Presentation on theme: "This presentation was prepared by EIF. The information included in this presentation is based on figures available for May 2011 Any estimates and projections."— Presentation transcript:
This presentation was prepared by EIF. The information included in this presentation is based on figures available for May 2011 Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct. Ioannis Tsakiris Head of Region Regional Business Development JEREMIE 11 May 2011
1 / 23 EIF at a glance
2 / 23 EIF - The Challenge: Financing Innovation amongst SMEs in Europe Importance of SMEs as the Foundation Stone for Tomorrow’s Prosperity Source: Eurostat, Commission Communication on Modern SME policy for Growth and Employment SMEs account for a large proportion of Europe’s economic activity Micro-businesses dominate employment in countries such as Italy (48%) and Greece (57%) Successive EU summits put issues of growth, employment, innovation and competitiveness high on agenda Support to SMEs : one of the top six EIB Group priorities EIF is the SME risk financing arm of the EIB Group
3 / 23 EIF at a Glance Dual Objective of Meeting EU Policy Goals & Generating a Satisfactory Return on Equity EU specialised institution for SMEs, risk financing Venture Capital and Mezzanine (fund of funds) Structuring and Guaranteeing portfolios of SME and microfinance loans/leases Authorised Capital € 3bn EIB: 61.2% EU: 30 % Fin. institutions: 8.8 % Geographic Focus / Intermediaries EU 27, EFTA, Candidate Countries Distributing through Banks and Funds AAA rated Staffing, Culture and Values Leading-edge modern institution Adapting to changing market conditions Attracting talented staff High standards of compliance and integrity
4 / 23 Operating Model of EIF VALUE ADDED Own resources EIB (RCM, MEZ) EC (CIP) MA (JEREMIE) MS (ERP) Funds of Funds Regional (LfA) Product Development Mandate Management Transaction Execution Risk Management Follow-up & Relationship Focus Commercial Banks Development & Promotional Banks Guarantee Institutions Fund Managers SMEs Suppliers / Mandators Transformational Key Success Factors Intermediaries Transformational Role of EIF
5 / 23 JEREMIE Holding Funds in support of SMEs
6 / 23 The Joint European Resources for Micro to Medium Enterprises Joint initiative of the EU (DG Regio & EIB Group) launched in October 2005 Joint also because it potentially combines resources from the EU, National Public Authorities, EIF, EIB and/or other financial institutions Participation in JEREMIE optional for each country/region – Holding Fund Management Uses European Regional Development Funds or European Social Funds for enhancing SME access to finance in New Member States and in Regional Development areas through sustainable and “ revolving ” financial instruments Create and foster entrepreneurship in Europe JEREMIE: Increasing the Deployment of Self-Sustaining Financial Instruments for SMEs IMPLEMENTATIONDISBURSEMENT PROCESS EVALUATION JEREMIE Phases
7 / 23 Use ERDF/ESF to improve SME access to finance ; Reduce the practice of “ grant financing ”; Increase the flexibility of financial engineering instruments by making them permanent and ”revolving”; Leverage effect : try to attract other sources of funding (BEI, national funds, regional funds, banks, etc.); The concept of Holding Fund : a new idea, at the root of JEREMIE; HF provides funds to Financial Intermediaries which operate in the relevant market segments: VC, guarantees, micro-credit, etc...; Simplified procedures, thanks to HF concept; Delegation of the selection of the Financial Intermediaries and the monitoring and the reporting to Commission to an independent external expert, Allocation of funds to a series of financial instruments To support SMEs throughout the lifecycle Reallocation of funds within the Holding Fund at any time Why JEREMIE?
8 / 23 Key Structural Benefit: Funds Allocated Upfront to Fund Holder and Managed at Local Level HF Manager European Commission ERDF – DG Regio European Commission ERDF – DG Regio Managing Authority EU Level National /or regional Level Holding Fund (« HF ») Financial intermediaries National/regional /Local Level Regional /Local Level SMEs Microfinance beneficiaries Structure investments, select Financial Intermediaries Administer, monitor & report on investments Attract a syndicate of investors Closely collaborate with national/regional authorities Role of the HF Manager Disbursement Up front Irreversible Local holding fund Greater delegation to Local Authorities Management/administration are outsourced to HF Mgr. THE MANAGER IS SELECTED BY MEMBER STATE/REGION
9 / 23 Public Stock Markets SME Cash Flows SME Development Stages Pre-seed Phase HIGHER RISK Seed PhaseStart-up Phase LOWER RISK Emerging Growth Development Portfolio Guarantees & Credit Enhancement EIF Tool Kit for SMEs Business Angels, TT Microcredit VC Seed & Early Stage Formal VC Funds & Mezzanine Funds Funded Risk Sharing for SMEs
10 / 23 JEREMIE Holding Funds
11 / 23 The JEREMIE process
12 / 23 JEREMIE Process: call for expression of interest Progress Process Fact finding Instrument design Internal approval Selection criteria Inv. Board approval State aid assessment Publication Q & A process Call deadline Follow-on from gap analysis, discussions with key market players and associations Expert driven process to specify product details, to meet market needs whilst respecting regulations Internal review and approval process including specialists from legal, risk management & compliance Monitoring committee’s approval of a specific selection criteria Full presentation of product and call documents to local IBs Formal state aid assessment by competent local authorities Website and other media to ensure market awareness Ensuring answers are communicated to all
13 / 23 JEREMIE Process: selection and approval Progress Process Draft board report Eligibility check Selection Panel Pre-selection phase Set up of due diligence Final Selection Due diligence Board submission/approval Call deadline To FI, mandator and media as appropriate Initial check to ensure ‘EoI’ passes eligibility checklist with support of compliance Internal agreement of members and observers of core selection team Desk-based review of submitted documents with initial scoring (QAC) and then team review (minuted) Invitations to 2 nd screening issued & DD team formalised Presentation of FIs to DD team in loco, scores reviewed & minuted Short-listed applicants undergo intensive 2 day interview process Proposal presented to EIF Board for approval Communication of decision Preparation of decision documents reviewed by all depts.
14 / 23 Outcome of the JEREMIE process to date 121 VC applications received 70 Guarantee applications received 42 Due Diligences carried out 31 approved transactions Greece Romania Latvia Lithuania Slovakia Languedoc Roussillon (FR) Campania (IT) Cyprus Bulgaria Sicily (IT) Malta Greece Romania Latvia Lithuania Slovakia Languedoc Roussillon (FR) Campania (IT) Cyprus Bulgaria Sicily (IT) Malta
15 / 23 Holding Funds Portfolio Mix (in %) Funded Risk Sharing Product (FRSP) Guarantees Risk Capital Fund Microcredit Other Equity Flexible non-allocated funds
18 / 23 Debt: Smaller funding, typically trough “loans”, for small projects concerning the creation of innovative SMEs with good potential. Such financing, which ensures a link with regional venture capital funds, is extremely limited in L-R. Equity: Funding through equity for the creation of enterprises: local intermediaries tend to move further away from this area of financing to focus investment activity on growth and development of enterprises. This failure is noticed for the creation of innovative enterprises. Case Study : JEREMIE via ERDF in Languedoc- Roussillon (FR) market analysis : main conclusions
19 / 23 JEREMIE Funding Agreement signed for LR Signature: 22 October 2008 Size: EUR 30m in 3 instalments: EUR 11m in 2008, EUR 10m in 2009 and EUR 9m in 2010 Duration: until 31 December 2015 Governance/Management: EIF = responsibility for JHF operations “Comité de Pilotage” (Investment Board) consisting of representatives of the French State and of the L-R Region with an advisory role and responsibility for the supervision of the operations – the 1 st meeting took place in December 2008, and bi-monthly meetings have taken place thereafter. EIF = observer status
20 / 23 Languedoc-Roussillon financial instruments Languedoc-Roussillon is characterised by 3 types of financial engineering instruments Seed loans: interest-free loans (up to EUR 100,000) for SMEs operating in innovative sectors Co-investment fund: technology-oriented and innovative SMEs, participation in the equity of the SMEs of up to EUR 2.5m Guarantee: this product can be applied widely, with a minimum leverage effect of x8.4 and better terms for the SMEs (reduction of personal guarantee + interest rate reduction) Financial Intermediaries for all 3 financial products selected
21 / 23 What has the JEREMIE initiative brought to the Languedoc-Roussillon authorities? A better understanding of financial engineering. EIF has defined all the three instruments (seed loans, Co-investment, Guarantee), however the LR authority has been heavily involved since the beginning in the process. Encouragement to move away from grant-dependency to a revolving approach. With a grant approach, there is no leverage. However with the implementation of JEREMIE LR, the EUR 30m (50% ERDF, 50% Region LR) will be leveraged into EUR 143 m that will facilitate SMEs access to finance. JEREMIE in LR does not only benefit SMEs but also the LR economy as a whole. Prioritisation of actions to be implemented in order to develop the SMEs. In other words, instead of various initiatives (which may be difficult to follow and monitor, leading to fragmentation of leverage), the JEREMIE initiative will focus all efforts on one accurate target –thus reinforcing the competitiveness of this target (e.g. SMEs with a significant innovative component).
22 / 23 What has the JEREMIE initiative brought to the Languedoc-Roussillon authorities? Facilitates the monitoring of selected financial intermediaries. So far, it was not easy for the LR authority to monitor financial intermediaries (time consuming, lack of knowledge, etc.). Thanks to JEREMIE (under EIF) the LR authority was able to outsource the management of the reporting documents to the EIF Encourages to extention of concept to other sources of EU funding (for the next programming period) So far, JEREMIE has been implemented through ERDF. Due to the aforementioned benefits, the LR authority would like to carry out JEREMIE with EARDF and ESF source of funding during
23 / 23 Contact European Investment Fund 96 boulevard Konrad Adenauer L-2968 Luxembourg Tel.: (+352) Fax: (+352)