Recent policy approaches to SME finance Dr. Helmut Kraemer-Eis Head - - PowerPoint PPT Presentation

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Recent policy approaches to SME finance Dr. Helmut Kraemer-Eis Head - - PowerPoint PPT Presentation

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Recent policy approaches to SME finance Dr. Helmut Kraemer-Eis Head of Research & Market Analysis European Investment Fund 07 July 2014 Rome The European Investment Fund (EIF) at a glance 1994 2000 AAA-rated Shareholders Were

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“Recent policy approaches to SME finance”

  • Dr. Helmut Kraemer-Eis

Head of Research & Market Analysis European Investment Fund

07 July 2014 – Rome

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The European Investment Fund (EIF) at a glance

2000

Majority owned by the European Investment Bank (EIB) with which we form the EIB Group

Shareholders

62.1% EIB, 30% EC, 25 public and private financial institutions holding the remaining 7.9%

AAA-rated

We’re AAA-rated by all major rating agencies, with a strong capital base

1994

founded and started providing venture capital to European businesses in 1997

Dual objective

pursuing EU policy objectives as well as financial sustainability

Wide range of resources

EIB, own res., European Comm., Member States / Regions, private investors, public institutions, etc.

Working

with financial intermediaries across the 28 EU countries, EFTA and all Accession countries

Access to Finance

Helping SMEs, micro- enterprises and European regions innovate and grow by making finance more accessible

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Let’s recall - the backbone of the EU economy

Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from Eurostat 3

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“THE” SME?: different needs in different stages

SME Development Stages

PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT

HIGHER RISK LOWER RISK

Business Angels, Technology Transfer

Microcredit VC Seed & Early Stage Formal VC Funds & Mezzanine Funds SME lending, Portfolio Guarantees & Credit Enhancement Public Stock Markets

4

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Microfinance: Heterogeneous market environment

People at risk of poverty or social exclusion

Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from Eurostat (top) and ECB (right)

Share of enterprises reporting access to finance as their most pressing problem

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VC – Market activity

Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from EVCA

Funds raised by VC firms located in Europe Venture Capital investment activity evolution in Europe

3.59 3.76 1.93 1.79 1.78 1.40 1.46 2.49 2.56 2.08 1.99 2.00 1.87 1.84 0.20 0.29 0.15 0.14 0.17 0.12 0.12 6.3 6.6 4.2 3.9 4.0 3.39 3.41 1 2 3 4 5 6 7 2007 2008 2009 2010 2011 2012 2013 bn EUR Later stage venture Start-up Seed To Total ventu tal venture re 8.3 6.3 3.7 3.2 5.2 3.9 4.0 1 2 3 4 5 6 7 8 9 2007 2008 2009 2010 2011 2012 2013 bn EUR

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Share of government agencies in VC fundraising

2 4 6 8 10 2007 2008 2009 2010 2011 2012 2013 bn EUR New funds ds raise sed d (exclu cludi ding g capital tal gains) s) Classified Unclassified 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2007 2008 2009 2010 2011 2012 2013 Government agencies Family offices & Private Individuals Corporate investors Insurance companies Banks Pension funds Fund of funds & Other asset managers Academic Inst. / Endowments / Foundations Capital markets Sovereign wealth funds
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Outstanding loans & interest rate statistics

Source: ECB data 7

No information on SME loans available, but approximation possible!

Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from ECB

Evolution of monetary financial institutions interest rates on new loans to non-financial corporations

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SME Securitisation

European outstanding securitisation transactions (by collateral, bn EUR) SMESec transaction volumes in Europe and share of SMESec in total securitisation

Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from AFME 8

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Looking forward: EIB Group support for SMEs

  • Support to SMEs is EIF’s & EIB Group core business!
  • Implementation of capital increase & EREM
  • Continue to address specific market-gaps in SME finance, using a toolbox of

instruments and working with a wide range of banking partners and non- banking financial intermediaries.

  • Crowding-in of private resources is key!
  • Continue strengthening cooperation with the European Commission, Member

States, international organisations, national and multilateral development financing institutions, and also SME and banking associations.

  • Support the European Commission in designing the new financial instruments

for the Multi-Annual Framework (Cosme / Horizon 2020 / Structural Funds).

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Thank you for your attention!

  • Dr. Helmut Kraemer-Eis

h.kraemer-eis@eif.org Further information can be found here: http://www.eif.org/news_centre/research/index.htm

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Annex 1: EIF’s recent activities / new instruments for SME finance (examples)

2013: a record volume of EUR 1.5bn equity commitments was achieved creating market traction and leveraging EUR 7.1bn 2013: EUR 1.8bn of guarantees were committed to financial intermediaries stimulating new loan portfolios and mobilising additional resources, leveraging EUR 8.6bn New European initiatives – debt financing (guarantees):

  • RSI - Risk-Sharing Instrument for innovative and research oriented SMEs/small MidCaps
  • New securitisation approaches, e.g. SME Covered Bonds

New European initiatives – equity (Venture Capital): National initiatives:

  • DVI - Dutch Venture Initiative
  • CYPEF - Cyprus Entrepreneurship Fund

Multi country initiatives:

  • BIF - Baltic Investment Fund
  • WB EDIF - Western Balkans Enterprise Development & Innovation Facility
  • Polish Growth Fund of Fund
  • MDD - Mezzanine Dachfonds für Deutschland
  • EAF - European Angels Fund
  • SIA - Social Impact Accelerator

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Annex 2: The shape of EIF in 2014 and beyond

EC COSME / Horizon 2020 Equity EIB Risk Capital Resources Structural Funds EIB Risk Enhancement Mandate (EREM)

Funds-of-funds Co-investment facilities with national public bodies Public co-investors / promotional institutions National & Regional

  • Hold. Funds (Struc.Funds)

Guarantee institutions Full range of equity spectrum SME initiative Youth employment Microfinance

EC COSME/Horizon 2020 Guarantees & Securitisation

Guarantees Risk sharing Public co-investors / promotional institutions

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Committing and mobilising resources to support 100 000 SMEs a year

“ ”

Resources Products

Erasmus, Innovation Social Enterprise ABS

Funds Banks Other FIs Other market players MFIs Micro- enterprises Innovative SMEs SMEs Mid-Caps

Partners Intermediaries Target groups

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Annex 3 : New EIB Group Risk Enhancement Mandate

(figures in the graph below are indicative)

  • Scale up instruments for Access to Finance for SMEs
  • Help mitigate the effects of deleveraging and tighter regulation of European Banks (Risk-

Sharing and Capital Relief)

  • Complements the European Council call + ECB Support for Securitization
  • Enhance EIF risk taking capacity for mezzanine tranches (possibly complemented by EIB

investment in senior tranches)

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Annex 4: Enhanced cooperation with the EC

“ ”

EIB Group is committed to continue implementing EU initiatives

Horizon n 2020 2020

Equity ity Facility ility for R&I SME and Small ll Mid Caps Guar arantee antee Facility ility for RI (RSI successor)

Instru rumen ments ts under r Structur ctural l and Cohesion ion Funds

EU level el instru trume ment nt (contr ntrib ibutio tion n of Membe mber State te funds s from Operational ational Programme ammes to centra trally lly managed ged EU programs ams) Off-the the shelf f instr trume ments nts Tailor lor-made ade instrume ments nts

Compet etit itiv ivenes ness s & & SME (COSM SME)

Equity ity Facility ility for Grow

  • wth

th (Loan Guar arante ntee Facility ility Social

l Change e & & Innova vatio tion

Progres ess Microfina

  • financ

nce e II Social ial enter erpr pris ise e inve vesting ting Erasmu mus for all Student dent Loan Guarantee antee Facility ility Structu tural/ al/Cohe

  • hesion

ion Funds Central al EU instrume ments ts

Jobs, Growth th and Social l Cohesion ion

Creativ tive e Europe pe Cultural al and Creativ tive e Secto tor Guaran ante tee e Facility ility

Research rch, , Develo lopment Innova vati tion

Joint t instr trume ment nt

New SME Initi tiati tive ve

Pooling ling of resources es from European pean Structu tural al and Invest estme ment t Funds ds (ESIF IF), ), COSME and Horizon zon 2020, , EIB/EIF IF and nationa ional l promot

  • tional

ional banks ks Guarantee antees of new loans ns to to SMEs, , securitisation itisation of existing ting SME loans ns

Source: EC, adapted