Financial instruments for SME support under ESI funds 2014-2020 Conference "Linking entrepreneurship and science and financing from the EU budget" European Parliament, Brussels, 8 December 2015 Dr Joerg Lackenbauer, DG Regional and Urban Policy European Commission Regional Policy
Strategic framework SME support and the promotion of SME competitiveness is a key priority for the European Regional Development Fund (ERDF) The simple expansion of production capacity, mergers with other firms, transfer of ownership or simple increase of the staff number do not per se increase competitiveness and are thus no priority for ERDF support Scope of support: primarily, the ERDF supports the development of endogenous potential for SME competitiveness ; it allows for productive investments, fixed investment in infrastructure, support for enterprises, networking, cooperation and technical assistance Support under thematic objective 3 should contribute to enhancing the competitiveness of SMEs , i.e. aid has to focus on enterprises, and the result indicators also have to relate directly to the impact on these enterprises 2 Regional Policy
Investment priorities • (a) promoting entrepreneurship, in particular by facilitating the economic exploitation of new ideas and fostering the creation of new firms, including through business incubators • (b) developing and implementing new business models for SMEs, in particular with regard to internationalisation; • (c) supporting the creation and the extension of advanced capacities for product and service development; • (d) supporting the capacity of SMEs to grow in regional, national and international markets, and to engage in innovation processes; • in its essence, ESIF-based SME support (both through grants and financial instruments) is about stimulating entrepreneurship (= new companies) and new growth in existing companies through innovation and internationalisation! 3 Regional Policy
Investment priorities • Ideally SME support measures under ESIF should address the key bottlenecks to growth of SMEs (within the thematic objective and in combination with measures under other TOs and/or funded outside the ERDF): • 1. Access to customers and (international) markets • 2. Access to Finance/Credit • 3. Innovating products and services, technology transfer • 4. Access to business intelligence and support services • 5. Access to skilled people • Important: policy strategies, ex-ante conditionalities! 4 Regional Policy
Financial instruments in 2007-13 and 2014-20: some figures At the end of 2014, EUR 9.4 billion of Structural Funds from the 2007-13 period were paid to financial instruments for enterprise (mainly SME) support Apart from this, 2007-13 financial instruments were devoted to energy efficiency and urban development Their use is much wider in 2014-20, but SME support remains a core area for ESIF financial instruments As of now, EUR 10.3 billion are planned to be used for financial instruments for SME support ("TO3") across the EU (but likely to change!) However, FIs-based support under many other thematic objectives will be spent in and for the benefit of SMEs as well, e.g. for RDI/TO1 (EUR 3.3 billion), EE/TO4 (EUR 3.8 billion) etc. 5 Regional Policy
Financial Instruments for 2014-2020 EU-level Instruments Shared management Instruments Research, Horizon 2020 Development Equity and Risk Sharing Instruments Innovation Financial instruments under European Structural and Investment Funds Competitiveness & Growth, Jobs Creative Europe SME (COSME) Contribution to EU level Guarantee Facility and Social Equity & guarantees (central management); e.g. Cohesion SME Initiative Social Change Erasmus for all National/regional & Innovation Guarantee Facility (EASI) instruments (shared management) Connecting Europe LIFE Off-the shelf FIs Infrastructure Facility (CEF) Private Finance for and energy Tailor made FIs Risk sharing Energy Efficiency instruments (PF4EE) e.g. Project bond Natural Capital initiative Finance Facility Regional Policy
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Used in the right way and under the right circumstances, financial instruments can be more effective than grants… Higher immediate policy impact through leveraged resources (public and private) Sustainability of support due to revolving funds which remain in the programme area Financing provided before investment takes place (different from grants) Better quality of projects (investment must be repaid) Incentives to use FIs as alternative to grants (move away from "grant dependency" culture) 8 Regional Policy
1. Wider scope: Use in all types of ESIF programmes (including ETC programmes) Common provisions cover all five Funds: ERDF, ESF, Cohesion Fund, EAFRD and EMFF Expansion to all thematic objectives & priorities !! but FIs should support only investments expected to be financially viable which do not give rise to sufficient funding from market sources Regional 9 Policy
2. More implementation options for managing authorities Traditional implementation: MA sets up a FI at national, regional, transnational or cross-border level: Tailor made instruments (cf 2007-2013) • Standardised “off -the- shelf” instruments , quick roll-out • MA can implement loans or guarantees directly (or through intermediate body) without formal set-up of a fund MA can contribute programme allocations to EU level instrument (COSME, Horizon, "SME Initiative") Regional 10 Policy
3. Continuity of principles and concepts of 2007- 2013: Reuse of resources paid back National co-financing at different times and levels Combination of grants and FIs 4. Some changes to adapt to market practise and to reinforce flexibility: VAT eligibility • Extended eligibility of management costs for some FIs • Incentives on national co-financing • Regional 11 Policy
4. Some changes to ensure sound design and implementation of financial instruments: Compulsory ex-ante assessment which must be carried out prior to • decision to support financial instruments Payments in relation to FIs phased and subject to implementation on • the ground Management costs and fees performance-oriented • Comprehensive annual reporting by managing authority on each • financial instrument Regional 12 Policy
Financial instruments are not new : around 5% of 2007-13 Cohesion Policy allocations were implemented through financial instruments The Investment Plan aims at an overall doubling of the use of financial instruments precisely because of their capacity to leverage additional funds and generate higher impact First preliminary figures indicate that Member States intend to invest more than EUR 20 billion under their new Operational Programmes through financial instruments (loans, guarantees, equity …) Other sources of finance for SMEs include ESIF-based grants for SME projects, the EFSI SME Window, and EU-centrally managed financial instruments such as H2020 and COSME 13 Regional Policy
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