.8 million loan from the CEB and a further €3.2 million investment from KredEx.

Only multi-apartment buildings where at least three apartment owners want to avail of the loan are eligible, ideally represented by a housing association. A minimum commitment of 20% energy savings is required in buildings up to 2000 m², while in larger buildings this increases to 30%. Energy audits are obligatory.

In 2010, KredEx started offering grants from a fund worth €24 million. Funding came from a Green Investment Scheme where Estonia sold carbon credits to Luxembourg under Kyoto Protocol obligations. Housing associations are eligible for these grants for 15%, 25% or 35% of renovation costs. Figures show that the average 25% grant was €36,043 and that nearly 600 households received a grant with expected energy savings of 41.3%. 

While this fund is now closed, KredEx is still taking applications in the hope that it can secure new funding, According to, Mirja Adler, the combination of a loan and a grant is the best way to improve energy efficiency. “Usually in multi-apartment buildings, owners’ incomes vary and quite large investment is needed to renovate a building completely. Depending on the price of energy a small grant is a good motivator to start the process and long term favourable loans are needed to make the investment affordable.”

 By Iva Pocock

Iva Pocock is a journalist with over 15 years of experience, primarily in the environmental sector. She has written for the Irish Times, industry publications such as Technology Ireland and, internationally, for Water & Wastewater and Chemical Watch. She has also written for the Irish Renewable Energy Information Office (REIO).