Cohesion & Regional
Disparities in employment, education and wealth exist throughout the EU and accession counties. We aim to support the EU’s cohesion policy by finding new and innovative ways to help SMEs become more competitive. This includes increasing the volume of financing available to SMEs across Europe through an innovative instrument called the SME Initiative (SMEi), smartly using the European Regional Development Fund (ERDF) as a lever to allow relatively small commitments to yield bigger results and boosting the financing available to SMEs in accession countries.
Bringing different European resources together creates synergies, saves money and spreads expertise – allowing the maximum of capital to penetrate through to small businesses.
Supporting regional ecosystems are a key policy objective of the EC and for Member States and regions. In 2019, we also continued working with NPIs, European structural funds (known as ESIF) and more. Together, we identify financing gaps. We aim to complement one another. We share our years of experience to deploy a greater number of resources in a more agile manner.
Individual transactions have been allocated to thematic areas based on a combination of investment stage and/or mandate objective. This overview is for illustrative purposes only and provides an indication of our main areas of investment focus in 2019.
Top ups for the SMEi Romania, Italy and Finland
In 2019, a number of different countries decided to increase their contributions to the SMEi based on the local demand for financing. Finland increased its contribution by EUR 45m, now expected to generate EUR 750m of loans in the country. Italy increased its contribution by EUR 220m, which will generate more than EUR 1.5bn of additional financing for SMEs. Meanwhile, after fully deploying the initial facility, Romania topped up by EUR 150m, to a total of EUR 250m. This will generate almost EUR 1.4bn of loans to small businesses in Romania.
…and full deployment across all countries
Demand has been so strong that the facilities are now fully deployed in Bulgaria, Romania, Finland, Italy, Spain and Malta.
Nourishing the private equity and venture capital market in the Baltics
In 2019, the EIF continued its support to the Baltic region. Together with the Baltic NPIs ALTUM, INVEGA and KredEx, the EIF launched a second generation EUR 156m fund-of-funds, the Baltic Innovation Fund 2 (BIF 2). BIF 2 will provide continuity from the original Baltic Innovation Fund, a pan-Baltic initiative that has already boosted the private equity and venture capital market in Estonia, Latvia and Lithuania by backing seven Baltic PE and VC funds and helping to attract EUR 78m from local private investors. In 2019, BIF 2 already contributed towards the EUR 125m BaltCap Private Equity Fund III.
Entrepreneurs benefit in Ile de la Réunion
We address financing gaps in the furthest reaches of the EU, including in Ile de la Réunion. In 2019, we saw the first operational year of the EUR 50m mandate between Réunion and the EIF – and the outcomes were positive: 30% of the portfolio has already supported more than 230 local entrepreneurs across the island, with 99% of them micro entrepreneurs and 92% of SMEs entrepreneurs whose businesses are less than five years old.
Building on equity financing options in underserved areas
Building a VC infrastructure in regions of Europe suffering from lack of equity financing options is paramount. One of the steps we have taken towards equity cohesion in 2019 is to invest EUR 32.55m in Fil Rouge Capital II under the Croatian Venture Capital Initiative (CVCi). This is the first VC fund dedicated to Croatia, a country where capital for seed and early stage start-ups is largely absent. Its accelerator will allow Fil Rouge to invest in more than 100 start-ups at the idea stage while the fund will also have the capacity to invest in companies that already show validation of their product in the market. With the EIF’s involvement, the fund has reached a size of EUR 45m and we are confident that Fil Rouge will significantly accelerate the development of the Croatian venture capital market, an important contributor to faster economic growth and a modern economy.
Enlargement & Neighbourhood
If we want a harmonious Europe, it is important to support not just the EU Member States, but also the countries to the east and south of the European territories. With our neighbours, we can build upon common values, such as democracy and human rights, the rule of law, good governance, market economy principles and sustainable development. Small businesses play a crucial role in economic health. That is why we work to improve access to financing for SMEs in the Western Balkans, Turkey, Georgia, Moldova and the Ukraine.
Targeting youth employment in the Western Balkans
The Western Balkans region is home to a number of EU accession countries. It is therefore in everyone’s best interests to facilitate its growth, expansion and success. One key area is youth unemployment, where rates are some of the highest in the world. With our partners, we are making it easier for young people in the region by guaranteeing loans for youth employment. The EUR 10m Guarantee facility for Youth Employment in Western Balkans will form part of the Western Balkan Enterprise Development and Innovation Facility, designed to improve access to finance for SMEs in the Balkans. In 2019, we signed the delegation agreement for this facility and approved five transactions.
Supporting SMEs in Georgia, Moldova and the Ukraine
By the end of June 2019, we had guaranteed more than 1,300 loans issued to SMEs in Georgia, Moldova and Ukraine under the DCFTA initiative (Deep and Comprehensive Free Trade Agreement). About two thirds of the loans guaranteed under the DCFTA Initiative are issued in local currencies, improving access to finance for SMEs, supporting more than 37,000 jobs in the region and making loans available for longer terms. Thanks to this positive performance, the EC and the EIB agreed in 2019 to make a second tranche of EUR 40m available under the guarantee window of the facility. The DCFTA Initiative is a 2016 EIB and EC project, funded by the EU Neighbourhood Investment Facility and the EU Support to Ukraine to re-launch the Economy programme.
“Looking back, it is incredible how much we’ve evolved. From a five-person micro-business of intermediary salespeople to a cutting-edge research and production company with clients across Europe, North America and Asia…”
Magda Anglès – Rovalma
Barcelona, Spain. Different types of steel.
Financing purpose: purchasing machinery.
EIF financing: SMEi
Reaching out to NPI networks across Europe
Working and interacting closely with NPIs across Europe is central to what we do and helps our activity exert a greater impact. The EIF-NPI Equity Platform was started in 2016, to facilitate cooperation between the EIF and NPIs in the area of equity investments. The platform plays an important role in fostering cooperation and sharing knowledge between NPIs. We now represent every EU Member State that has an NPI and then some – that’s 45 NPIs in 29 countries in the EIF-NPI Equity Platform.
Notable NPI investments in 2019
• The EIF joined forces with the Croatian Bank for Reconstruction and Development (HBOR) to improve access to finance for SMEs in Croatia. The Croatian Growth Investment Programme (CROGIP) will make up to EUR 70m available to small businesses through equity investments;
• A new fund-of-funds programme for Slovenia, the Slovene Equity Growth Investment Programme (SEGIP), a EUR 96.5m partnership with the NPI SID Banka launched a successful call to commit half of its resources into two new teams focused on the Slovene private equity landscape;
• In less than one year, the EIF has largely deployed Portugal Tech, a EUR 100m partnership with Portuguese NPI, IFD, to support early-stage and seed ICT investments in Portugal.
…prompting even more funds
The demand from Portuguese companies for early-stage funding means we are now launching Portugal Growth to take SMEs to the next stage. With IFD, the EIF will deploy at least EUR 100m total into private equity, growth capital and mezzanine funds in Portugal.
Making connections with multilateral institutions…
We have developed strong connections with NPIs in Member States. However, institutions outside of Member States can also be highly relevant for EU programmes. That is why Innovation Norway and New Business Venture Fund (Iceland) joined the EIF-NPI Equity Platform in 2019, bringing with them their local knowledge and expertise in their own equity markets. Another new member is Black Sea Trade and Development Bank, an international financial institution with a multilateral focus, covering geographies in Eastern Europe. Our new partners will help build the geographical spread of knowledge and skills even further.
…and building new programmes…
We have a strong pan-European investment pipeline and we want NPIs to gain exposure to it. A new programme, known as the EIF-NPI Fund Underwriting Programme, means that the EIF will sign commitments in funds and transfer the economic interests to the relevant NPI when the fund invests in the NPI’s country or region. So far, our partnerships include:
• The participation of Belgian NPI SFPI-FPIM for up to EUR 100m;
• The participation of Catalonian NPI, ICF, for EUR 15m.
• By pooling resources and working together, we gradually defragment the venture capital market in the EU.
…but we can do more
We already work closely with NPIs in the areas of equity and guarantees. We aim to continue working together across Europe to help deliver the objectives of the Capital Markets Union (CMU), namely defragmentation of capital markets.
Challenges ahead
With the new EU budgetary period (InvestEU) on the horizon in 2021, we will have to work out how we can continue to collaborate effectively. We welcome this opportunity to develop new programmes and new cooperation models.
“We gathered all the right ingredients from the start – a good working attitude, high production capacity… but success didn’t come straight away. I didn’t know anything about business plans or marketing so I’ve had to learn it all step by step… Had it not been for the EU’s help, we wouldn’t have been able to meet our demands and keep the business going.”
Dan Popescu – Pop Industry
Slatina, Romania. Production of long-lasting trailers and containers.
Financing purpose: cashflow, purchasing material.
EIF financing: SMEi