Head of Region
Regional Business Development
11 May 2011
Ioannis Tsakiris
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.
JEREMIE
EIF at a glance
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EIF - The Challenge: Financing Innovation
amongst SMEs in Europe
 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
Source: Eurostat, Commission Communication on Modern
SME policy for Growth and Employment
the EIB Group
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Importance of SMEs as the Foundation Stone
for Tomorrow’s Prosperity
EIF at a Glance
EU specialised institution for SMEs, risk financing
Venture Capital and Mezzanine (fund of funds)
Structuring and Guaranteeing portfolios of SME and microfinance loans/leases
Geographic Focus /
Intermediaries
EU 27, EFTA,
Candidate Countries
Distributing through Banks
and Funds
Authorised Capital
€ 3bn
EIB: 61.2%
EU: 30 %
Fin. institutions: 8.8 %
AAA rated
Staffing, Culture and Values
Leading-edge modern institution
Adapting to changing market conditions
Attracting talented staff
High standards of compliance and integrity
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Dual Objective of Meeting EU Policy Goals & Generating a
Satisfactory Return on Equity
Operating Model of EIF
Transformational Role of EIF
Suppliers /
Mandators
Own resources
EIB (RCM, MEZ)
EC (CIP)
MA (JEREMIE)
MS (ERP)
Funds of Funds
Regional (LfA)
Transformational
Key Success
Factors
Product Development
 Commercial Banks
Mandate Management
 Development &
Transaction Execution
Promotional Banks
Risk Management
 Guarantee Institutions
Follow-up &
 Fund Managers
Relationship Focus
VALUE ADDED
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Intermediaries
SMEs
JEREMIE Holding Funds in
support of SMEs
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JEREMIE: Increasing the Deployment of
Self-Sustaining Financial Instruments for SMEs
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
EVALUATION
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2006
IMPLEMENTATION
JEREMIE Phases
DISBURSEMENT
PROCESS
2013
Why JEREMIE?
 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
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 Reallocation of funds within the Holding Fund at any time
EU
Level
Managing Authority
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Regional
/Local Level
National/regional
/Local Level
European Commission
ERDF – DG Regio
National /or
regional Level
Key Structural Benefit: Funds Allocated Upfront
to Fund Holder and Managed at Local Level
Disbursement
 Up front
 Irreversible
Local holding fund
 Greater delegation to Local
Holding Fund (« HF »)
HF
Manager
Role of the HF Manager
 Structure investments, select
Financial
intermediaries
SMEs
Authorities
 Management/administration are
outsourced to HF Mgr.
Financial Intermediaries
 Administer, monitor & report on
investments
 Attract a syndicate of investors
 Closely collaborate with
national/regional authorities
Microfinance
beneficiaries
THE MANAGER IS SELECTED
BY MEMBER STATE/REGION
EIF Tool Kit for SMEs
Public Stock Markets
SME Cash Flows
Funded Risk Sharing for SMEs
Portfolio Guarantees & Credit Enhancement
Formal VC Funds & Mezzanine Funds
Funded Risk Sharing for SMEs
VC Seed & Early Stage
Microcredit
Business Angels, TT
Pre-seed Phase
Seed Phase
Start-up Phase
Emerging Growth
Development
SME Development Stages
HIGHER RISK
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LOWER RISK
JEREMIE Holding Funds
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The JEREMIE process
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JEREMIE Process: call for expression of interest
Call deadline
Progress
Q & A process
Publication
State aid assessment
Inv. Board approval
Selection criteria
Internal approval
Instrument design
Fact finding
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Ensuring answers are
communicated to all
Website and other media to
ensure market awareness
Formal state aid assessment by
competent local authorities
Full presentation of product and call
documents to local IBs
Monitoring committee’s approval of a specific
selection criteria
Internal review and approval process including
specialists from legal, risk management & compliance
Expert driven process to specify product details, to
meet market needs whilst respecting regulations
Follow-on from gap analysis, discussions with key
market players and associations
Process
JEREMIE Process: selection and approval
Communication of
decision
Progress
Board
submission/approval
Draft board report
Due diligence
Final Selection
Set up of due diligence
Pre-selection phase
Selection Panel
Eligibility check
To FI, mandator and
media as appropriate
Proposal presented to EIF
Board for approval
Preparation of decision
documents reviewed by all depts.
Short-listed applicants undergo
intensive 2 day interview process
Presentation of FIs to DD team in loco,
scores reviewed & minuted
Invitations to 2nd screening issued & DD
team formalised
Desk-based review of submitted documents with initial
scoring (QAC) and then team review (minuted)
Internal agreement of members and observers of core
selection team
Initial check to ensure ‘EoI’ passes eligibility checklist with
support of compliance
Call deadline
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Process
Outcome of the JEREMIE process to date
70 Guarantee
applications
received
121 VC
applications
received
42 Due
Diligences
carried out
31 approved
transactions
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•
Greece
•
Romania
•
Latvia
•
Lithuania
•
Slovakia
•
Languedoc Roussillon (FR)
•
Campania (IT)
•
Cyprus
•
Bulgaria
•
Sicily (IT)
•
Malta
Holding Funds Portfolio Mix (in %)
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Funded Risk Sharing Product (FRSP)
Microcredit
Guarantees
Other Equity
Risk Capital Fund
Flexible non-allocated funds
Amount of Private Finance Attracted
3500m
3000m
2500m
2000m
1,978
1,547
1500m
1000m
842
624
500m
0m
1,008
75
HFs
211
HFs
229
241
HFs
HFs
HFs
HFs
HFs
HFs
HFs
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011
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JEREMIE mandates & their financial
engineering products
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Case Study : JEREMIE via ERDF in LanguedocRoussillon (FR)
market analysis : main conclusions
 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.
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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 1st meeting took place in December 2008,
and bi-monthly meetings have taken place thereafter.
 EIF = observer status
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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
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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).
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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 2014-2020
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Contact
European Investment Fund
96 boulevard Konrad Adenauer
L-2968 Luxembourg
Tel.: (+352) 42 66 881
Fax: (+352) 42 66 88 200
www.eif.org
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Ioannis Tsakiris - Assembly of European Regions