Financial Instruments for SMEs

developed by the EIB Group

12 March 2015, Bucharest

Hubert Cottogni

Agenda

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SME financing in Romania

EIF within the EIB Group, and what we do for SME financing

EU-EIF financial instruments

SME Initiative

Investment Plan for Europe (“Juncker Plan”)

Financial instruments under shared management in

Romania

SME financing in Romania

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SME financing in Romania

Gross fixed investment expenditure in Romania decreased by 5% year-on-

year in both 2014 and 2013*.

Access to finance**:

In 2014, a great number of enterprises reported a decline in profit and in

the profit margin and turnover respectively;

Access to finance was a major issue for 18 percent of firms; other

problems were taxation, competition and finding customers

Half of companies funded themselves from retained earnings;

The main difficulties perceived by companies which applied for a loan

were:

the requirements regarding the value or type of collateral; and

the high level of interest rates and commissions.

Working capital or payments to suppliers ranked topmost among the

purposes of companies’ financial needs.

**The Economist Intelligence Unit

**National Bank of Romania, “Survey on the access to finance of non-financial corporations in Romania”, December 2014

EIF within the EIB Group, and what we

do for SME financing

EIB Group

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The EU’s bank, founded in 1958 and owned

by the EU Member States. Largest

multilateral borrower and lender.

The EU’s leading provider of SME risk

financing, owned by EIB, EC and financial

institutions, founded in 1994.

EIB Group in 2014:

EUR 80.3bn lending

EUR 14.7bn invested in innovation

290 000 SMEs supported

European Investment Fund

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Assets

under

managementof over EUR 13bn,

mobilising

EUR 79bn with other

market players

Shareholdersunique tripartite

structure: 62.1% EIB,

30% European

Commission (EC),

7,9% by 25 public &

private financial

institutions (FIs)

AAA-ratedby three major

rating agencies

Capital

increase

to EUR

4.5bn ensuring strong

capital base

EIF works indirectly with SMEs through intermediaries such as

banks, guarantee funds, microfinance institutions,

leasing companies, venture capital funds

Helping businesses at every stage:EIF standardized and customizable products

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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

Portfolio Guarantees & Credit Enhancement

Formal VC Funds & Mezzanine Funds

SM

E C

ash

flo

ws

Loans & Credit Lines

Leasing, Factoring & Export Credit

European and Structural Funds

EU-EIF financial instruments

EU-EIF financial instruments

Horizon 2020Equity Facility for R&I

SME and Small Mid Caps

Guarantee Facility for RI

(RSI successor)

[EUR 1.06bn] for guarantees

to SMEs/small mid caps.

[EUR 0,43bn] for equity (CIP

GIF 1 successor)

Instruments under

Structural and

Cohesion Funds

EU level instrument(contribution of Member State

(MS) funds from Operational

Programmes to centrally

managed EU programs)

Off-the shelf

instruments

Tailor-made

instruments

Significantly higher amounts

than currently, to be decided by

each MS

Competitiveness & SME (COSME)[EUR 1.32 bn]:Equity Facility for Growth(GIF successor)[EUR 660m]Loan Guarantee Facility[EUR 660m](CIP GIF 2 successor)

Social Change

& InnovationProgress Microfinance II

Social enterprise investing

[EUR 192m]

Erasmus for allStudent Loan Guarantee

Facility

[EUR 517 m]

Financial instruments under

shared managementEU financial instruments

Source: EC, adapted

Jobs,

Growth

and

Social

Cohesion

Creative EuropeCultural and Creative

Sector Guarantee Facility

[EUR 121m]

Research,

Development,

Innovation

Joint instrument

New SME InitiativePooling of resources from

European Structural and

Investment Funds (ESIF),

COSME and Horizon

2020, EIB/EIF and national

promotional banks

Guarantees of new loans to

SMEs, securitization of

existing SME loans

Up to [EUR 8.5bn] from

ESIF,

[EUR 63 m] from H2020

and [EUR 63 m] from

COSME

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SME Initiative

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The SME InitiativeIntroduction (i)

Key objectives

Better access to finance for SMEs through capital relief, loss protection

and liquidity

Increased multiplier on public budget through participation of EIB/EIF

and private sector

Reduction of financial markets fragmentation

Two risk-sharing instruments endorsed by the European Council:

1. Guarantee facility for portfolios of new SME loans

2. Securitisation instrument for portfolios of both new and existing

SME loans

Eligible assets: SME Loans, leasing and guarantees. Restructured loans

and refinancing not permitted

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The SME InitiativeIntroduction (ii)

Key advantages

Credit risk protection on new (option 1) and existing, and

new (option 2) portfolios of SME debt finance

Uncapped guarantee (option 1) or counterguarantee and full capital

structure (Option 2 – subject to risk retention rules)

subscribed/underwritten by EIB/EIF and possibly third party investors

Subject to the national regulator, capital relief on such portfolios

Attractive pricing of the two options due to no fees being charged

by the FLP ESIF funds and expected loss pricing for ESIF and

EU mezzanine tranches. EIB Group apply their customary pricing

policy. Transfer to such benefit to the final beneficiary to be ensured

Provision of funding (in option 2) cash deals and possible by the EIB

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The SME InitiativeSchematic allocation of risks (all options)

Senior risk

(EIB, third parties)

Mezzanine risk

(EIF, EU Funds,

ESIF)

First Loss Piece

(ESIF, originator)Only under Option 2

Portfolios created

from eligible SME

loans

Tranches

associated with

different risks

Instrument based

on a risk-sharing

structure

Adapted to strong

and weak SME credit

environments

ESIF deployed for

- local use

poled us

ESIF to be

complemented by

small volume of EC

central budget

Reta

ined b

y t

he

origin

ato

r

Investment Plan for Europe

A new European Fund for

Strategic Investments (EFSI)

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Mobilising Finance for

Investment – leverage

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Financial instruments under shared

management in Romania

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More than EUR 3bn of finance for SMEs channelled through structural funds between 2007-2013.

Overall, Member States allocated approximately EUR 14bn to Financial Engineering Instruments

(FEI) in the 2007-2013 period of which more than 50% were committed to holding funds.

The allocations for FEIs for 2014-2020 period are expected to increase significantly.

FIs under shared management:

Stimulating SME Finance through structural funds

EIF managed holding

Funds have mobilised

a total of 3bn to SMEs

through high risk

capital with 80

counterparts (out of

which 49 are new EIF

counterparts).

Fostering development

of SMEs in EU

Member States and

regions through

revolving

instruments as

opposed to grants.

A total of 1.2bn assets

under management,

through 14 holding

funds across Europe,

both at regional and

national level.

“

”Impartial advice

that helps regional

and national

authorities manage

their resources.

Know-how transfer

to regions and helping

develop sustainable

risk capital markets

at the local level.

EIF managed Fund of funds on behalf of

Member States and/or Regions

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Equity Fund-of-Fund Activity

UK FTF: GBP 200m

ERP (DE): EUR 1000m

LFA-EIF (DE): EUR 100m

NEOTEC (SP): EUR 183m

PVCi (PT): EUR 111m

iVCi (TR): EUR 160m

BIF (LT,LV,EE): EUR100m

DVI (NL): EUR 150m

PGFF (PL): EUR 90m

MDD (GER): EUR 200m

EAF (GER, SP, A): EUR 122.5m

Holding Funds Supported by Structural Funds (JEREMIE)

BULGARIA: EUR 349m

CALABRIA (I): EUR 45m

CAMPANIA (I): EUR 90m

CYPRUS: EUR 20m

EXTREMADURA (ES) : EUR 19.8m

GREECE: EUR 250m

LANGUEDOC

ROUSSILLON (FR): EUR 30m

LITHUANIA: EUR 67.1m

ROMANIA: EUR 150m

MALTA: EUR 12m

PACA (FR): EUR 20m

SLOVAKIA: EUR 100m

SICILY (I): EUR 60m

SICILY ESF (I): EUR 15m

TOTAL : EUR 2.4bn

TOTAL : EUR 1.2bn

Other Mandates

TOTAL : EUR 371.9m

* ERP, LFA, BIF, WBEDIF will be increased in due course, along with EAF in Germany, Spain and Austria.

WBEDIF (AL,BA,HR,MK,ME,RS,XK): EUR 145m

IPA Turkey (GAGF-G43-TTA*): EUR 126.9m

CYPEF (CY): EUR 100m

JEREMIE I (2007-2013) in Romania

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SMEs

EUR 475m at end 2015 (currently EUR 380m)

3 instruments, 9 intermediariesPortfolio

guaranteeRisk sharing loan Risk capital

POS CCE

EUR 150m

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Potential future financial

instruments in Romania

Financial instruments are foreseen under multiple

Operational Programmes.

The ex-ante assessment, which is a requirement for

contributions to financial instruments, is ongoing

(coordinated by the Ministry of European Funds).

Decisions to make:

Contribution to the SME Initiative?

Continuation of FIs managed under fund-of-funds

(JEREMIE) ?

Other instruments.

Contact Details

Hubert Cottogni

Deputy Director

Head of Mandate Management

Phone: (+352) 2485 81229

email: h.cottogni@eif.org

European Investment Fund

37B, avenue J.F. Kennedy

L-2968 Luxembourg

www.eif.org

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