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JEREMIE June 2006

JEREMIE June 2006. Main Agenda. European Investment Fund at a glance Why JEREMIE? Key elements of Choice Current Status & Next Steps. European Investment Fund - at a glance. Created in 1994, part of EIB Group Operational platform to support SME finance in Europe.

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JEREMIE June 2006

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  1. JEREMIEJune 2006

  2. Main Agenda • European Investment Fund at a glance • Why JEREMIE? • Key elements of Choice • Current Status & Next Steps

  3. European Investment Fund - at a glance Created in 1994, part of EIB Group Operational platform to support SME finance in Europe Tripartite Shareholding = 61.9% by EIB, 30% by EC, 8.1% various International Banks. Subscribed capital: EUR 2 billion Two Primary Objectives:- - The pursuit of Community objectives such as SME creation, growth, employment, regional development, knowledge- based economy and innovation - To generate an appropriate return on its resources

  4. European Investment Fund Portfolio – Year End 2005 = EUR 12.4 billiontotal portfolio under management

  5. EIF institutional drivers • The Lisbon Process (March 2000): transform the EU into « the most competitive and dynamic knowledge-based economy in the world ». • The Barcelona EU Summit (March 2002): increase overall spending on R&D on innovation in Europe .. with the aim of approaching 3% of GDP by 2010 ». • The Brussels EU Summit (March 2005): European Council urged EIF« to diversify its activities, in particular towards the financing of innovative SMEs through individual-investor (business-angel) and technology-transfer networks ».

  6. EIF resources European Community (MAP) Dahlia SICAR S.R. EUR 600m EUR 4 000m EUR 450m Up to EUR 1bn Being increased Being increased Being increased Evergreen To be committed in venture capital funds and financial institutions in the EU and Candidate Countries 500 000 SMEs indirectly benefited from EIF

  7. Main Agenda • European Investment Fund at a glance • Why JEREMIE? • Key elements of Choice • Current Status & Next Steps

  8. Lessons from recent History Policy Difficulties Only a small portion of the ERDF Funds intended for SME financing was actually utilised across period of 2001 - 2006 Possible reasons: difficulty to comply with the Commission’s eligibility and timing requirements Hence the need for reviewing the ERDF disbursement procedure in order to optimize the utilization of the funds and support a greater number of SMEs

  9. New Factors in Policy For Member States 2013 deadline does not apply But need to create entrepreneurial culture by using financial engineering to stimulate private sector investments EU 15 ERDF Funds will practically cease after 2013 deadline Hence the need to shift from grants to innovative and revolving financial instruments able to provide finance to SMEs after the 2013 deadline

  10. Why JEREMIE? « JEREMIE »stands forJoint European Resources for Micro-to-Medium Enterprises

  11. Key Factors • JEREMIE is an initiative of the European Union (DG Regio) launched in October 2005 • « Joint » because it combines intellectual resources from EC, National Public Authorities, EIF, EIB and/or other International Financial Institutions (IFIs) • JEREMIE is not an organisation, but a series of coherent actions • JEREMIE is an option for each Country Main Targets: • Use ERDF funding for enhancing the Access to Finance to SMEs in Regional Development areas through sustainable and « revolving » financial instruments • Develop the role of SMEs / Entrepreneurship in EU Regional Policy

  12. Status as of Today • EC has asked the EIF to undertake evaluations as part of JEREMIE for each country in partnership with National Development Authorities • EIF has formed a JEREMIE team from internal and external specialists • Some regions and countries have begun process - Slovak Republic - Spain (Andalucia, Extremadura, Valencia) - Bulgaria - Hungary • Evaluation Phase to be completed by end of 2007 Note: Evaluations funded by DG REGIO and the EIF

  13. JEREMIE: Future Phases 2006 2007 - 2013 SME SME SME SME SME SMEs SMEs SMEs SMEs SMEs Microfinance Providers (MCPs) Tech Transfer Activities Guarantee schemes Venture Capital Funds DISBURSEMENT PROCESS Transforming parts of the ERDF grants into financial products for SME Multiplier effect on the budget by attracting EIB & IFIs’ lending IMPLEMENTATION OF NATIONAL FUNDS EVALUATION PHASE Preparation of Operational Programmes

  14. Main Agenda • European Investment Fund at a glance • Why JEREMIE? • Key elements of Choice • Current Status & Next Steps

  15. The importance of Choice The JEREMIE offers several choices to Member States JEREMIE is an option for Member States

  16. JEREMIE is an option for member states/regions JEREMIE ERDF funds to member state/region Partly allocated to financial instruments Articulated across various schemes Microfinance Instruments Grants Venture Capital Funds Practical Implentation Programme developed jointly with the EIF Member State selects % of Funds for Financial Engineering Via JEREMIE Measures for Competitiveness Guarantees Infrastructure Competition Others SME Financing

  17. Choice no. 1 for Member States Member States Choice JEREMIE No JEREMIE Advantages • Irreversible disbursements • Greater Delegation to Local Authorities • Use of Market-driven revolving instruments • Management and administration activities assumed by Fund Manager Issues • Structural challenges • 2013 deadline • Time delays • No upfront payment

  18. € € € € € Key structural benefit: funds allocated upfront to Fund Holder at local level Disbursement: European Commission ERDF – DG Regio EU Level • Up front • Irreversible Programming Authority Local holding fund: • Greater delegation to Local Authorities • Management/administration are outsourced to HF Mgr. National /or regional Level Managing Authority Role of the HF Manager: Holding Fund (« HF ») HF Manager • Structure investments, select Financial Intermediaries • Administer, monitor & report on investments • Attract a syndicate of investors • Closely collaborate with national/regional authorities Financial intermediaries National/regional /Local Level € € € € SMEs Regional /Local Level THE MANAGER IS SELECTED BY MEMBER STATE/REGION Microfinance beneficiaries

  19. Choice no. 2 for Member States Manager Selection Structure investments, select Intermediaries Administer, monitor & report on investments Attract a syndicate of investors Closely collaborate with national authorities Tender Process Selecting EIF Issues • Lengthy process • Commission involvement • EIF may apply alone or as J/V Advantages of EIF as Manager • Proven expertise • European centre of best practice • Jointly developed programmes based on evaluations • One stop shop for multiple instruments • Immediate disbursement • Funds based and managed locally • Cooperation with EIB • Possible Leverage factor

  20. EIF EIF Holding Fund Holding Fund Holding Fund Holding Fund The cooperation with EIF in the context of JEREMIE can occur in four main forms EIF as sole Holding Fund manager EIF partial Holding Fund manager Other Mgr Microf VC Guar Microf VC Guar Beneficiary fin. institutions Beneficiary fin. institutions EIF joint manager of Holding Fund(e.g. in with local devt. agency) EIF as advisor to the Holding Fund manager EIF Manager EIF Co-Mgr Microf VC Guar Microf VC Guar Beneficiary fin. institutions Beneficiary fin. institutions

  21. Main Agenda • European Investment Fund at a glance • Why JEREMIE? • Key elements of Choice • Current Status & Next Steps

  22. Preparation 2006-2007 EVALUATION PHASEin cooperation with Local / Regional / National actors • Gap analysis in regions / Member States of potential supply / demand of financial engineered products in SME finance • Identification of market driven (revolving) instruments, out of grants system, to « fill the gaps » • Interim reports: freely available to Regions, Programming and Managing authorities, any interested parties (potential Holding Fund, etc…) PROGRAMME DEVELOPMENT in support of DG REGIO and competent National or Regional Authorities • Use of conclusions / recommendations made in Interim Report and (final) Evaluation report • Diagnosis / definition of priorities and operations : ACTION PLAN • Active cooperation with stakeholders and Financial Intermediaries

  23. The JEREMIE Phases & Next Steps Evaluations Programme Planning Selection of Fund Manager Allocation of Funds Selection of Intermediaries 1) Preparation 2006-2007 2) Implementation 2007+ 3) SMEs receive financing 2007 2013

  24. Much more can be done thanks to financial engineering • JEREMIE is the opportunity for optimising the use of ERDF resources • using the possibility to implement tailor-made instruments (efficient and sustainable), selective use of grants etc… • leveraging ERDF funding with EIB loans and EIF expertise in support of designed specific needs • increasing cooperation / co-investments between DG REGIO, EIF, EIB and national / regional institutions • enhancing SMEs access to finance in regions

  25. European Investment Fund JEREMIE Project 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (00 352) 42 66 88 212 Fax: (00 352) 42 66 88 280 jeremie@eif.org www.eif.org

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