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

“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 We’re AAA -rated by founded and Majority owned by 62.1% EIB, 30% started providing the European all major rating EC, venture capital to Investment Bank agencies, with a 25 public and European (EIB) with which we strong capital base private financial institutions businesses in 1997 form the EIB Group holding the remaining 7.9% Access to Finance Dual objective Wide range of Working Helping SMEs, pursuing EU with financial resources micro- enterprises policy objectives intermediaries EIB, own res., and European as well as financial across the 28 EU European Comm., regions innovate sustainability countries, EFTA Member States / and grow by making and all Accession Regions, private finance more countries investors, public accessible institutions, etc. 2

Let’s recall - the backbone of the EU economy Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from Eurostat 3

“THE” SME?: different needs in different stages Public Stock Markets SME lending, Portfolio Guarantees & Credit Enhancement Formal VC Funds & Mezzanine Funds VC Seed & Early Stage Microcredit Business Angels, Technology Transfer PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT SME Development Stages HIGHER RISK LOWER RISK 4

Microfinance: Heterogeneous market environment People at risk of poverty or social exclusion Share of enterprises reporting access to finance as their most pressing problem Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from Eurostat (top) and ECB (right) 5

VC – Market activity Funds raised by VC firms located in Europe Share of government agencies in VC fundraising 9 8.3 45% Government agencies 8 40% Family offices & Private Individuals 7 6.3 35% Corporate investors 6 30% Insurance companies 5.2 bn EUR 25% 5 Banks 4.0 20% 3.9 Pension funds 3.7 4 3.2 15% Fund of funds & Other asset managers 3 10% Academic Inst. / Endowments / Foundations 5% 2 Capital markets 0% 1 Sovereign wealth funds 2007 2008 2009 2010 2011 2012 2013 0 10 New funds ds raise sed d 2007 2008 2009 2010 2011 2012 2013 (exclu cludi ding g capital tal gains) s) 8 6 Classified bn EUR Venture Capital investment activity evolution in Europe Unclassified 4 2 0 Total ventu To tal venture re Later stage venture Start-up Seed 2007 2008 2009 2010 2011 2012 2013 6.6 7 6.3 0.29 0.20 6 5 2.56 2.49 4.2 4.0 3.9 bn EUR 0.15 4 3.39 3.41 0.14 0.17 Source: Kraemer-Eis, Lang, 0.12 0.12 Gvetadze (2014), based on 3 2.08 1.99 2.00 data from EVCA 1.84 1.87 2 3.76 3.59 1 1.93 1.79 1.78 1.46 1.40 0 2007 2008 2009 2010 2011 2012 2013 6

Outstanding loans & interest rate statistics Evolution of monetary financial institutions interest rates on new loans to non-financial corporations Source: ECB data Source: Kraemer-Eis, Lang, Gvetadze (2014), based on data from ECB No information on SME loans available, but approximation possible! 7

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

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). 9

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 10

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): • EAF - European Angels Fund • SIA - Social Impact Accelerator National initiatives: • Polish Growth Fund of Fund • DVI - Dutch Venture Initiative • MDD - Mezzanine Dachfonds für Deutschland • CYPEF - Cyprus Entrepreneurship Fund Multi country initiatives: • BIF - Baltic Investment Fund • WB EDIF - Western Balkans Enterprise Development & Innovation Facility 11

Annex 2: The shape of EIF in 2014 and beyond “ Committing and mobilising resources ” to support 100 000 SMEs a year Resources Products Partners Intermediaries Target groups Funds-of-funds Funds EC COSME / Horizon Innovative Co-investment facilities 2020 Equity Full range of equity SMEs with national public spectrum Other bodies EIB Risk Capital Public co-investors / market promotional Resources players SMEs institutions Guarantees National & Regional Structural Funds Risk sharing Hold. Funds (Struc.Funds) Banks Erasmus, Innovation Mid-Caps EIB Risk Enhancement Social Enterprise Public co-investors / Other FIs Mandate (EREM) ABS promotional institutions Micro- EC COSME/Horizon SME initiative Guarantee institutions enterprises 2020 Guarantees MFIs Youth employment & Securitisation Microfinance 12

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) 13

Annex 4: Enhanced cooperation with the EC “ EIB Group is committed to continue ” implementing EU initiatives Central al EU instrume ments ts Joint t instr trume ment nt Structu tural/ al/Cohe ohesion ion Funds Research rch, , Horizon n 2020 2020 Instru rumen ments ts under r New SME Initi tiati tive ve Develo lopment Equity ity Facility ility for R&I Structur ctural l and Cohesion ion Pooling ling of resources es Innova vati tion SME and Small ll Mid Funds from European pean Caps Guar arantee antee Facility ility Creativ tive e Europe pe Structu tural al and for RI (RSI successor) Cultural al and Creativ tive e Invest estme ment t Funds ds (ESIF IF), ), EU level el instru trume ment nt Secto tor Guaran ante tee e Facility ility (contr ntrib ibutio tion n of Membe mber Compet etit itiv ivenes ness s & & COSME and Horizon zon State te funds s from SME (COSM SME) 2020, , EIB/EIF IF and Operational ational Programme ammes to Jobs, Equity ity Facility ility for Grow owth th nationa ional l promot otional ional centra trally lly managed ged EU Growth th (Loan Guar arante ntee Facility ility banks ks programs ams) and Social l Guarantee antees of new Off-the the shelf f instr trume ments nts Erasmu mus for all Cohesion ion Social l Change e loans ns to to SMEs, , Student dent Loan Guarantee antee & & Innova vatio tion securitisation itisation of existing ting Tailor lor-made ade instrume ments nts Facility ility Progres ess Microfina ofinanc nce e II SME loans ns Social ial enter erpr pris ise e inve vesting ting 14 Source: EC, adapted