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JEREMIE June 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
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
Created in 1994, part of EIB GroupOperational platform to support SME finance in Europe
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Total portfolio in EUR Number of intermediaries
VENTURE CAPITAL€ 3.1bn
(€369m signed in 2005)
217
Venture Capital funds
GUARANTEES
€ 9.3bn
(€1.685 bn signed in 2005)
165
Banks/Guarantee institutions
= EUR 12.4 billion total portfolio under management
European Investment Fund Portfolio – Year End 2005
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• 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 ».
EIF institutional drivers
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EIF resources
EUR 600m EUR 4 000m EUR 450m
Up to EUR 1bn
To be committed in venture capital funds and financial institutions in the EU and Candidate Countries
European Community (MAP)
Being increased
Being increased
Being increased
Evergreen
500 000 SMEs indirectly benefited from EIF
Dahlia SICAR S.R.
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Main Agenda
• European Investment Fund at a glance
• Why JEREMIE?
• Key elements of Choice
• Current Status & Next Steps
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Possible reasons: difficulty to comply with the Commission’s
eligibility and timing requirements
Possible reasons: difficulty to comply with the Commission’s
eligibility and timing requirements
Lessons from recent History
Only a small portion of the ERDF Funds intended for SME financing was actually utilised across period of 2001 - 2006
Policy Difficulties
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
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New Factors in Policy
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
For Member States
2013 deadline does not apply
But need to create entrepreneurial culture by using financial engineering to stimulate private sector investments
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« JEREMIE »stands for
Joint European Resources for Micro-to-
Medium Enterprises
Why JEREMIE?
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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
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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
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JEREMIE: Future Phases
Venture CapitalFunds
Preparation of
Operational Programmes
EVALUATION PHASE
2006 2007 - 2013
IMPLEMENTATION OF NATIONAL FUNDS
DISBURSEMENT PROCESS
MicrofinanceProviders(MCPs)
Tech TransferActivities
Guarantee schemes
Transforming parts of the ERDF grantsinto financial products for SME
Multiplier effect on the budget by attracting EIB & IFIs’ lending
SMESMEs
SMESMEs
SMESMEs
SMESMEs
SMESMEs
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Main Agenda
• European Investment Fund at a glance
• Why JEREMIE?
• Key elements of Choice
• Current Status & Next Steps
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The JEREMIE offers several choices to Member States
The importance of Choice
JEREMIE is an option for Member States
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JEREMIE is an option for member states/regions
Others
Guarantees
Microfinance
Instruments
Venture
Capital
Funds
Practical Implentation Programme developed
jointly with the EIFMember State selects
% of Funds for Financial Engineering
Via
JEREMIE
SMEFinancing
Infrastructure
Competition
Grants
ERDF funds to member state/region
Measures for Competitiveness
Partly allocated to financial instruments
Articulated across various schemes
JEREMIE
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Choice no. 1 for Member States
No JEREMIEJEREMIE
Member States Choice
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
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Key structural benefit: funds allocated upfront to Fund Holder at local level
HF Manager
HF Manager
European CommissionERDF – DG Regio
European CommissionERDF – DG Regio
Managing AuthorityManaging Authority
EU
Leve
lNa
tiona
l /or
re
gion
al L
evel
Holding Fund (« HF »)Holding Fund (« HF »)
Financial intermediaries
Financial intermediaries
Natio
nal/r
egio
nal
/Loc
al L
evel
Regi
onal
/Loc
al
Leve
l
SMEs Microfinancebeneficiaries
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
Programming Authority Programming Authority €
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Choice no. 2 for Member States
Tender Process Selecting EIF
Manager Selection
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
Issues Lengthy process Commission involvement EIF may apply alone or as J/V
Administer, monitor & report on investments
Attract a syndicate of investors
Closely collaborate with national authorities
Structure investments, select Intermediaries
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The cooperation with EIF in the context of JEREMIE can occur in four main forms
Holding Fund
EIF
VC Guar Microf
EIF as sole Holding Fund manager
Beneficiary fin. institutions
Holding Fund
EIF
VC Guar Microf
EIF joint manager of Holding Fund(e.g. in with local devt. agency)
Beneficiary fin. institutions
Co-Mgr
Holding Fund
EIF
VC Guar Microf
EIF partial Holding Fund manager
Beneficiary fin. institutions
Holding Fund
Manager
VC Guar Microf
EIF as advisor to the Holding Fund manager
Beneficiary fin. institutions
Other Mgr
EIF
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Main Agenda
• European Investment Fund at a glance
• Why JEREMIE?
• Key elements of Choice
• Current Status & Next Steps
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Preparation 2006-2007
EVALUATION PHASE in 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 DEVELOPMENTin 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
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The JEREMIE Phases & Next Steps
1) Preparation2006-2007
2) Implementation2007+
3) SMEs receive financing2007 2013
Evaluations
Programme Planning
Selection of Fund Manager
Allocation of Funds
Selection of Intermediaries
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
Much more can be done thanks to financial engineering
European Investment Fund
JEREMIE Project 43, avenue J. F. Kennedy L-2968 Luxembourg
Tel.: (00 352) 42 66 88 212Fax: (00 352) 42 66 88 280
