The Portuguese ExperienceThe Portuguese Experience
INOFININOFIN
Financial innovation Framework ProgrammeFinancial innovation Framework Programme
Instruments to Enhance the Access of Instruments to Enhance the Access of SMESME’’ss to Financial Marketsto Financial Markets
José Furtado, Vice-ChairmanGeneve, 10.04.08
International Conference
Investing in Innovation
The INOFIN Initiative
I. Overall Perspective
II. Supply Side Approach - Risk Sharing Instruments
III. Demand Side Approach - Investment Readiness Programs
2
Contents
BankIntermediation
EquityChain
Hands -- onProximityCapillarity
Hands- - offImmaterial
Scale
A Systemic ApproachFinancial Markets Channeling Savings for Investment
SAVIN
GS
BU
SIN
ESSE
S
ScopeRational for Incomplete Financial Markets
Financial MarketsFinancial Markets
Supply(Operators)
Demand(SME)
MIS-MATCHBusiness Profile• Stage position in “life curve”• Level of specialization• Critical size
Available Resources• Human Capital• Financial Structure
Entrepreneurial Culture• Entrepreneurial spirit• Market culture
Management Skills• Management Teams• Organization• Information Systems
MIS-MATCHDetermined byEnvironment• Regulatory issues• Regulation • Taxation• Contracting and Law
Transaction Costs• Scale of Operations• Geographical Dispersion• Appraisal / Evaluation
Risk-Reward Patterns • Asymmetric Information• Risk Perception• Risk Profile of operators
Liquidity • Nature of assets • Secondary / Exit Markets
Determined by
There’s a role for Stateunder certain circumstances
Insufficient coverage for certain segments
Segments of limited attractiveness for financial operators
Strategic Guidelines
The Role of Public Policies
- Promote a Better Environment - Reiforcing the efficiency of thebank intermediation process and the enlargement of capital markets
- Promote Business Dynamics – Programs designed according theSME needs along their life cycle and for improving their adaptabilityfacing the new challenges
- Promote Macro-Economic Goals – Stimulate investment andgrowth, encourage innovation and entrepreneurship
3
1
2
The INOFIN Initiative
I. Overall Perspective
II. Supply Side Approach - Risk Sharing Instruments
III. Demand Side Approach - Investment Readiness Programs
6
Contents
Provide co-investment
and other risk-sharing
features to the venture
capital and private
equity industry
Provide guarantees to
credit enhance the
cash-conversion of
bank loans through
securitisation
Provide guarantees
to reduce the
exposure of mutual
guarantee societies
MutualCounter-Guarantee
Fund
FCGM
CreditSecuritisation
GuaranteeFund
FGTC
VentureCapital
SyndicationFund
FSCR
StateState
Supply Side ApproachPublic Instruments for Risk Sharing
The Role of Public InstrumentsEnhancing the Market Players
FCGMMutual
Guarantee FSCRVentureCapital
FGTCLoans
Securitisation
State FundedInstruments
Bank Intermediation
Equity Markets
SAVINGSSME
Financial intermediaries and Investors
Mutual Guarantee SystemGeneral Framework
FCGM
SPGM
SGM ... ...
Balcão 1 ... ... ... ...
Banks, Business Chambers, Municipalities, Univ…
SME
State
GuidelinesFunding
PublicAgencies
Securitization of SME LoansGeneral Framework
Banks
SME
FGTC
TermDeals Warehousing
MultissellerUnisseller
Investors
State
GuidelinesFunding
PublicAgencies
Universities , BA, VC, Intermediaries and Investors
SME
FSCR
SyndicationCo-Invest.
Fund RaisingMechanism
Tech TransferAccelerator
PublicAgencies
State
Venture Capital ActivityGeneral Framework
GuidelinesFunding
NewNew
EQUITY CHAIN
SAVIN
GS
CO
MPA
NIE
S
Private Equity
Plataform
VentureCapital
Alternative Stock Markets
INOFINMarketPlace EIF PVCi
Fund of Funds
Plataform
Plataform
FINCRESCE
FINICIA
FINTRANS
Development of Capital Markets in PortugalA Huge Challenge - The INOFIN Roadmap
The INOFIN Initiative
I. Overall Perspective
II. Supply Side Approach - Risk Sharing Instruments
III. Demand Side Approach - Investment Readiness Programs
13
Contents
FINICIA FINCRESCE FINTRANS
Programmes Alongside the Business Life Cycle
Demand Side ApproachInvestment Readiness for Sustainable Deal Flow
FINICIA ProgrammeFinancing Start-Ups
Facilitating accessto finance for
Entrepreneurs andSmall Companies
at the initialphases of their life
cycle
HIGH INNOVATION PROJECTS
SMALL-SCALE BUSINESS START-UPS
REGIONAL BUSINESS INITIATIVES
FINICIA Platforms“Eco-systems” for Start-Ups
Co-InvestmentVC Fund
SME
Local NetworK
FSCR RiskSharing
Business Angels Corporate Ventures
ProcurementApproach
ProjectEvaluation
InvestmentForum
BusinessFollow Up
Incubators ResearchInstitutesBusiness
ChambersUniversities Development
Agencies
FINCRESCE ProgrammeFinancing High Growth SME’s
Upgrading on Risk Profile
Promote Market Reputation
Customized Financial
Products and Services
Optimizing companyfinancing conditions
necessary to promotegrowth strategies and
strenghten theircompetitiveness
FINCRESCE ProgrammeImplementation Model
BanksPerspective
Actual Profile / Performance
IAPMEI Perspective
Growth Potential +
-
-
+ExcellentExcellent
SMESME’’ss
InvestingInvestingCompaniesCompanies
LeadingSME’s
Axis II
Risk Profile
Enhancement
Axis I
New Challenges
LeadingSME’s
Portfolio of Leading SME’s
General Profile
2006 (2005) %
Capital structure
Equity/Assets ratio 43% 0,1%
Performance
ROE 12,2% 0,4%
ROI 5,2% 0,2%
Productivity
Sales/Employee 194.000 € _
Profits/Employee 7.900 € _
Portfolio: 2.000 Leading SME’s
Turnover: 15 B€
(10% of the Portuguese GNP)
Employment: Over 120.000 people
Bank Internal Rating Score:
24% AAA / 36% AA, 40% A
Differentiated Financial Products and Services
FINCRESCE ProgrammeAvailable Offer
Communication with the Market
Reinforcement of the Endogenous Potential
• Knowledge and Information• Organization and Management• Production• Access to Markets
• Competitive conditions of financing – Scale effect and Risk Sharing
• Access to the Capital Markets
• Financial community• Innovation and quality• Good practices and strategic ambitions• Globalization of businesses
Benchmarking
Specialized information
Instruments for self-diagnosis
“High intensity” Consulting and a pool of managers and experts
Directories and individualised communication support services
Measures of Communication and Image
Communication Support Services and access to markets
Credit Offer, financial risk management instruments, insurance and corporate finance services, under favourable conditions
Mezzanine finance
Access to operators of private equity and venture capital, institutional investors and introduction to the market of capitals
FINTRANS ProgrammeFinancing Equity Transmission and M&A
Encouragingfounders succession
and/ortransfer of assets
into new valuechains, thusinducing the
economyregeneration
Company ReestructuringMergers and Acquisitions
Management CapacityMBO-MBI
José Furtado
Innovation on Financing
Supply Side Approach
- Risk Sharing Instruments
Demand Side Approach
- Investment Readiness Programs
International Conference
Investing in Innovation
José Furtado, Vice-Chairman IAPMEIGeneve, 10.04.08