Instruments in favour of SME Financing. International conference on guarantees Budapest 3-4 October 2013

Transcription

1 Instruments in favour of SME Financing International conference on guarantees Budapest 3-4 October

2 Helping businesses at every stage Public Stock Markets 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 2

3 Our counterparts We work with a wide range of counterparts to support SMEs Resources and Mandators European Investment Bank EIF own resources European Commission Member States/regions Managing Authorities Corporates/private Public institutions Other third parties Intermediaries and counterparts Commercial Banks Development Banks Guarantee Institutions Leasing Companies Microfinance inst. Fund Managers Corporates Business Angels microenterprises, SMEs and small mid-caps 3

4 Our resources We manage resources for credit and equity from different stakeholders European Investment Bank Risk Capital Resources (RCR) EUR 7bn European Commission Competitiveness and Innovation Framework Progr. (CIP) EUR 1bn allocated to equity and guarantees Risk-Sharing Instrument (RSI) EUR 270m Progress Microfinance EUR 200m National & Regional Funds 20 European and regional Funds-of-Funds including Germany, Portugal, Spain, Turkey, UK 14 Holding Funds supported by structural funds EUR 1.3bn 4

5 Encouraging lending by sharing risk We provide a wide range of products addressing SME needs and helping our intermediaries increase their lending capacity to SMEs Protecting our financial intermediaries capital by sharing the risk they take when lending to SMEs We make it easier for financial institutions to transfer credit risk to capital markets Providing First loss portfolio guarantees, risk sharing instruments and credit enhancement SMEs benefit from reduced collateral requirements Guarantees are often provided free of charge, which benefits SMEs Direct guarantees / counter-guarantees 5

6 EIF business model: adaptable to local situations Our model is flexible: direct guarantees, counterguarantees, capital market transactions Allows cooperation with all types of intermediaries Ensures adaptation to local needs and market players to maximise impact and SME reach-out f EIF Counter Guarantor SEF Guarantee 50% 30-80% System Guarantor Guarantor Guarantee Guarantee Slovenian Slovenian Banks Lender SMEs 9 / 11

7 RSI counter-guarantee 7

8 Western Balkans Guarantee Facility New Guarantee Facility supporting access to lending for SMEs in Western Balkans (Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYROM, Montenegro, and Serbia) EUR 21m first loss cover to generate a total SME loan volume of minimum EUR 110m Providing guarantees to financial institutions Banks, micro-finance institutions, counter-guarantee schemes and mutual guarantee organisations

9 Risk Transfer Guarantee Instruments Risk tolerance and leverage Product Portfolio Tranche Form Leverage SMEG First Loss Direct guarantee Counter - guarantee FLPG* First Loss + Second Loss Direct guarantee = 5 to 7 Credit Enhancement Second Loss (mezzanine) Direct guarantee = 6 to 8 RSI Blended (uncapped) Direct guarantee Counter-guarantee = 14 = 5 (on EC FLPG) ABS wrap Funding Senior Direct guarantee = 2 to 3 Risk tolerance Deal rationale Financial Institutions Pricing Leverage Self-sustainability Target Beneficiaries *First loss product guarantee Expected Loss Expected Loss Expected Loss Expected Loss Expected Loss SMEG (First Loss) FLPG (First + 2 nd Loss) Credit Enhancement (Second Loss) RSI (uncapped) ABS wrap (Senior) 9

10 CIP SME Guarantee Facility CIP budget envelope for Guarantees 600m covering Implementation via guarantee schemes, banks and leasing companies Committed to SME financing Able to comply with the requirements under the Facility, especially enhanced access to finance Selection of intermediaries with wide geographical cover in each country so that as many SMEs as possible have access 4 business lines: Loan Guarantees, Micro-Credit Guarantees, Equity Guarantees, Securitisation 10

11 CIP Implementation Key figures: 64 agreements 47 intermediaries 23 countries. EUR 460m of budget committed Guarantee volume of EUR 7.4bn is provided, expected to reach a loan volume of more than EUR 12bn resulting in an expected leverage of 16 (guarantee volume / budget) EUR 50,000 average supported loan amount ( 3.8 average staff number of supported SME 11

12 Overview of possible EU-EIF financial instruments Central EU instruments Structural/Cohesion Funds Research, Development, Innovation Jobs, Growth and Social Cohesion Horizon 2020 Equity 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 0,45bn] for equity Competitiveness & SME (COSME) [EUR 1.4bn] (current prices): Equity Facility for Growth [EUR 690m] Loan Guarantee Facility [EUR 746m] (CIPsuccessor) Social Change & Innovation Progress Microfinance II Social enterprise investing [EUR xxxm] Creative Europe Cultural and Creative Sector Guarantee Facility [EUR xxxm]? timing shifted Erasmus for all Student Loan Guarantee Facility [EUR 660m] 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 - SME Initiative Significantly higher amounts than currently, but to be decided by each MS 12 Source: EC, adapted

13 COSME Guarantee Facility Envisaged Design Discussions with EC so far focused on loan window Budget of EUR 690m envisaged for 2014 to 2020 What will remain the same? Available to support all types of SMEs Free-of-charge counter-guarantee capped at expected loss What are the key aspects expected to change? One flexible window (e.g. no specific micro window) Only high risk SMEs are eligible (no active lending of FI) Loan limit of EUR 150k, potentially also larger loans provided that SME does not meet any of the 10 innovation criteria under RSI 13

14 COSME EUR 150k limit Impact on CIP agreements Loan window: 26% of all CIP agreements had an average loan amount in excess of EUR 150k 14

15 Erasmus Master Student Loan Guarantee Facility DG Education and Culture (ERASMUS FOR ALL) Contribute to the achievement of the EC student mobility targets Based on the outcome of studies on Student Lending, consultations with policymakers and experts/consultants, and pre-test with several Financial Intermediaries. Market gap in the financing of cross-border High Education Students EC contribution of [EUR606m] Total Student loans volume [EUR3.7bn] Leverage: [6.2x] 15

16 SME Initiative EC proposal to the European Council to improve SME access to finance by leveraging European Structural and Investment Funds ( ESIF ); To be implemented as Joint Instruments: ESIF+EU Central Budget (COSME/H-2020) Blended with EIF/EIB underwriting capacity and third party investors 2 risk-sharing instruments ( Options ): 1. Guarantee facility for portfolios of new SME loans 2. Securitisation facility (for existing and new loans)

17 SME Initiative Schematic allocation of risks (all options) Portfolios created from eligible SME loans Tranches associated with different risks Instrument based on a risk-sharing structure Senior risk (EIB, third parties) Mezzanine risk (ESIF, EIF, [third parties]) First Loss Piece (ESIF, originator) 3 options under consideration Adapted to strong and weak SME credit environments ESIF deployed for - local use - pooled use ESIF to be complemented by small volume of EC central budget

18 SME Initiative - Next steps ECOFIN and European Council decision (Oct); Market testing (Sep/Oct) Ex-ante assessment (market gaps) (Nov) MS decision on participation (Dec); Negotiation of Funding Agreements with participating MS (Q1-2014)