Special Report No 4/2011 ‘The audit of the SME Guarantee facility’
Date: 2011-06-10
Institutions: European Court of Auditors
Subjects: guarantee, small and medium-sized enterprises, tax system

EUROPEAN
COURT OF AUDITORS

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THE AUDIT OF THE 
SME GUARANTEE FACILITY

EN

 
 
 
 
Special Report No 4 

 2011

THE AUDIT OF THE SME 
GUARANTEE FACILITY

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-1
Fax +352 4398-46410
e-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 4 

 2011

A great deal of additional information on the European Union is available on the Internet. 

It can be accessed through the Europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Publications Office of the European Union, 2011

ISBN 978-92-9237-157-9

doi:10.2865/24926

© European Union, 2011

Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special Report No 4/2011 – The audit of the SME Guarantee facility

CONTENTS

3

Paragraph

GLOSSARY

I–VII	

EXECUTIVE	SUMMARY

1–11	

1–6	

INTRODUCTION

SMEs	AND	ACCESS	TO	FINANCE

7–11	

THE	MAIN	FEATURES	OF	THE	SMEG	FACILITY

12–14	

AUDIT	SCOPE	AND	APPROACH

15–98	

AUDIT	FINDINGS

15–27	

DESIGN	OF	THE	SMEG	FACILITY

16–19 

THE SMEG FACILITY IS BASED ON A VALID IMPLICIT INTERVENTION LOGIC

20–22 

 THE IMPACT ASSESSMENT HELPED TO DESIGN THE FACILITY; HOWEVER, IT CONTAINED LIT TLE FACTUAL 
EVIDENCE IN SUPPORT OF THE FACILITY

23–27 

COMPARED TO MAP, THE OBJECTIVES ARE MORE PRECISE, BUT LACK CLARITY AND SPECIFIC TARGETS

28–45	

	SETTING	UP	THE	MANAGEMENT	STRUCTURE	OF	THE	SMEG	FACILITY:	
DELEGATING	THE	DAY-TO-DAY	MANAGEMENT	TO	THE	EIF

31–33 

DELAYS IN PLANNING THE SMEG FACILITY

34–37 

TO PRESERVE THE CONTINUITY OF THE SUPPORT A ‘RETROACTIVITY CLAUSE’ WAS INTRODUCED

38–45 

APPROPRIATE MANAGEMENT FRAMEWORK ESTABLISHED TO OPERATE THE SMEG FACILITY 

46–55	

SELECTION	OF	FINANCIAL	INTERMEDIARIES

47–50 

WELL-DESIGNED SELECTION FRAMEWORK 

51–53 

INSUFFICIENT RECORDS JUSTIFYING THE AGREEMENT PARAMETERS  

54–55 

POLICY OBJECTIVES NOT FULLY DEFINED IN THE GUARANTEE AGREEMENTS

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4

56–72	

PERFORMANCE	MONITORING	AND	REPORTING

59–68 

PERFORMANCE INDICATORS WERE ESTABLISHED, BUT SHOULD BE MORE STABLE AND BALANCED

69–72 

 REPORTING REQUIREMENTS ARE CLEAR AND REASONABLE AND ONLY SOME FINANCIAL INTERMEDIARIES 
CONSIDER THEM AS A BURDEN

73–98	

ACHIEVEMENTS	OF	THE	SMEG	FACILITY		

74–87 

OUTPUTS OF THE SMEG FACILITY 

88–98 

EUROPEAN ADDED VALUE

99–104	

CONCLUSIONS	AND	RECOMMENDATIONS

ANNEX	I	 —	OVERVIEW	OF	THE	CIP	STRUCTURE	DOWN	TO	THE	SME	GUARANTEE	FACILITY

ANNEX	II	 —	MONITORING	BY	THE	COMMISSION	AND	THE	EIF

ANNEX	III	 —	REPORTING	BY	THE	FINANCIAL	INTERMEDIARIES	TO	THE	EIF

REPLY	OF	THE	COMMISSION

Special Report No 4/2011 – The audit of the SME Guarantee facility

Special Report No 4/2011 – The audit of the SME Guarantee facility

	
	
	
GLOSSARY

5

Additionality: The EU SME Guarantee facility is intended to provide additional access to finance for SMEs 
and not to substitute for state spending. Additionality will typically occur if lending volumes increase 
when compared to a scenario without EU intervention.

CIP:  The  Competitiveness  and  Innovation  Framework  Programme  was  established  by  Decision 
No 1639/2006/EC of the European Parliament and of the Council covering the period 2007–13. It is a 
programme launched by DG ENTR and DG ECFIN, managed by the EIF under the supervision of DG ECFIN 
to foster entrepreneurship and innovation of EU SMEs. 

CIP	Decision: Decision No 1639/2006/EC of the European Parliament and of the Council of 24 October 
2006 establishing a Competitiveness and Innovation Framework Programme (2007 to 2013)

DG	ECFIN: Directorate-General for Economic and Financial Affairs at the Commission

DG	ENTR: Directorate-General for Enterprise and Industry at the Commission

EIB: European Investment Bank

EIF: The European Investment Fund has been set up by the EIB to structure and grant specialised finan-
cial products, including venture capital, guarantee instruments for SMEs and securitisation. The EIF 
works with a network of financial intermediaries, many of which are specialised in SME finance. In the 
context of the CIP, the EIF can be seen as the operational manager of the SME Guarantee facility.

EIP: The Entrepreneurship and Innovation Programme is one of three pillars of the CIP framework to 
promote entrepreneurship and innovation.

Ex ante	impact	assessment: Commission Staff Working Document, Annex to the Proposal for a Decision 
of the European Parliament and of the Council establishing a Competitiveness and Innovation Frame -
work Programme (2007–2013), SEC(2005) 433.

Financial	instruments: The financial intermediaries participating in the SMEG facility can be public 
guarantee institutions, mutual guarantee organisations, micro-finance institutions and commercial or 
publicity owned or controlled banks.

Financial	intermediary: The financial intermediaries participating in the SMEG facility can be public 
guarantee institutions, mutual guarantee organisations, microfinance institutions and commercial or 
publicly owned or controlled banks. They may be direct lenders that provide loans to SMEs, or indirect 
guarantee organisations that either co-guarantee or counter-guarantee a loan portfolio, of one or sev-
eral direct lenders.

FMA: Fiduciary and Management Agreement of 20 September 2007 between the European Community 
and the EIF for the SMEG facility under the Competitiveness and Innovation Framework Programme 
(2007–13).

G & E: The Growth and Employment initiative established by Council Decision 347/1998/EC covering the 
period 1998–2000. The successor programme of G & E is the MAP.

Guarantee	cap	amount: The guarantee cap amount refers to the maximum amount of losses for which 
the EIF is liable under an EU guarantee.

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Guarantee	cap	rate: The guarantee cap rate is a pre-agreed rate at which the EIF’s liability is capped 
under a guarantee agreement. The amount of the EIF’s liability under a guarantee agreement (guarantee 
cap amount) can be calculated by multiplying the actual portfolio volume by the guarantee rate and the 
guarantee cap rate. 

For example, portfolio volume = 1 000; guarantee rate = 50 %; guarantee cap rate = 10 %. Thus, maxi-
mum EIF liability (guarantee cap amount) = 1 000 x 50 % x 10 % = 50.

Guarantee	deal: Guarantee deals are the individual guarantee agreements between the EIF and a finan-
cial intermediary covering the activities performed on the basis of these agreements.

Impact: Longer-term socioeconomic consequences that can be observed after the completion of an 
intervention, which may affect either direct or indirect addressees of the intervention. 

Implementation	report: The CIP Council decision stipulates that the Commission should draw up an 
annual implementation report for the framework programme and for each specific programme, examin-
ing the supported activities in terms of financial implementation, results and, where possible, impact. 
The Commission should communicate the annual implementation reports to the European Parliament, 
the Council, the European Economic and Social Committee and the Committee of the Regions.

Input: Financial, human and material resources that are mobilised for the implementation of an inter-
vention. 

Lisbon	strategy: During the meeting of the European Council in Lisbon (March 2000), the Heads of State 
or Government launched a ‘Lisbon strategy’ aimed at making the European Union the most competitive 
economy in the world and achieving full employment by 2010.

MAP: The Multi-Annual Programme for Enterprise and Entrepreneurship covering the period 2001–06 
is an SME programme of DG ENTR managed by the EIF under the supervision of DG ECFIN. It was the 
predecessor programme of the CIP.

Maximum	portfolio	amount: The maximum portfolio amount is the maximum loan volume which may 
be covered by the EU guarantee. It is established by the EIF for each financial intermediary, taking into 
account various considerations such as the available EU budget and comparable past lending volumes. 

OECD: Organisation for Economic Cooperation and Development

Outcome: Change that arises from the implementation of an intervention and which normally relates to 
the objectives of this intervention. Outcomes include results and impacts. Outcomes may be expected 
or unexpected, positive or negative. 

Output: What is produced or accomplished with the resources allocated to an intervention. 

Reference	volume: Reference volume represents the amount of guarantees or financing which the inter-
mediary could reasonably be expected to achieve in the absence of the EU guarantee.

Result: Immediate changes that arise for direct addressees at the end of their participation in an inter-
vention. 

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SME: Small and medium-sized enterprise. As per the Commission recommendation of 6 May 2003 con-
cerning the definition of micro, small and medium-sized enterprises, SMEs are defined as enterprises 
which employ fewer than 250 employees, which have an annual turnover not exceeding 50 million euro, 
and/or an annual balance sheet total not exceeding 43 million euro and which conform to the criterion 
of being an autonomous enterprise.

SMEG	facility: SME Guarantee facility: a financial instrument managed by the EIF, providing guarantees 
or counter guarantees to financial intermediaries for loans granted by financial institutions to SMEs aim-
ing at increasing the SMEs’ debt financing supply.

SMEG	windows: The four windows of the SMEG facility are:
• debt financing via loans or leasing,
• microcredit financing,
• guarantees for equity or quasi-equity investments in SMEs, and
• securitisation of SME debt finance portfolios.

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EXECUTIVE  
SUMMARY

I.
T h e   S M E   G u a r a n t e e   ( S M E G )   f a c i l i t y   i s   a 
financial instrument managed by the Euro -
p e a n   I n v e s t m e n t   F u n d   o n   b e h a l f   o f   t h e 
Europe an  Commission   an d  provi din g  g uar-
a n t e e s   o r   c o u n t e r   g u a r a n t e e s   t o   f i n a n c i a l 
i nte r m e d i a r i e s   fo r   l o a n s   gra nte d   by   f i n a n -
c i a l   i n s t i t u t i o n s   to   S M E s   a i m e d   at   i n c re a s -
in g th e supply of debt financ ing.

II.
T h e   o b j e c t i v e   o f   t h e   C o u r t ’s   a u d i t   w a s   t o 
a s s e s s   t h e   e f fe c t i ve n e s s   o f   t h e   S M E G   f a c i l -
i t y,   n o t a b l y   t h e   d e s i g n   a n d   p l a n n i n g,   t h e 
m a n a g e m e n t   o f   i t s   o p e r a t i o n s   a n d   t h e 
achievement  of its  obj ec tive s. 

III.
Th e   Co u r t   fo u n d   t h at   t h e   o b j e c t i ve s   o f   t h e 
current SMEG facilit y are more precise than 
u n d e r   t h e   p r e d e c e s s o r   p r o g r a m m e s ,   b u t 
t h e y   a re   o n l y   s p e c i f i c,   m e a s u ra b l e,   a c h i e v -
a b l e   a n d   t i m e d   i n   re l at i o n   to   t h e   ex p e c te d 
o u t p u t s .   T h e   i n t e r v e n t i o n   l o g i c   w a s   n o t 
m a d e   e x p l i c i t   a n d   l i m i t e d   q u a n t i f i c a t i o n 
o f   p o t e n t i a l   i m p a c t s   w a s   p r o v i d e d   a t   t h e 
plann in g stag e of  t he facilit y. 

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EXECUTIVE 
SUMMARY

VII.
T h e   C o u r t   r e c o m m e n d s   t h a t   t h e   p r o -
g r a m m e   l o g i c   s h o u l d   b e   m a d e   e x p l i c i t   i n 
a ny   s i m i l a r   f u t u re   i n t e r ve n t i o n ,   a n d   a d d i -
t i o n a l   o r   b e t t e r   p e r f o r m a n c e   i n d i c a t o r s 
c o n s i d e r e d .   T h e   s e l e c t i o n   o f   p o t e n t i a l 
f i n a n c i a l   i n t e r m e d i a r i e s   s h o u l d   b e   b a s e d 
o n   m i n i m u m   r e q u i r e m e n t s   f o r   t h e   c r i t -
e r i a   t h a t   h ave   to   b e   f u l f i l l e d   by   t h e   a p p l i-
c a n t s   a n d   a   s c o r i n g   s y s t e m   s h o u l d   b e   p u t 
i n   p l a ce   to   m a k e   t h e   a p p l i c at i o n s   co m p a r -
a b l e .   A p p r o p r i a t e   m e a s u r e s   t o   m i n i m i s e 
d e a d w e i g h t   s h o u l d   b e   e n v i s a g e d .   D u r i n g 
t h e   p l a n n i n g   p e r i o d ,   t h e   E U   a d d e d   v a l u e 
o f   t h e   i n s t r u m e n t   s h o u l d   b e   c l e a r l y   d e m -
ons trated. 

IV.
T h e   f r a m e w o r k   f o r   t h e   m a n a g e m e n t   o f 
daily operations is considered appropr iate, 
b u t   d o e s   n o t   i n c l u d e   s co r i n g   s t a n d a rd s   o r 
minimum requirements for the selec tion of 
finan cial  inter med iar ies. 

V.
S u f f i c i e n t   o u t p u t   i n d i c a t o r s   w e r e   e s t a b -
l i s h e d ,   w h i c h   w e r e   u s e d   t o   r e p o r t   o n 
SMEG’s implementation. Repor ting require -
ments are satisfac tor y and accepted by the 
finan cial  inter med iar ies. 

V I.
T h e   o n l y   q u a n t i f i e d   t a rg e t   re l a t i n g   t o   t h e 
n u m b e r   o f   S M E s   t o   b e   r e a c h e d   w i t h   t h e 
SMEG facilit y is attainable. Concer ning the 
p u r p o s e   o f   t h e   l o a n s   g r a n t e d ,   l e s s   t h a n 
h a l f   w e r e   g i v e n   t o   S M E s   t h a t   l a c k e d   c o l -
l a t e r a l   a n d   o n l y   1 2   %   w e r e   g i v e n   t o   S M E s 
that used them for innovative investments. 
The analysis of the Cour t ’s sample of loans 
i d e n t i f i e d   a   d e a d w e i g h t   o f   3 8   % .   T h e   E U 
a d d e d   va l u e   o f   t h e   f a c i l i t y   wa s   n o t   c l e a r l y 
d e m o n s t rate d   b e fo re   i t   wa s   l a u n c h e d   n e i -
ther is it indicated in the guarantee agree -
ment s  wit h t he finan cial  inter me d i ar ie s.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

INTRODUCTION

10

1.	

2.	

3.	

S M E s	 A N D 	 ACC E S S 	TO 	 F I N A N C E

Small and medium-sized enter pr ises (SMEs) are the back bone 
of   the   EU  econo my 1,   rep re sent ing   99   %  of  all  enter p r i se s  an d 
p r o v i d i n g   7 5   m i l l i o n   j o b s   i n   t h e   E u r o p e a n   U n i o n 2.   H o w e v e r, 
t h e   f i n a n c i a l   m a r k e t s   a re   w a r y   o f   i nve s t i n g   i n   n e w   o r   yo u n g 
SMEs which are perceived as high-risk investments, especially 
i f   t h e y   a re   i n   i n n ov a t i ve   m a r k e t s.   Acco rd i n g   t o   t h e   O b s e r v a-
tor y of European SMEs 3, limited access to finance is a problem 
for SMEs in Europe. The public sec tor has an impor tant role to 
play in s up p o r tin g the S ME  sec tor,  in  par tic ula r  t h e prov is ion 
of  su ita bl e financing. 

S M E   p o l i c y   i s   a   k e y   e l e m e nt   o f   t h e   L i s b o n   s t rate g y   a i m i n g   to 
make  Europ e a  mo re at trac tive place  to inve st  an d wor k 4. Th e 
L i s b o n   s t ra te g y   s t re s s e d   t h a t   e n t re p re n e u r i a l   i n i t i a t i ve s   a n d 
i n n ov a t i o n   m u s t   b e   s t i m u l a t e d   a n d   e n c o u r a g e d.  Th e re fo re   a 
f r i e n d l y   e n v i r o n m e n t   s h o u l d   b e   c r e a t e d   f o r   s t a r t i n g   u p   i n -
novat ive  bu sines ses,  es p ecially   SM E s 5.  On e  of  th e  E U  s uppor t 
m e a s u re s   to   S M E s   f a c i l i t ate s   t h e i r   a cce s s   to   e x te r n a l   f i n a n ce 
an d is  k nown as th e SM E Gu arante e  (S M E G)  f acil it y. 

The  SMEG  facil it y  was   es tab lish ed  in   O c tober   2 0 0 6   as   par t   of 
t h e   Co m p e t i t i ve n e s s   a n d   I n n o v a t i o n   Fr a m e wo r k   Pro g r a m m e 
(CIP) 6. I t originates in Council Decision 98/347/EC on measures 
of financial assistance for innovative and job - creating SMEs — 
Growth and Employment (G & E), which was continued as par t 
of the subsequent Multi-Annual Programme for Enterprise and 
E n t re p re n e u r s h i p   ( MA P ) 7  e s t a b l i s h e d   i n   2 0 0 1 .   U n d e r   t h e   C I P, 
t h e   S M E G   f a c i l i t y   i s   o n e   o f   t h e   Co m m u n i t y ’s   f i n a n c i a l   i n s t r u -
m e nt s   w h i c h   we re   l a u n c h e d   u n d e r   t h e   E nt re p re n e u r s h i p   a n d 
I nnovat io n Pro gramme ( EIP )  ( se e A nn ex  I) . 

1 

‘Giving SMEs the credit 

they need’, The magazine of 

enterprise policy, European 

Commission, 12.2.2009.

2  COM(2005) 551 final, 
10.11.2005.

3  Observatory of European 
SMEs, Analytical Report, 

November 2006–January 2007, 

Flash Eurobarometer. 

4  COM(2005) 24 final, 2.2.2005.

5  Lisbon European Council 
23 and 24 March 2000, 

Presidency conclusions. 

6  Decision No1639/2006/EC of 
the European Parliament and of 

the Council of 24 October 2006 

establishing a Competitiveness 

and Innovation Framework 

Programme (2007 to 2013)  

(OJ L 310, 9.11.2006, p. 15).

7  Council Decision 2000/819/
EC of 20 December 2000 on a 

multiannual programme for 

enterprise and entrepreneurship, 

and in particular for small and 

medium-sized enterprises 

(SMEs) (2001–2005) (OJ L 333, 

29.12.2000, p. 84).

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4.	

5.	

T h e   E I P   h a s   w i d e - r a n g i n g   o b j e c t i v e s :  ‘ t o   i m p r o v e   a c c e s s   t o 
f i n a n c e   fo r   t h e   s t a r t - u p   a n d   grow t h   o f   S M E s   a n d   i nve s t m e n t 
i n   i n n o v a t i o n   a c t i v i t i e s’.  T h e   S M E G   f a c i l i t y   e n c o m p a s s e s   d i f -
fe r e n t   t y p e s   o f   g u a r a n t e e   s c h e m e s ,   e a c h   a i m i n g   t o   s u p p o r t 
ent rep reneu rship  thro u gh th e en ha ncem ent of  SM E  acce ss  to 
finance. I t comprises four different schemes (or ‘windows’), the 
loans  and le ase s win dow, t he mic rocred it  wi n dow,  t he  e quit y 
an d q uasi- equ it y w ind ow  an d th e  se cur i tis at ion  wi n dow.

T h e   S M E G   f a c i l i t y   w a s   a l l o c a t e d   9 7 8   m i l l i o n   e u r o   f o r   t h e 
 p e r i o d   1 9 9 8   t o   2 0 1 3   u n d e r   t h e   t h r e e   s u c c e s s i v e   f r a m e w o r k 
p r o g r a m m e s   ( G   &   E ,   M A P   a n d   C I P ) .   A t   t h e   e n d   o f   2 0 0 9 ,   t h i s 
budg et   g uarante ed  a  tot al  l oan  por tfol io  of   1 0 ,6   bi lli on   e uro 
(see   Table   1).

TA B L E 	 1

S M E G 	 FAC I L I T Y 	 O V E R A L L 	 B U D G E T

SMEG 1998 (G&E)

SMEG 2001 (MAP)

SMEG 2007 (CIP)

Total

Budget
(million euro)

187

281

5101

978

Guaranteed loan portfolio
 as at the end of 2009
(million euro)

2 402

4 642

3 534

10 578

Indicative budget for SMEG at the start of the CIP. The allocation of budgets between the different types of 

1 
financial instruments is done on an annual basis.

Source: ECA based on various reports from the European Commission and the European Investment Fund.

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6.	

 51 0  mil lio n  e uro  are  ear mar k ed  un d er   th e   c ur rent  CIP   for   th e 
p e r i o d   2 0 0 7   t o   2 0 1 3 .   T h e   b u d g e t   i s   o n l y   d r a w n   u p o n   w h e n 
g u a r a n t e e d   l o a n s   d e f a u l t ,   a n d   fo r   e a c h   i n t e r m e d i a r y   a   m a x -
i m u m   E U   b u d g e t   l i a b i l i t y   i s   f i x e d .   U n t i l   3 1   D e c e m b e r   2 0 0 9 
t h e   to t a l   a m o u n t   o f   g u a ra nte e   c a l l s   m a d e   u n d e r   t h e   C I P   wa s 
1 , 7   m i l l i o n   e u r o .   F o r   a   d e t a i l e d   b r e a k d o w n   o f   t h e   r e s u l t s 
achie ve d by th e fac il it y  under t h e C IP,  s ee  Tab le  2.

T H E 	 M A I N 	 F E AT U R E S 	 O F 	T H E 	 S M E G 	 FAC I L I T Y

7.	

T h e   o p e r a t i o n a l   m a n a g e m e n t   o f   t h e   S M E G   f a c i l i t y   i n v o l v e s 
seve ral  p ar t ie s (s ee Fig ur e  1) .

TA B L E 	 2

R E S U LT S 	 AC H I E V E D 	 BY 	T H E 	 S M E G 	 FAC I L I T Y 	 U N D E R 	T H E 	 C I P 	 — 	 K E Y 	 F I G U R E S	
A S 	 AT 	31	 D E C E M B E R 	2009

Number of intermediaries

Number of agreements

Countries covered

Number of SMEs

Number of loans

Number of employees (estimated at inclusion date)

EU guarantee in million euro 

Net called guarantees in million euro

Loan amount in million euro

Investment amount in million euro

Estimated SME financing guaranteed in million euro

Total

21

25

13

58 767

64 327

217 134

3 534

1,7

3 793

6 849

11 610

Loan window

Microcredit window

17

21

11

50 476

55 796

204 155

3 306

0,8

3 695

6 692

11 264

4

4

4

8 314

8 531

13 004

228

0,9

98

157

346

Source: ‘Quarterly Report 31 December 2009 — SMEG 2007 facility’, the European Investment Fund.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

13

8.	

 Tw o   d i re c t o r a t e s - g e n e r a l   a t   t h e   E u r o p e a n   Co m m i s s i o n ,   p l u s 
t h e   E u r o p e a n   I nve s t m e n t   Fu n d   ( E I F ) 8,   a re   a l l   i nvo l ve d   i n   t h e 
design, management and monitoring of the SMEG facilit y. The 
D i re c to rate - G e n e ra l   fo r   E nte r p r i s e   a n d   I n d u s t r y   ( D G   E N T R )   i s 
t h e   co o rd i n a to r   o f   t h e   l e g a l   b a s i s,   p re p a re s   t h e   a n n u a l   wo r k 
p r o g r a m m e s   a n d   i m p l e m e n t a t i o n   r e p o r t s   o f   t h e   v a r i o u s   C I P 
pillars and is responsible for organising the programme evalu-
a t i o n s .   T h e   D i r e c t o r a t e - G e n e r a l   f o r   E c o n o m i c   a n d   Fi n a n c i a l 
A f f a i r s   ( D G   E C F I N )   h a s   t h e   d i r e c t   m a n a g e m e n t   r e s p o n s i b i l -
i t i e s   fo r   S M E G ,   b e i n g   i n   c h a r g e   o f   n e g o t i a t i n g   t h e   Fi d u c i a r y 
a n d   M a n a g e m e n t   Ag re e m e n t   ( FMA)   w i t h   t h e   E I F 9,   a p p ro v i n g 
f i n a n c i a l   i nte r m e d i a r i e s,   m o n i to r i n g   c a s h   m ove m e nt s   o n   t h e 
tru st   acco unt s  an d  ensu r ing   th at   f und s  are   spe nt  in   lin e   wi th 
the  CI P ’s o bjec t ives.   

8  The EIF is the European Union 
body specialised in providing 

guarantee instruments and risk 

capital for SMEs.

9  Fiduciary and Management 
Agreement dated 20.9.2007 

between the European 

Community and the EIF for 

the SMEG facility under the 

Competitiveness and Innovation 

Framework Programme 

(2007–13).

F I G U R E 	 1

O V E R V I E W 	 O F 	T H E 	 S M E G 	 P R O C E S S 	 F LO W

EU	represented	
by	the	Commission
(DG	ENTR	and	DG	ECFIN)

entrusts

EIF	selects	financial
intermediaries	(FI)
and	provides

co-guarantees (or)  
guarantees

p
a
y
s
g
u
a
r
a
n
t
e
e
c
a

l
l
s

g
u
a
r
a
n
t
e
e
c
a

l
l
s

i
f

l

o
a
n
d
e
f
a
u
l
t
s

FI

r
e
p
a
y
l

o
a
n
s

g
r
a
n
t
s
l

o
a
n
s

SME s

provides guarantee

Partner bank

guarantee calls if loan defaults

pays guarantee calls

g
r
a
n
t
s
l

o
a
n
s

r
e
p
a
y
l

o
a
n
s

SME s

Source: European Court of Auditors.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

 
 
 
 
 
 
 
 
 
 
14

9.	

10.  

11.  

 The EIF provides guarantees to financial intermediaries aiming 
to improve their lending capacity and, therefore, the availabil-
it y  and   ter ms  o f  l o ans  towards  SM E s. The   E IF  s ign s   guarante e 
agreements in its own name, on behalf of the Commission and 
at the r isk and cost of the Union budget. I n order to allow the 
Commission to monitor the facility, the EIF repor ts to DG ECFIN 
on  the  p rogres s achieved o n a quar te r ly  bas is.

 The financial intermediaries par ticipating in the SMEG facilit y 
are public guarantee institutions, mutual guarantee organisa -
t i o n s ,   m i c r o f i n a n c e   i n s t i t u t i o n s   a n d   c o m m e r c i a l   o r   p u b l i c l y 
o w n e d   o r   c o n t r o l l e d   b a n k s .  T h e y   c a n   b e   d i r e c t   l e n d e r s   t h a t 
provide loans to SMEs or indirec t guarantee organisations that 
e i t h e r   co - g u a ra nte e   o r   co u nte r- g u a ra nte e 1 0  a   S M E   l o a n   p o r t -
folio of one or several direct lenders. Each guarantee deal 11 de -
ter mines  spe cific  target vo lume s for  t h e loa ns  to be achi eve d 
by t he f inanc ial  inter mediar y. 

10  A co-guarantee provides a 
second guarantee in addition 

to the main guarantee to the 

lender, whereas a counter-

guarantee guarantees part of the 

first guarantor’s guarantee. 

11  ‘Guarantee deals’ are the 
individual guarantee agreements 

between the EIF and a financial 

intermediary and the activities 

performed on the basis of these 

agreements. 

12  Commission 
Recommendation 2003/361/EC 

of 6 May 2003 concerning the 

definition of micro, small and 

medium-sized enterprises  

(OJ L 124, 20.5.2003, p. 36). 

S M E s   h a v e   t o   m e e t   t h e   C o m m i s s i o n’s   S M E   d e f i n i t i o n   t o   b e 
e l i  g i b l e   f o r   a   g u a r a n t e e   u n d e r   t h e   S M E G   f a c i l i t y.   A n   S M E   i s 
d e f i n e d   a s   a n   e n t e r p r i s e   w h i c h   e m p l o y s   fe we r   t h a n   2 5 0   e m -
p l oye e s   a n d   w h i c h   h a s   a n   a n n u a l   t u r n ove r   n o t   e xce e d i n g   5 0 
million euro and/or an annual balance sheet total not exceed-
in g 43 mil lion  eu ro. I t  m us t also sat is fy  th e  c r iter ion  of  be i ng 
an  au ton omo us enter p r is e 12.

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AUDIT SCOPE AND APPROACH

15

12.	 The objec tive of the Cour t ’s audit was to assess the effec tive -
n e s s   o f   t h e   S M E G   f a c i l i t y   b y   a d d r e s s i n g   t h e   fo l l o w i n g   a u d i t 
que st ions:

13  Financial intermediaries 
in Belgium, France, Hungary, 

Slovenia, Italy, Spain and 

Germany were visited. 

 ο H a s   t h e   C o m m i s s i o n   d e s i g n e d   t h e   S M E G   f a c i l i t y   a n d   i t s 
management struc ture in a coherent and effec tive manner?

 ο H ave  t he   Co mm is s ion  and   t he  E IF  es ta bli sh ed   and  appli ed 
e f fe c t i ve   p ro ce d u re s   to   s e l e c t   a p p ro p r i ate   f i n a n c i a l   i nte r -
m e d i a r i e s   a n d   t o   m o n i t o r   t h e   p e r f o r m a n c e   o f   t h e   S M E G 
fac il it y?

 ο H ave th e SM E gu arantee de als contr ibuted  to  th e ach ie ve -

me nt  o f t he  p o l ic y ’s o b jec tives? 

13.	 The  au dit  exa mined  t he  ro l es  an d  res pons ibi li ti es   of   all  m ain 
p a r t i e s   i nvo l ve d   i n   t h e   S M E G   f a c i l i t y   —   t h e   Co m m i s s i o n ,   t h e 
E I F   a n d   t h e   f i n a n c i a l   i nte r m e d i a r i e s.  Th e   m a i n   fo c u s   w a s   t h e 
S M E G   f a c i l i t y   u n d e r   t h e   C I P   ( 2 0 0 7 – 1 3 ) ;   t h e   S M E G   u n d e r   t h e 
MAP  was u sed fo r th e p ur po se of  com par i son s  wi th  t he  CIP. 

14.	 The  aud it  covered th e fo l l owing :

 ο an assessment of whether the SMEG objec tives were SMART 
a n d   w h e t h e r   t h e   d e s i g n   a n d   p l a n n i n g   o f   t h e   f a c i l i t y   w a s 
l ike ly  to  achieve effec t ive result s;

 ο a n   e v a l u a t i o n   o f   t h e   m a n a g e m e n t   o f   t h e   S M E G   f a c i l i t y ’s 
operations, comprising an assessment of the financial inter-
mediar y selec tion procedures and the Commission and EIF 
rep o r ting  a nd mo nitor in g proce dures ;

 ο vis it s   to  nine   financial  inter med iar ie s 13  ( out  of  the  14   th at 
were contrac ted at the audit planning stage in June 2009). 
T h e y   w e r e   s e l e c t e d   a c c o r d i n g   t o   t h e   f o l l o w i n g   c r i t e r i a : 
(i) type of guarantee; (ii) actual guarantee volume achieved; 
(iii) type of financial intermediar y ; and (iv) direc t guarantee 
o r   co u nte r- g u arante e.   Fo r   e ac h  f i n a n c i a l  inte r m e d ia r y   th e 
re l ate d  gu a ra ntee   p rop os a l,   it s  as s es s m e nt   by   t h e   E IF   a nd 
the Commission and the agreement signed between the EIF 
and  th e financial inter mediar y  we re  exam in ed ;

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 ο s e l e c t i o n   o f   a   s a m p l e   o f   1 8 1   l o a n s   f ro m   t h e   n i n e   f i n a n c i a l 
intermediaries visited in order to assess that the use of the 
g u a r a n t e e d   S M E   l o a n s   w a s   i n   l i n e   w i t h   t h e   S M E G   o b j e c -
t ives 14;  and

 ο a questionnaire to all 51 financial intermediaries par ticipat -
i n g   u n d e r   MA P   a n d / o r   C I P 1 5  i n   o rd e r   to   o b t a i n   t h e i r   v i e ws 
o n t he de sign and management  of   th e S ME G  f ac il i t y 16.

14  Documentation concerning 
the proposal and approval of 

the loan, the assessment of 

the borrower’s credit risk and 

the purpose of the loan was 

inspected on the financial 

intermediaries’ premises. 

15  The questionnaire invited 
the intermediaries to answer 

48 questions on topics such as: 

(i) the SMEG application process; 

(ii) the EIF’s management during 

the lifetime of the guarantee; (iii), 

the guaranteed product; and  

(iv) the impact of the financial 

crisis on the products. In 

addition, the intermediaries that 

participated under the MAP 

but not the CIP were asked to 

indicate the reasons. 

16  Comments from both the EIF 
and Commission were taken 

into account when drafting the 

questions. A response rate of  

82 % was obtained (42 out of  

51 financial intermediaries).

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Special Report No 4/2011 – The audit of the SME Guarantee facility

AUDIT FINDINGS

17

D E S I G N 	 O F 	T H E 	 S M E G 	 FAC I L I T Y	

15.	 Public inter vention is more likely to be successful if it is prop -
er l y de signe d.  I n order  to  ass ess  t he  de si gn , th i s se c ti on  an a-
l y s e s   t h e   i n t e r v e n t i o n   l o g i c   u n d e r l y i n g   t h e   S M E G   f a c i l i t y.   I t 
scrutinises the ex ante impac t assessment for the CIP 17 related 
to the SMEG facilit y and the ex tent to which the results of this 
as s essm ent  were  t ak en into  account  d ur in g  t he  d es ign  s tag e. 
Finally, the objec tives of the SMEG facilit y are assessed in the 
l i g ht   o f   s p e c i f i c,   m e a s u ra b l e,   a c h i e va b l e,   re l e va nt   a n d   t i m e d 
(S MA R T ) c r iter ia.

T H E 	 S M E G 	 FAC I L I T Y 	 I S 	 B A S E D 	 O N 	 A 	VA L I D 	 I M P L I C I T	
I N T E R V E N T I O N 	 LO G I C

16.  

The inter vention logic provides the link bet ween an inter ven -
t i o n ' s   i n p u t s   a n d   t h e   p r o d u c t i o n   o f   i t s   o u t p u t s   a n d ,   s u b s e -
que nt l y, to its imp ac t s on so c iet y  in  te r m s of  res ul ts  an d  out-
com es.  I t  de scr ib es  how  an inter ve nt ion  is  ex pec te d to att ai n 
its global objec tives. An explicit inter vention logic shows how 
the  p ro gramme  is su p p os ed to fun c ti on.

17.   Neither the CIP Decision nor the Commission’s proposal or the 
i m p a c t   a s s e s s m e n t   fo r   C I P   e x p l i c i t l y   d e s c r i b e d   t h e   i n te r ve n-
tio n l o gic  o f th e  SM EG  facil it y  in   th i s  ma nn e r.  The   abse n ce  of 
an explicit inter vention logic was also noted by the EIP interim 
eva lu ato r 18. 

18.  

The different preparator y documents, however, do provide suf-
ficient information to make an implicit assumption on how the 
S M E G   f a c i l i t y   i s   s u p p o s e d   t o   f u n c t i o n .   Fo r   l e n d e r s   i t   c a n   b e 
d i f f i c u l t   t o   a s s e s s   i n d i v i d u a l   l o a n   a p p l i c a t i o n s   a n d   t h e   r i s k s 
involved, especially if a borrower does not have an established 
track record (star t-ups). I n such a situation the bor rowers can 
guarantee the loan to the lender through the provision of col -
lateral, but those who do not have sufficient collateral may be 
denied access to credit even with viable business propositions. 
The SM EG facil it y s eeks  to remed y  t h is  s it uati on by  provi di ng 
gu ara nte es in c ases  w h ere the S ME s  are  un able  to do s o. 

17  Commission Staff Working 
Document, Annex to the 

Proposal for a Decision of the 

European Parliament and of 

the Council establishing a 

Competitiveness and Innovation 

Framework Programme (2007–

13), SEC(2005) 433, 6.4.2005.

18  The interim evaluator 
recommended providing ‘a 

clear statement of intervention 

logic for each measure in 

order to improve the overall 

coherence of the programme 

and to demonstrate the 

impact’, European Commission 

‘Interim evaluation of the 

Entrepreneurship and Innovation 

Programme’, 2009. 

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19.  

 Never theless, in the absence of an explicit inter vention logic, 
it is difficult to understand the rationale of some specific ele -
ments of the SMEG facilit y, such as targeting innovative SMEs 
b y   t h e   l o a n   w i n d o w.   I n n o v a t i v e   S M E s   a r e   t a r g e t e d   t h r o u g h 
debt financing although equity investments are generally con-
side re d mo re ap p rop r iate for  th is  t y pe  of  SM E 19.

19  See for instance North, 
Baldock, Ekanem, Whittam and 

Wyper: ‘Access to Bank Finance 

for Scottish SMEs’, 2008. 

20  COM(2002) 276 final, 5.6.2002. 

21  The impact assessment 
considers the outputs such as 

number of loans or number of 

SMEs as impacts. However, the 

actual impact is lower than the 

outputs, because a part of the 

SMEs would have obtained the 

loans without the guarantee. 

T H E 	 I M PAC T 	 A S S E S S M E N T 	 H E L P E D 	TO 	 D E S I G N 	T H E	
FAC I L I T Y;	 H O W E V E R ,	 I T 	 CO N TA I N E D 	 L I T T L E 	 FAC T UA L	
E V I D E N C E 	 I N 	 S U P P O R T 	 O F 	T H E 	 FAC I L I T Y

20.  

T h e   i m p a c t   a s s e s s m e n t   i s   a n   i m p o r t a n t   i n s t r u m e n t   u s e d   b y 
the Commission when designing a polic y 20. The impac t assess-
m e n t   s h o u l d   i d e n t i f y   a n d   a n a l y s e   t h e   p r o b l e m   a t   s t a k e ,   t h e 
objec tives to be pursued and the main polic y options that are 
av a i l a b l e   t o   a c h i e ve   t h o s e   o b j e c t i ve s.   Fo r   t h e   v a r i o u s   p o l i c y 
options, the assessment should evaluate their likely economic, 
so cial  a nd e nviro nment al  impac t s.  Fi na lly, t h e i mpac t  as se ss-
ment shoul d identify the mo n itor in g  an d e val uat ion  ar rang e -
ments  ne eded du r ing p ol ic y  impl em entat ion .

21.   As   re g a rd s   t h e   S M E G   f a c i l i t y,   t h i s   t y p e   o f   a n a l ys i s   fo r m s   p a r t 
of the CIP impac t assessment. The CIP impac t assessment con-
taine d all  t he mandato r y sec tion s  and  as such  it  gives insi ght 
into the considerations that shaped the design of the CIP and 
its  main el ement s s uch as t he SM E G f ac il it y. Thus, th e  C IP  i m-
pac t assessment represents an improvement compared to the 
MAP,  fo r whic h no s uc h anal ysis  was  m ade. 

22.   H o w e v e r,   m a n y   p a r t s   o f   t h e   C I P   i m p a c t   a s s e s s m e n t   a r e   n o t 
sufficiently detailed and quantified. For example, the analysis 
of   the   pro b le m  l ac ks   any   in dicat ion   of   it s  magn i tude   an d  th e 
analysis of different polic y options is based only on a simplis -
t i c   q u a l i t a t i ve   co m p a r i s o n   w i t h o u t   a ny   q u a n t i f i c a t i o n   o f   t h e 
lik el y imp ac t s. Fo r t he retain ed opt ion ,  except  for  th e i mpac t 
o n   t h e   n u m b e r   o f   j o b s,   t h e   Co m m i s s i o n   q u a n t i f i e d   e x p e c te d 
ou tp u ts 21 instead o f th e imp ac t.

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CO M PA R E D 	TO 	 M A P,	T H E 	 O B J E C T I V E S 	 A R E 	 M O R E 	 P R E C I S E ,	
B U T 	 S T I L L 	 L AC K 	 C L A R I T Y 	 A N D 	 S P E C I F I C 	TA R G E T S	

23.  

S M A R T   o b j e c t i v e s   s h a l l   b e   s e t   fo r   a ny   b u d g e t   a c t i v i t y 2 2.  T h e 
ob jec tive s are co nsidered:

22  Article 27(3) of Council 
Regulation (EC, Euratom)  

 ο sp ec ific   if  t hey   are  p recis e  and  con c rete  en ough   n ot   to  be 

on the Financial Regulation 

No 1605/2002 of 25 June 2002 

o p en to  va r ying  inter p retat ions 23; 

applicable to the general budget 

of the European Communities 

 ο m e a s u r a b l e   i f   t h e   o u t p u t   c a n   b e   m e a s u r e d   a n d   t h e r e fo r e 

(OJ L 248, 16.9.2002, p. 1).

any  imp rovements as s essed ; 

 ο ac hievab le  if  t he  exp ec ted   re sult s  c an  rea list ic a lly   be   pro -

du ced w it h the  avail ab l e res ources ;

 ο r e l e v a n t   i f   t h e y   r e l a t e   t o   t h e   n e e d s   a n d   t o   t h e   s t r a t e g i c 

o b jec t ives;  and

 ο t imed  if th ey re late to  a d eadlin e  or  t im e pe r iod 23.

24.   D u e  to  t he  rat her  comp l ex  s tr uc tu re   of   th e   C IP   ( se e   A nn ex  I ) , 
t h e   h i e r a rc h i c a l   s t r u c t u re   o f   t h e   o b j e c t i v e s   i s   a l s o   c o m p l e x . 
Fo u r   g l o b a l   o b j e c t i v e s   a r e   s e t   a t   t h e   l e v e l   o f   t h e   f r a m e w o r k 
pro gram me 24.   I n  th e  cas e  o f  the  EIP   whic h  inc lud es   t he   S ME G 
facilit y, the immediate objec tives 25 are defined at the level of 
the specific programme 26. Although no specific objec tives are 
set at the level of the financial instruments, Ar ticle 19.2 of the 
CIP Decision describes each window of the SMEG facilit y in an 
ob jec tive -l ike  f as hio n ( see  B ox  1) . 

25.  

Th e o bj ec t ives are rel evant, but th ey  are  on ly  spe c if ic,  st ate d 
in a measurable format and timed as regards the expected out-
puts  of  t he fac il it y. The qu ant if ied  t arg et  of  rea chi n g 3 1 5  7 5 0 
SM Es s eem s to b e reaso nab l y  ach i evable  ( se e  paragraph  7 7 ).

23  The definition is taken from 
the European Commission, 

‘Impact assessment guidelines’, 

SEC(2005) 791, 15.6.2005.

24  CIP Decision, Article 2.

25  Immediate objectives concern 
the result of an intervention 

on direct addressees and take 

account of the envisaged 

specific domain and particular 

nature of the policy intervention 

under consideration. For SMEG, 

the relevant EIP objective is 

considered to be the immediate 

objective.

26  CIP Decision, Article 10.

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26.  

 Compared to the MAP, the objec tives of the SMEG facility were 
more precise. However, they are defined in a ver y broad man -
n e r.   Fo r   i n s t a n c e,   a c c o rd i n g   t o   t h e   E I P   i m m e d i a t e   o b j e c t i ve, 
t h e   l o a n s   h ave  ‘ to   i m p rove   a cce s s   to   f i n a n ce   fo r   t h e   s t a r t- u p 
a n d   grow t h   o f   S M E s’.   S u c h   a n   o b j e c t i ve   i m p l i e s   a   ve r y   b ro a d 
s e t   o f   p o t e n t i a l   t a r g e t   S M E s   a s   i t   c a n   b e   a r g u e d   t h a t   a l m o s t 
any  b o r row ing   by  any  S ME   will  be  un de r ta k en   in   orde r   to  en-
sure the growth of a company. Also, the concept of innovation 
ha s b een  inter preted in a w ide way 27.

27  Examples of innovation found 
in the sample: investment in 

new packaging and sorting 

technology in a warehouse and 

a new oven with additional 

functionalities in a bakery shop.

B O X 	 1

O B J E C T I V E S 	 R E L E VA N T 	TO 	T H E 	 S M E G 	 FAC I L I T Y

Global	objective

To foster the competitiveness of enterprises, in particular of SMEs.

Immediate	objective		

To improve (…) access to finance for the start-up and growth of SMEs and investment in innovation 
activities.

The	four	SMEG	windows	

Loan window — shall reduce the particular difficulties SMEs face in accessing finance either due to 
the perceived higher risk associated with investments in certain knowledge-related activities such 
as technological development, innovation and technology transfer, or due to a lack of sufficient 
collateral.

Microcredit window — shall encourage financial institutions to play a greater role in the provision 
of loans of a smaller amount which would normally involve proportionately higher unit handling 
costs for borrowers with insufficient collateral. In addition to guarantees or counter-guarantees, 
financial intermediaries may receive grants to partially offset the high administrative costs inherent 
in microcredit financing.

Equity and quasi-equity window — shall include investments which provide seed capital and/or capi-
tal in the start-up phase, as well as mezzanine financing, in order to reduce the particular difficulties 
which SMEs face because of their weak financial structure, and those arising from business transfers.

Securitisation window — shall mobilise additional debt financing for SMEs under appropriate risk-
sharing arrangements with the targeted institutions. Support for those transactions shall be made 
available upon an undertaking by the originating institutions to grant a significant part of the liquid-
ity resulting from the mobilised capital for new SME lending in a reasonable period of time.

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28  In accordance with 
Article 43(4) of Commission 

Regulation (EC, Euratom) No 

2342/2002 of 23 December 2002 

laying down detailed rules for 

the implementation of Council 

Regulation (EC, Euratom)  

No 1605/2002 on the Financial 

Regulation applicable to the 

general budget of the European 

Communities (OJ L 357, 

31.12.2002, p. 1).

29  For SMEG: the Fiduciary 
and Management Agreement 

and the related operational 

guidelines (such as the ‘Guidance 

on enhanced access to finance’).

27.  

T h e   C I P   i m p a c t   a s s e s s m e n t   s e t s   a n   o u t p u t   t a r g e t   f o r   t h e 
n u m b e r   o f   S M E s   e x p e c t e d   t o   b e n e f i t   w i t h i n   t h e   s e v e n - y e a r 
programme horizon. Targets in terms of results or impac t have 
not been set (for more details, see paragraph 64). An estimated 
number of direc t jobs maintained or created within five years 
was provided in the impac t assessment. This does not direc tly 
re l a t e   t o   a ny   o f   t h e   o b j e c t i ve s,   b u t   c a n   b e   d e r i ve d   f r o m   t h e 
renewed Lisb o n s t rategy.

S E T T I N G 	 U P 	T H E 	 M A N AG E M E N T 	 S T R U C T U R E 	 O F	
T H E 	 S M E G 	 FAC I L I T Y:	 D E L E G AT I N G 	T H E 	 D AY - TO -
D AY 	 M A N AG E M E N T 	TO 	T H E 	 E I F

28.	 T h e   c o r n e r s t o n e   o f   e f f i c i e n t   a n d   e f fe c t i v e   d e l e g a t i o n   i s   t h e 
c o n t r a c t u a l   a g r e e m e n t   d e t a i l i n g   t h e   p r o v i s i o n s   f o r   t h e   i m -
p l e m e nt at i o n   o f   t h e   t a s k s   e nt r u s te d   to   t h e   s p e c i a l i s e d   b o d y. 
This contrac tual agreement should in par ticular detail the ob -
l i g at i o n s   o f   t h e   s p e c i a l i s e d   b o d y   a n d   i n c l u d e   a l l   a p p ro p r i ate 
a r ra n g e m e nt s   fo r   e n s u r i n g   t h at   t h e   p o l i c y   o b j e c t i ve s   w i l l   b e 
at tain ed 28. 

29.  

Th e   E I F   h a s   s y s t e m a t i c a l l y   d e ve l o p e d   e x p e r t i s e   i n   p ro v i d i n g 
f i n a n c i a l   e n gi n e e r i n g   p ro d u c t s   to   S M E s   i n   Eu ro p e.   I t   wa s   s e -
lec ted by the European Communit y to operate the day-to - day 
m a n a g e m e n t   o f   t h e   S M E G   f a c i l i t y   a t   i t s   s t a r t   i n   1 9 9 8 .   U s i n g 
the  EIF  under  t he s ucces sive multi an n ua l progra mme s (G & E, 
MA P   a n d   t h e n   C I P )   a i m s   to   e n s u re   t h e   re q u i re d   co nt i n u i t y   o f 
the  manag em ent  of  t he SME G fac i li t y. 

30.	

I n t his contex t, t he Cour t examin ed :	

 ο w h e t h e r   t h e   i m p l e m e nt at i o n   o f   t h e   S M E G   f a c i l i t y   wa s   b e -
i n g   e f fe c t i ve l y   p l a n n e d   to   avo i d   d e l ays   a n d   to   p rov i d e   a n 
u ninte r rup ted su p p or t to the  S M E s ; an d

 ο w h e t h e r   t h e   re g u l ato r y   f ra m e wo r k 2 9  d e f i n i n g   t h e   s e r v i ce s 
t o   b e   p r o v i d e d   b y   t h e   E I F   e n s u r e s   e f f i c i e n t   a n d   e f fe c t i v e 
ma nag ement o f th e f acil it y.

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31.  

32.  

D E L AYS 	 I N 	 P L A N N I N G 	T H E 	 S M E G 	 FAC I L I T Y

  C o n s i d e r i n g   t h a t   t h e   M A P   c o v e r e d   t h e   p e r i o d   f r o m   2 0 0 1   t o 
2006 and the CIP covers the period from 2007 to 2013, the star t 
of  t he  o p erat io n s u nder th e CIP  s h ould  h ave  be en  pl ann e d i n 
orde r to  pre ser ve the co nt inuit y  of  th e  f i nan c i al s uppor t.  Th e 
FMA   s ho uld  have  b een  in  p lace  at  lea st   1 1   m ont h s  (s ee   para-
g r a p h   3 3 )   b e fo re   t h e   s t a r t   o f   t h e   C I P   a s   t h i s   wo u l d   h a ve   l e f t 
sufficient time for signing the guarantee agreements bet ween 
the  EIF  and t he financial  inter m ed iar ie s.

30  The first guarantee agreement 
under the CIP between a 

financial intermediary and the 

EIF was signed on 2 September 

2008.

T h e   f i r s t   d r a f t   v e r s i o n   o f   t h e   FM A   u n d e r   t h e   C I P   w a s   d a t e d 
M a r c h   2 0 0 6 ,   b u t   w a s   n o t   s i g n e d   u n t i l   2 0   S e p t e m b e r   2 0 0 7 , 
n e a r l y   n i n e   m o n t h s   a f t e r   t h e   s t a r t   o f   t h e   C I P.   T h e r e a f t e r,   i t 
too k  a l mos t   o ne  year  until   th e  f ir s t  g ua ra nte e  agre e ment   be -
t we e n   t h e   E I F   a n d   a   f i n a n c i a l   i n te r m e d i a r y   wa s   s i gn e d 3 0  ( s e e 
Fig u r e  2).

F I G U R E 	 2

T I M E L I N E 	 O F 	T H E 	 M A P 	 A N D 	 C I P 	 L E G A L 	 B A S E	

Nine months delay

Twelve months delay

December 2006

January 2007

September 2007

September 2008

End of MAP as 
per Decision 
No 1776/2005/EC

Start of CIP as 
per Decision 
No1639/2006/EC

CIP FMA signed 
between the EC 
and the EIF

1st guarantee 
agreement  
between the 
EIF and a FI

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33.  

34.  

35.  

T h e   a v e r a g e   p e r i o d   f r o m   t h e   r e c e i p t   o f   t h e   C I P   a p p l i c a t i o n 
from an intermediar y up to the signature of the agreement was 
ne ar l y  1 1  mo nt hs 31.   M ore over,  the  timeframe  for  th e   a pplic a -
tio n p ro cess  wa s co nsidered to be un re as on able  by  ei g ht  out 
of 21 respondents to the Cour t ’s questionnaire 32. This delay in 
the selection process was mainly caused by the need to resolve 
tech n ical  is s ues  raised  by   the  E I F  before  t he   i mple me nt ati on 
o f   t h e   S M E G   f a c i l i t y,   s u c h   a s   a gre e i n g   o n   a   d e f i n i t i o n   o f   a n d 
measur ing the additionalit y of the loan guarantees (see para -
graph 84). Altogether, this led to a significant time gap in the 
tra nsit ion  o f t he  s ucces s ive programm es.

31  Calculated on the basis of 
the nine intermediaries visited, 

the average number of days 

for processing a successful 

application under CIP was 323. 

32  Based on the questionnaire 
(Q6) sent to all FIs who applied 

under CIP. 

33  The first guarantee 
agreements under the CIP were 

signed in September 2008.

TO 	 P R E S E R V E 	T H E 	 CO N T I N U I T Y 	 O F 	T H E 	 S U P P O R T	 	
A 	‘ R E T R O AC T I V I T Y 	 C L AU S E ’	WA S 	 I N T R O D U C E D

T h e   c o n t i n u i t y   o f   t h e   s u p p o r t   i s   i m p o r t a n t   fo r   t h e   f i n a n c i a l 
inter mediar ies as some introduced specific loan produc ts tai-
lored to the needs of the SMEG facilit y. The interruption of EU 
suppor t could cause higher losses to the financial intermediar-
ies if  th e pro duc t was  maintain ed  wit h out  t he  E U g uarante e.  

The ‘retroac tivit y clause’ was introduced with the aim of mini-
mising the time gap bet ween the t wo successive programmes 
a n d   p r e s e r v i n g   c o n t i n u i t y   b e t w e e n   t h e   M A P   a n d   C I P   p r o -
g r a m m e s .   T h i s   c l a u s e   e n a b l e d   t h e   f i n a n c i a l   i n t e r m e d i a r i e s 
to  ret roac tivel y  inc l ude  loan s  to  be  s uppor te d  by   t he   faci li t y 
which they had entered into bet ween the end of the availabil-
it y period under MAP and the date on which their CIP guaran-
tee a greeme nt  was  s igned. 

36.   A s   a   r e s u l t ,   t h e   e q u a l   t r e a t m e n t   o f   f i n a n c i a l   i n t e r m e d i a r i e s 
wa s n ot  ensu red s ince the finan cial  inter me di ar i es  wh ich  h ad 
par t icip ated in  t he MA P b en efite d f rom f avourabl e t reat me nt 
t h r o u g h   t h e   r e t r o a c t i v e   i n c l u s i o n   o f   l o a n s .   L o a n s   c o u l d   b e 
retro ac t ively  incl u ded as from S epte mbe r  2 0 0 7 ,  w he re as n ew 
f i n a n c i a l   i n t e r m e d i a r i e s   c o u l d   o n l y   i n c l u d e   l o a n s   o n c e   t h e i r 
gu ara nte e agre ement w it h th e E IF 33 h ad been sign ed.

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37.   Although the retroac tivit y clause was designed to resolve the 
financial intermediaries’ funding gap bet ween MAP and CIP, it 
cou l d no t  al ways  p revent a dis rupt ion  of  E U s uppor t to S ME s. 
T h i s   w a s   t h e   c a s e   fo r   t w o   o f   t h e   n i n e   f i n a n c i a l   i n t e r m e d i a r -
ies visite d fo r w hic h t he availabil it y  per iod  un de r  MAP  en d ed 
b e fo r e   t h e   s t a r t   o f   t h e   C I P   a v a i l a b i l i t y   p e r i o d   ( a   g a p   o f   fo u r 
mo nt hs). 

34  In accordance with 
Article 53 of Council Regulation 

(EC, Euratom) No 1605/2002.

A P P R O P R I AT E 	 M A N AG E M E N T 	 F R A M E W O R K 	 E S TA B L I S H E D	
TO 	 O P E R AT E 	T H E 	 S M E G 	 FAC I L I T Y	

38.  

T h e   S M E G   f a c i l i t y   o p e r a t e s   u n d e r   t h e   j o i n t   m a n a g e m e n t   o f 
the   Commiss io n   and  t he  EIF 34. To  en sure   a  succe ssful  delega-
t i o n ,   t h e   FMA   a n d   t h e   re l a te d   o p e r a t i o n a l   g u i d e l i n e s   s h o u l d 
in cl ud e:

 ο a   d e f i n i t i o n   o f   t h e   a c t i o n   to   b e   i m p l e m e n te d,   s u c h   a s   t h e 
specific objec tives per window (see Box 1 for a description 
o f t he w indows) ;

 ο t h e   m a n a g e m e n t   s t r u c t u re   fo r   t h e   i m p l e m e n t a t i o n   o f   t h e 

t ask s;  and

 ο the setting up of an adequate fee struc ture for the ser vices 

p rovid ed by t he E IF.

39.   Ar t icl e 3  of  th e FMA  stip u l ates  t he  t ask s t h e E I F ha s to i mple -

ment  (se e B ox   2): 

B O X 	 2

E I F 	 M A I N 	TA S K S 	 F O R 	 M A N AG I N G 	T H E 	 S M E G 	 FAC I L I T Y

 ο Identification, evaluation and selection of financial intermediaries

 ο Determination of, and agreement with, the financial intermediaries on the nature and detailed 

conditions of the EU guarantees

 ο Decisions to commit funds

 ο Execution, management and termination of the EU guarantees (including reporting and moni-

toring)

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40.	 Fo r   e a c h   S M E G   w i n d o w,   o p e r a t i o n a l   g u i d e l i n e s 3 5  w e r e   d e -
v e l o p e d   d e t a i l i n g   t h e   s p e c i f i c   p u r p o s e,   t h e   s e l e c t i o n   o f   t h e 
i n te r m e d i a r i e s,   t h e   e l i gi b i l i t y   c r i t e r i a ,   t h e   E U   g u a r a n te e   a n d 
t h e   m o d u s   o p e r a n d i .   T h e   C o m m i s s i o n   i s s u e d  ‘ G u i d a n c e   o n 
e n h a n c e d   a c c e s s   t o   f i n a n c e’  o n   2 9   O c t o b e r   2 0 0 7   t o   s u p p l e -
ment these operational guidelines, in par ticular the provisions 
o f   t h e   FMA   o n   e s t a b l i s h i n g   t h e   p a r a m e te r s   o f   t h e   g u a r a n t e e 
agreem ent. 

35  Fiduciary and Management 
Agreement, Annexes 1A to 1D.

41.	 Th e   m a n a g e m e n t   s t r u c t u re   e s t a b l i s h e d   fo r   t h e   S M E G   f a c i l i t y 
was appropriate as it improved the operational guidelines and 
the other provisions for the implementation of the tasks com-
pare d  wit h  th os e  un der  t he  MAP,   s in ce   th ey   cove r   all   t as ks  to 
be  car r ied o ut  in su ffic ient  d etail.   

42.	 T h e   fe e s   t o   b e   p a i d   t o   t h e   E I F   s h o u l d   b e   c a l c u l a t e d   s o   a s   t o 

tak e into  acco unt:

 ο p er fo r mance in ac hieving spec ifi c  targ ets ;

 ο the geographical distribution in the eligible countries; and

 ο t he de gree  o f novelt y and  comp lexit y of  t h e gu arante e in-

st ru ment.

43.	 The EIF fee scheme has been improved under CIP compared to 

MAP  since:

 ο t h e   fe e   s t r u c t u re   h a s   b e e n   s p l i t   i nto   fo u r   d i s t i n c t i ve   co m -
ponents better reflec ting the associated work load for each 
t ask ; a nd 

 ο the fee entitlement is triggered by the achievement of spe -

cif ic re sul t s (se e  Ta bl e 3).

TA B L E 	 3

O V E R V I E W 	 O F 	T H E 	 F O U R 	 I N C E N T I V E S 	 F E E S 	T H AT 	 CO N S T I T U T E 	 E I F	
R E M U N E R AT I O N

Type of incentive fee

To mainly encourage

Start-up Fee

Signature Fee

Implementation Fee

Monitoring Fee

Setting-up the programme within 12 months

Broad geographical coverage of the programme and use of specific windows

Additional volume achieved and daily operations

Assurance of sound financial management

Source: Annex 13 of the Fiduciary and Management Agreement.

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44.  

T h e   E I F  ‘s i g n a t u r e   f e e’  g i v e s   a   s p e c i f i c   b o n u s   f o r   w i d e   g e o -
graphic coverage of intermediaries. Fur thermore, fees are paid 
for  t he  p ar t icip atio n  of   inter me di ar ie s  in   count r i es   t hat   we re 
n o t   cove re d   b e fo re   a n d   a l s o   fo r   n e w   i n te r m e d i a r i e s   w h o   d i d 
not  p ar t ic ip ate u nd er the p revious  programm es. 

45.   D e s p i t e   t h e   i n c e n t i v e   f e e   f o r   u s i n g   s p e c i f i c   w i n d o w s ,   t h e 
 e q u i t y   a n d   q u a s i - e q u i t y   g u a r a n t e e s   a n d   s e c u r i t i s a t i o n   w i n -
d o w s   h a d   n o t   b e e n   u t i l i s e d   a s   a t   3 1   D e c e m b e r   2 0 0 9 .  T h i s   i s 
p a r t l y   d u e   to   t h e   f i n a n c i a l   c r i s i s,   w h i c h   n e g at i ve l y   i m p a c te d 
the  se cur it isatio n mar ket as a wh ole.

S E L E C T I O N 	 O F 	 F I N A N C I A L 	 I N T E R M E D I A R I E S

46.  

The audit assessed the selec tion process in respec t of the fol-
lowin g:

 ο whether the framewor k guiding the EIF on the selec tion of 
financial intermediaries was complete and ensured fair and 
t ran sp arent sel ec tio n; 

 ο whether the agreement parameters, determining the extent 

o f t he E U’s inter ventio n,  had bee n  co r rec tl y  se t;  an d

 ο w h e t h e r   p o l i c y   o b j e c t i v e s   h a d   b e e n   c o r r e c t l y   t r a n s l a t e d 

into t he  g ua rantee agreem ents.

W E L L - D E S I G N E D 	 S E L E C T I O N 	 F R A M E W O R K

47.  

The appraisal process should apply common standards to eval-
uating financial intermediaries, so as to ensure fair, struc tured 
and transparent selec tion. The EIF and the Commission should 
create  and   ap ply   minimu m  s tan dards  for   th e   s e lec t ion   of  po -
tential  inte r mediar ies. 

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48.  

The Commission empowered the EIF 36 to selec t intermediaries 
by   a p p l y i n g   t h e   s e l e c t i o n   c r i te r i a   a n d   p ro c e s s   s e t   o u t   i n   t h e 
re l e v a nt   g u a ra nte e   p o l i c i e s 3 7.  Th e   g u a ra nte e   p o l i c i e s   f u r t h e r 
state  th at  t he inter mediar ies are to be s ele c ted  in  con for m it y 
with best prac tice. An over view of the SMEG selec tion process 
car r ie d o ut  by t he EIF  is p rovided  i n B ox  3.

36  Fiduciary and Management 
Agreement, Article 3.1.

37  The Fiduciary and 
Management Agreement 

contains four guarantee policies 

49.  

 Wh en  definin g th e facil it y ’s  m anag em e nt  fram e wor k ,  t he  fo l -
lowing criteria for selec ting potential financial intermediaries 
we re l aid down  in the FMA 38:

 ο fin ancial   st anding   and  operatio nal   ca pa bilit y  of   t he   inte r-
me diar y  and   its  ab il it y   to  manag e   r i sk  and  to  co mply   wi th 
t he te r ms  an d conditio ns  of th e  SM E G f aci lit y ;

 ο w h e t h e r   t h e   i n t e r m e d i a r y   g u a r a n t e e s   d e b t   a n d / o r   m i c ro -
c r e d i t   f i n a n c i n g   p r o v i d e d   b y   a   w i d e   r a n g e   o f   l e n d e r s   t o 
SME s;

 ο g eo grap hic  coverag e (l o an wind ow  on l y) ;

 ο p o s s i b i l i t y   o f   p r o v i d i n g   m e n t o r i n g   a n d   b u s i n e s s   s u p p o r t 

(m ic roc redit  w indow  on l y) ; and

 ο a c c e p t a n c e   o f   t h e  ‘ E n h a n c e d   a c c e s s   t o   f i n a n c e’  c r i t e r i o n 

(s ee p aragraph  54 ).

relating to the four specific 

windows of the facility. The 

guarantee policies set out in 

specific terms the purpose 

of the underlying window, 

the selection process for 

intermediaries, the eligibility 

criteria, the modus operandi 

as regards enhanced access 

to finance, the reporting, the 

monitoring and audit, the 

promotion and the visibility.

38  Criteria corresponding to the 
loan and microcredit windows. 

The selection criteria relating 

to the equity and securitisation 

windows were not examined as 

these windows were not used 

until 31 December 2009.

B O X 	 3

T H E 	 E I F ’S 	 S E L E C T I O N 	 P R O C E S S 	 F O R 	 I N T E R M E D I A R I E S

 ο Analysis of intermediaries’ applications following an open call procedure

 ο Pre-selection of the applications — standardised check on formal requirements

 ο Due diligence process (including setting of guarantee parameters)

 ο Independent opinion of the EIF’s Risk Management Department

 ο Assessment by the EIF’s Compliance Department

 ο Approval by the EIF Board of Directors and by the European Commission (Director ECFIN — L)

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39  ‘‘Guidance on enhanced 
access to finance’’, 25 October 

2007. 

40  The guarantee cap rate is a 
pre-agreed rate at which the 

EIF’s liability is capped under 

a guarantee agreement. The 

amount of the EIF’s liability 

under a guarantee agreement 

(guarantee cap) can be 

calculated by multiplying 

the actual portfolio volume 

by the guarantee rate and 

the guarantee cap rate. For 

example, portfolio volume = 

1 000; guarantee rate = 50 %; 

guarantee cap rate = 10 % 

Thus, maximum EIF liability 

(guarantee cap) =  

1 000 x 50 % x 10 % = 50.

50.	 The  Co ur t  co nsiders   th e  c r iter ia   for   t h e  se le c ti on  of   f in an cial 
i n t e r m e d i a r i e s   t o   b e   i n   l i n e   w i t h   p r a c t i c e s   i n   c o m p a r a b l e   f i -
nancial institutions. However, neither the Commission nor the 
E I F   s e t   s c o r i n g   s t a n d a r d s   a g a i n s t   w h i c h   t h e   i n t e r m e d i a r i e s’ 
a p p l i c a t i o n s   c o u l d   h ave   b e e n   a s s e s s e d,   r a t e d   a n d   c o m p a re d 
a c c o rd i n g   t o   t h e i r   d e g re e   o f   c o m p l i a n c e   w i t h   t h o s e   c r i t e r i a . 
The  la ck o f precis ion  reg arding t h e s e lec tion  c r ite r i a allowe d 
the EIF to exercise a high level of discretion in evaluating the 
app l ic at io ns. 

I N S U F F I C I E N T 	 R E CO R D S 	 J U S T I F Y I N G 	T H E 	 AG R E E M E N T	
PA R A M E T E R S	

51.	 T h e   t w o   m a i n   p a r a m e t e r s   o f   t h e   g u a r a n t e e   a g r e e m e n t s   a r e 
t h e   re fe re n ce   vo l u m e   a n d   t h e   g u a r a n te e   c a p   r a t e.  Th e   re fe r -
e n c e   vo l u m e   re p re s e n t s   t h e   a m o u n t   o f   g u a r a n t e e s   o r   f i n a n -
cing   w hich  the   inter mediar y   coul d ‘re ason ably  b e  e xp ec ted  to 
achieve […] in the absence of the EU guarantee ’ 39. The reference 
vo l um e f ur ther  ser ves  as  a b asis  fo r  th e  com put at ion  of ad di -
tion al  a gre em ent   p arameters. Th e  g uarante e   c ap  rate 40  refer s 
t o   t h e   m a x i m u m   a m o u n t   o f   l o s s e s   fo r   w h i c h   t h e   E I F   i s   l i a b l e 
under a guarantee agreement. Both parameters are key fac tors 
as  the y w ill de ter m in e:

 ο whether the EU inter vention is additional to the guarantee 
scheme’s existing level of ac tivit y or simply replaces it; and

 ο t h e   m a x i m u m   l e v e l   o f   b u d g e t a r y   e x p o s u r e   t h e   E U   i s   e x -

p ec te d to face under a s pe cific  agre e ment.

52.	

I n   a c c o r d a n c e   w i t h   t h e   F M A   a n d   w i t h   t h e  ‘ G u i d a n c e   o n   e n -
hanced access to finance’, the volumes, including the reference 
vo l um e, are deter mined on the basi s  o f  t h e E IF’s  pro fes si on al 
judgement, based on past budgets and loss rates or forecasts 
(especially for public guarantee schemes) and considering the 
mar ke t  co ndit ions  and th eir evo lutio n  over  t im e. 

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53.  

 Weak nesses were found in the EIF’s documentation relating to 
the setting of the agreement parameters, including the refer-
ence  vo l ume   an d  th e  c ap   rate.  O n ly   a  summ ar y   of   t h e  re s ul ts 
o f   t h e   d u e - d i l i g e n ce   s te p   i s   i n c l u d e d   i n   t h e   E I F ’s   re q u e s t   fo r 
t h e   B o a rd   o f   D i re c t o r s’  a p p rov a l.  W h e n   s e t t i n g   t h e s e   p a r a m-
eters, the EIF takes as a basis the infor mation provided by the 
f i n a n c i a l   i n t e r m e d i a r y.   N o   e v i d e n c e   w a s   f o u n d   t h a t   t h e   E I F 
ve r ified  this infor mation.

41  CIP Decision, Article 19.

P O L I C Y 	 O B J E C T I V E S 	 N OT 	 F U L LY 	 D E F I N E D 	 I N 	T H E	
G UA R A N T E E 	 AG R E E M E N T S

54.  

Eac h g u arantee agreement  sh ould  co nt r i bute  to  th e  ac hi eve -
m e n t   o f   t h e   p o l i c y   o b j e c t i v e s   b y   s p e c i f y i n g   e x a c t l y   w h a t 
s h o u l d   b e   a c h i e ve d.  Th e   g e n e r a l   u n d e r t a k i n g s   a p p l i c a b l e   t o 
ever y intermediar y in the guarantee agreements include prin -
ciples of enhanced access to finance. These pr inciples are de -
r i ve d   f ro m   t h e   b ro a d e r   o b j e c t i ve s   s e t   o u t   i n   t h e   l e g a l   b a s i s 4 1 
a n d   i n   t h e   F M A   a n d   r e f l e c t   t h e s e   o b j e c t i v e s   a p p r o p r i a t e l y. 
B ox  4 p rese nt s t he  p r incip les  applicable  to t he  loan  wi n dow.

B O X 	 4

P R I N C I P L E S 	 O F 	 E N H A N C E D 	 ACC E S S 	TO 	 F I N A N C E 	 A S 	 P E R 	 G UA R A N T E E	
AG R E E M E N T 	 ( LO A N 	W I N D O W )

The purpose of this agreement is the provision of a guarantee by the ElF to the intermediary in order 
to partially cover the intermediary’s portfolio risk with a view to:

(i)  enhancing SMEs' access to finance;

(ii)  reducing the particular difficulties that SMEs face in accessing finance, either due to the per-
ceived higher risk associated with investment in certain knowledge-related activities such as 
technological development, innovation and technology transfer, or due to the lack of sufficient 
collateral; and

(iii)  stimulating job creation by supporting SMEs with growth and employment creation.

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55.	 Besides these general provisions, specific financial intermedi-
ar y guarantee terms may include ‘fur ther qualitative under tak-
ings in respec t of enhanced access to finance’. However, some 
of the intermediar y guarantee terms are inconsistent with the 
o b j e c t i ve s   o f   t h e   C I P   o r   p ro v i d e   l i t t l e   o p e r a t i o n a l   g u i d a n c e. 
Fo r ins tance :	

 ο i n   re s p e c t   o f   t h e   l a c k   o f   co l l ate ra l   a s p e c t   i t   wa s   fo u n d   fo r 
o n e   i n t e r m e d i a r y   t h a t  ‘i n   a d d i t i o n   t o   c o m p l y i n g   w i t h   a ny 
rel evant  p rovisio n o f t his agreeme nt [ …] th e  i nte r me di ar y 
u nder ta kes […] to  requ ire a low collate ral le vel i n  re lati on 
to intermediar y transac tions’. In this case the specific terms 
of the agreement translate the general conditions relating 
t o   t h e   l a c k   o f   c o l l a t e r a l   i n t o   r e d u c e d   c o l l a t e r a l   r e q u i r e -
m e n t s .   H o w e v e r,   t h i s   a l l o w s   d e   f a c t o   a l l   S M E s   t o   b e n e f i t 
from the reduced collateral requirements and does not en -
sure that only SMEs effec tively lack ing collateral, and thus 
u n a b l e   t o   b o r r o w   u n d e r   u s u a l   c o m m e r c i a l   t e r m s ,   b e n e f i t 
fro m  the  f acil it y ;  an d

 ο t h e   s p e c i f i c   t e r m s   o f   t h e   a g r e e m e n t s   l e a v e   b r o a d   d i s c r e -
tion in the matter of interpretation of innovation. The same 
guarantee agreement stated, without providing any fur ther 
explanation, ‘[…] the intermediar y under takes […] to enter 
into inter mediar y transac tions with newly created SMEs or 
SME s invol ved in  innovative  proj e c t s’.

P E R F O R M A N C E 	 M O N I TO R I N G 	 A N D 	 R E P O R T I N G

56.	 Effec tive monitor ing and repor ting requires relevant, reliable 
an d t ime ly info r mat ion  on  the s tat us  of  th e poli c y i mple me n-
tation and the ex tent to which the polic y objec tives are being 
met. 

57.   Per for mance monitor ing of the SMEG facilit y is car r ied out by 
both the Commission and the EIF (see A nnex II ). The infor ma -
tion flows from the SMEs (i.e. final beneficiar ies) through one 
o r   m o r e   l a y e r s   ( i n   t h e   c a s e   o f   c o -   o r   c o u n t e r - g u a r a n t e e s )   o f 
financ ial  inter m ediar ies  to t he E IF an d fi n ally  to th e  Commi s-
sion. Fin ancial  inter mediar ies  repor t to th e E IF on  a quar te r ly 
bas is  on  the  SME G  facil it y.   Bas ed  on   th i s  i nfor mat ion ,   th e  E IF 
p re p a re s   q u a r te r l y   co n s o l i d ate d   re p o r t s   fo r   t h e   Co m m i s s i o n , 
which then uses these repor ts for the annual implementation 
rep or t s o n the E I P and on  t he CI P. 

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58.  

 T h e   C o u r t   e x a m i n e d   t h e   f o l l o w i n g   a s p e c t s   o f   p e r f o r m a n c e 
mo nitor ing an d rep or ting :

42  ‘Evaluation of the indicators of 
the EIP’, February 2010.

 ο whether the Commission established a balanced set of per -
formance indicators to reliably measure the status of polic y 
imp l em ent atio n;  and

 ο w het her  t he   rep or ting  requireme nts   a re  c le ar   an d   re aso n-

ab l e.

59.  

60.  

P E R F O R M A N C E 	 I N D I C ATO R S 	W E R E 	 E S TA B L I S H E D,	 B U T	
S H O U L D 	 B E 	 M O R E 	 S TA B L E 	 A N D 	 B A L A N C E D

T h e   p r e r e q u i s i t e   f o r   e f f e c t i v e   m o n i t o r i n g   ( i . e .   t o   m e a s u r e 
p r o g r e s s   o f   t h e   i m p l e m e n t a t i o n   o f   t h e   S M E G   f a c i l i t y )   i s   t h e 
d e f i n i t i o n   o f   a   s e t   o f   c l e a r   i n d i c ato r s   a n d   a s s o c i ate d   t a rg e t s. 
I n d i c a t o r s   s h o u l d   b e   r e l a t i v e l y   s t a b l e   s o   t h a t   c h a n g e s   o v e r 
time  ca n b e o b ser ved and compare d. 

T h e   S M E G   p e r f o r m a n c e   i n d i c a t o r s   s h o u l d   c o n t r i b u t e   t o   a n 
a s s e s s m e n t   o f   t h e   a c h i e ve m e n t   o f   t h e   p r o g r a m m e’s   s p e c i f i c 
o b j e c t i ve s   a s   l a i d   d ow n   i n   t h e   l e g a l   b a s i s   a n d   t h e   g l o b a l   o b -
jec tives of the European Union polic y from which these objec-
tive s are de r ive d. 

61.  

For SMEG the Commission established six indicators (see  Table 4). 

62.   O f t he fo u r ind icators ( numbers  2 , 3,  5 and  6 ) in clude d in t he 
ex  a nte eval uat ion and in the E IP  2 009  Wo r k  Program me, on ly 
t wo  were c ar r ied  over (n um bers  2  an d 3 )  to th e  Commi ss ion’s 
EIP I mp l eme nt atio n R ep or t. I n  th e  E IP  2 0 1 0  Wor k Programm e, 
two initial indicators were dropped (numbers 5 and 6) and two 
new indicators were added (numbers 1 and 4). These changes, 
made in 2010, were a reac tion to a study on the evaluation of 
the  indic ators 42.

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TA B L E 	 4

S M E G 	 I N D I C ATO R S 	 E S TA B L I S H E D 	 BY 	T H E 	 CO M M I S S I O N

SMEG indicators

EC commitment to 
debt finance and 
total financing 
guaranteed

The number of 
jobs created or 
maintained in 
SMEs receiving new 
financing

The number of 
SMEs receiving new 
financing

Number of SMEs 
supported, 
classified by sector 
of activity 

The change 
in the volume 
of investment 
financing

Total net 
disbursement

1

2

3

4

5

6

Indicators 
foreseen in the 
ex ante impact 
assessment1

Indicators in 
the EIP Work 
Programme 2009

n/a

n/a

315 7502

Yes, but no target 
value was assigned

Indicators 
reported 
in the EIP 
Implementation 
Report 2009

111,8 million euro 
(cap amount) guar-
anteeing an actual 
loan volume of  
2 771 million euro

Number of em-
ployees at inclusion 
date: 151 475

Indicators in 
the EIP Work 
Programme 2010

Type of indicator

Yes, but no target 
value was assigned

Output

Yes, but no target 
value was assigned

Impact

315 750

Yes, but no target 
value was assigned

47 791

Yes, but no target 
value was assigned

n/a

n/a

n/a3

Yes, but no target 
value was assigned

Yes, but no target 
value was assigned

Yes, but no target 
value was assigned

Not reported.

Yes, but no target 
value was assigned

Yes, but no target 
value was assigned

Not reported.

n/a

n/a

Output

Output

Result

Output

1  Annex to the Proposal for a Decision of the European Parliament and of the Council establishing a Competitiveness and 
Innovation Framework Programme (2007–2013), SEC(2005) 433.

2  One job created or maintained for each SME receiving new financing. The Commission considers that as the data of the 
Growth and Employment initiative indicate that beneficiary SMEs created on average 1.2 jobs, a more conservative ratio should 

be used to account for the fact that microcredit guarantee corresponds to more than 20 % of all companies reached by SMEG and 

thus, fewer jobs are expected to be created by these companies, bringing down the overall average.

3  The information can be found in the EIF quarterly reports only.

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43  To measure results and 
impacts, several indicators 

were suggested, for example 

contribution to the performance 

of beneficiaries (growth of sales, 

jobs created/maintained, new 

products or services developed) 

or total (or average) turnover 

growth of SMEs financed. 

44  For example, an intermediary 
in Slovenia obtained the 

employment data from the 

national social security and 

insurance institution.

45  An intermediary in Spain 
collects the information annually 

from the regional guarantee 

societies on a sample basis.

46  Another intermediary in 
Spain calculates the change 

in employment by comparing 

expectations at the time of the 

loan request compared with 

actual employment at the time 

of calculation.

47  For example, an intermediary 
in Italy collects the employment 

data only in the initial guarantee 

application and does not update 

those at later stage.

63.	

In the ex ante evaluation only two indicators (numbers 2 and 3) 
h a d   t a r g e t   v a l u e s   a s s i g n e d   t o   t h e m .   T h e   E I P   2 0 0 9   a n d   2 0 1 0 
Wo r k   P r o g r a m m e s   d i d   n o t   s e t   t a r g e t s   f o r   t h e   i n d i c a t o r s   t o 
achieve in the respec tive per iod. I n the absence of target val -
ues, it is difficult to assess whether the programme is develop -
in g as  expe c ted.

64.	 Even though the Commission tried to create a balanced set of 
m e a s u r a b l e   i n d i c a t o r s ,   i n c l u d i n g   o u t p u t ,   i m p a c t   a n d   r e s u l t 
i n d i c a t o r s,   t h e   o n l y   re s u l t   i n d i c a t o r   ( n u m b e r   5 )   w a s   n o t   c a r -
ried over and was finally dropped by the Commission. The only 
i m p a c t   i n d i c a t o r   ( n u m b e r   2 )   i s   p r o b l e m a t i c   ( s e e   p a r a g r a p h s 
67 and 68) and all remaining indicators are output indicators. 
T h u s ,   t h e   i n d i c a t o r s   h a v e   b e c o m e   m o r e   o f   a n   i n s t r u m e n t   o f 
operational management than an indicator to measure the im -
pac t and the success of the programme. I t is difficult to str ike 
t h e   r i g h t   b a l a n c e   b e t we e n   c o l l e c t i n g   t h e   d a t a   e c o n o m i c a l l y 
and monitoring per formance effec tively. The evaluators of the 
EIP indicators suggested a set of balanced indicators including 
dat a co l le c tio n m etho ds and t im in g 43. 

65.	

I f meaningful conclusions as to the achievements of the SMEG 
p ro gra m m e   a re   to   b e   d raw n ,   i t   i s   e s s e nt i a l   t h at   t h e   m o n i to r-
i n g   d a t a   p ro v i d e d   b y   t h e   f i n a n c i a l   i n t e r m e d i a r i e s   s h o u l d   b e 
rel ia bl e, i.e. acc u rate and co mple te. 

66.	 T h e   f i n a n c i a l   i n t e r m e d i a r i e s   v i s i t e d   b y   t h e   Co u r t   h a d   a l l   e s-
tablished procedures for collec ting the data necessar y for re -
p o r t i n g   t o   t h e   E I F.  T h e   q u a l i t y   o f   t h e   re p o r t i n g   p ro c e s s e s   a t 
i n t e r m e d i a r y   l e ve l   i s   c h e c k e d   d u r i n g   t h e   o n - s i t e   m o n i t o r i n g 
vis it s by  the EI F. 

67.  

The  co l le c t io n o f d at a rel ated to  ‘ t he  numbe r  of  jo bs c reate d ’ 
in dicato r p os es diff ic u l ties for some  f in an c i al i nte r me d iar ie s. 
I n   s o m e   c o u n t r i e s   t h e   d a t a   a re   o b t a i n e d   f ro m   g ove r n m e n t a l 
i n s t i t u t i o n s 4 4,   s o m e   f i n a n c i a l   i n t e r m e d i a r i e s   c o l l e c t e d   t h e m 
on a sam pl e b asis 45,  o t hers made c alculations  us in g expec ted 
values 46 or the financial intermediaries did not update employ-
ment data annually as it would be too burdensome 47. Since the 
q u a l i t y   o f   e m p l o y m e n t   d a t a   v a r i e s   f r o m   c o u n t r y   t o   c o u n t r y, 
a d d i n g   t h e m   u p   r a i s e s   c o n c e r n s   a s   t o   t h e   r e l i a b i l i t y   o f   t h e 
val u e of th e indic ato r co ncer n in g  t h e n um ber  of  j obs cre ated 
(n um b er 2).

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48  ‘Manual for compiling reports 
under the SME guarantee facility 

2007–13 (CIP)’ — EIF.

49  Based on a questionnaire 
(Q14), 36 out of 41 financial 

intermediaries who answered 

this question agreed that 

the operational instructions 

provided by the EIF were clear.

50  Based on a questionnaire 
(Q15), 40 out of 41 financial 

intermediaries who answered 

this question agreed that the 

EIF is always willing to give 

explanations during the lifetime 

of the guarantee.

51  Based on a questionnaire 
(Q16), eight out of 42 financial 

intermediaries who answered 

this question did not agree that 

the reporting requirements were 

reasonable.

68.   A n o t h e r   p r o b l e m   w i t h   t h i s   i n d i c a t o r   i s   t h a t   t h e   v a l u e s   a r e 
taken from the number of persons employed by the suppor ted 
SMEs, which is not equivalent to the number of jobs created or 
m a i n t a i n e d   at   S M E s   re ce i v i n g   n e w   f i n a n c i n g.  Th e   n e w   f i n a n-
cing   receive d  by  an  SM E  is  n ot  th e   onl y  f ac tor   wh i ch  le ads   to 
m a i n t a i n i n g   o r   c re a t i n g   j o b s.  T h e r e   i s   n o   a n a l y s i s   a s   t o   h o w 
t h e   g u a r a n t e e d   l o a n   c o n t r i b u t e d   t o   m a i n t a i n i n g   o r   c re a t i n g 
job s. 

69.  

70.  

R E P O R T I N G 	 R E Q U I R E M E N T S 	 A R E 	 C L E A R 	 A N D	
R E A S O N A B L E 	 A N D 	 O N LY 	 S O M E 	 F I N A N C I A L	
I N T E R M E D I A R I E S 	 CO N S I D E R 	T H E M 	 A S 	 A 	 B U R D E N

Fin ancial  inter mediar ies  s ho uld h ave c le ar  repor ti ng  req ui re -
ments  in o rder to col l ec t t he data for  m oni tor i ng  an d re por t-
ing on the SMEG programme. Time and resources to obtain the 
re q u i re d   i n fo r m at i o n   fo r   t h e   i n d i c ato r s   s h o u l d   n o t   c re a te   a n 
unne ce ssa r y adm inistrat ive burde n . 

Fi n a n c i a l   i n t e r m e d i a r i e s   a re   re q u i re d   to   co l l e c t   v a r i o u s   d a t a 
o n   t h e   s u p p o r t e d   S M E s   a n d   r e p o r t   t o   t h e   E I F   o n   a   r e g u l a r 
 basis (see A nnex III). R epor ting requirements are listed in the 
guarantee agreement bet ween the EIF and the financial inter-
m e d i a r y.  To   t h i s   e n d,   c l e a r   g u i d e l i n e s 4 8  h a ve   b e e n   i s s u e d   b y 
t h e   E I F   t o   t h e   f i n a n c i a l   i n t e r m e d i a r i e s   a s   t o   h o w   t o   c o m p i l e 
the requested data. Corroborating this statement, 88 % of the 
f i n a n c i a l   i nte r m e d i a r i e s   a gre e d   t h at   t h e   o p e rat i o n a l   i n s t r u c -
t i o n s   p ro v i d e d   b y   t h e   E I F   we re   c l e a r 4 9.   Fu r t h e r m o re,   9 8   %   o f 
the  f inancial  inter mediar ies s tated  th at t h e E IF i s always wi ll -
i n g   t o   p r o v i d e   f u r t h e r   i n fo r m a t i o n   t o   c l a r i f y   o p e r a t i o n a l   i s-
sue s 50. 

71.  

The results of the Cour t ’s questionnaire also showed that only 
2 0   %   o f   f i n a n c i a l   i n t e r m e d i a r i e s   p a r t i c i p a t i n g   u n d e r   t h e   C I P 
a n d / o r   t h e   M A P   f i n d   t h e   r e p o r t i n g   r e q u i r e m e n t s   u n r e a s o n -
abl e 51. 

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72.	

In cases where data collection through financial intermedi  aries 
pose s a l ot  o f dif ficul ties (fo r ex ample,  e mploy me nt d ata) ,  al-
ter nat ive me thods  of  co ll e c ting  in for mat ion  could  h ave be e n 
m o re   a p p ro p r i ate.   B o t h   re p o r t s,  ‘ Eva l u at i o n   o f   t h e   i n d i c ato r s 
o f   t h e   E I P ’  a n d   t h e  ‘ I n te r i m   e v a l u a t i o n   o f   t h e   E I P ’,   s u g g e s te d 
usin g  sur veys in the contex t of an  e val uat ion .

AC H I E V E M E N T S 	 O F 	T H E 	 S M E G 	 FAC I L I T Y

73.	 This section describes the outputs delivered by the SMEG facil-
it y. The outputs are analysed in relation to the facilit y ’s objec-
t i ve s.   Fu r t h e r m o re,   t h e   Eu ro p e a n   a d d e d   v a l u e   o f   t h e   f a c i l i t y 
is examined, in par ticular whether the facilit y ’s objec tives are 
b e t te r   a c h i e ve d   by   i m p l e m e nt at i o n   at   Co m m u n i t y   l e ve l   t h a n 
at  nat io nal o r region al l evel.

O U T P U T S 	 O F 	T H E 	 S M E G 	 FAC I L I T Y

74.	 Th e   C I P   f i n a n c i a l   i n s t r u m e n t s   s h o u l d  ‘i m p rove   ( … )   a c c e s s   t o 
f i n a n c e   fo r   t h e   s t a r t - u p   a n d   grow t h   o f   S M E s   a n d   i nve s t m e n t 
in  in novat ion  ac t ivit ies 52’.  M ore specific ally, t he S M EG fac i l it y 
und er C IP se t s out to: 

 ο reac h 315 750 SM Es 53;

 ο guarantee loans that finance SMEs’ innovative investments 54  
o r   a re   p ro v i d e d   t o   S M E s   l a c k i n g   s u f f i c i e n t   c o l l a t e r a l ;   a n d 
t herefo re

 ο en hance acce ss  to  f inance whe re  t h e  ma r k e t f ail s.

75.	 T h e   f o l l o w i n g   a n a l y s i s   w a s   b a s e d   o n   a   r e v i e w   o f   t h e   l o a n 
 sample selec ted by the Cour t 55. As regards investments in cer-
tain k nowledge -related ac tivities such as technological devel-
opment, innovation and technology transfer, reference is made 
to the OECD Oslo Manual for the measurement of scientific and 
techn o lo gic al  ac t iv it ies 56. 

52  CIP Decision, Article 10.

53  Annex to the Proposal for 
a Decision of the European 

Parliament and of the Council 

establishing a Competitiveness 

and Innovation Framework 

Programme (2007–13), 

SEC(2005) 433.

54  Relevant only for the loan 
window. CIP Decision,  

Article 19.2 refers to ‘investments 

in certain knowledge-related 

activities such as technological 

development, innovation and 

technology transfer’.

55  A sample of 181 loans was 
selected from the nine financial 

intermediaries visited. The 

number of loans chosen per 

intermediary reflecting the 

achieved guarantee volume and 

was limited to a range from 10 to 

45. 

56  ‘The OSLO Manual, Proposed 
guidelines for collecting and 

interpreting technological 

innovation data’, OECD, 1997, 

also referred to in recital 8 

preceeding the CIP Decision and 

in the European Commission’s 

2009 impact assessment 

guidelines — SEC(2009) 92.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

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T h e  o v e r a l l   T a r g e T  o f  r e a c h i n g 315 75 0 SMe S  i S 
a T T a i n a b l e

76.   All   financ ial  inter mediar ies  visited   cle ar l y  t arg ete d  S ME s   an d 
all had procedures in place to verify the SME status of the bor-
rower.

77.   As   reg ards   t he  overal l   t arg et  of  re ac h in g   3 1 5   7 5 0   S ME s 57,  t he 
Commission and the EIF made a successful effor t to overcome 
t h e   c o n s e q u e n c e s   o f   t h e   i n i t i a l   d e l a y   ( s e e   p a r a g r a p h   3 2 )   b y 
c o n c e n t r a t i n g   o n   t h e   l a r g e r   f i n a n c i a l   i n t e r m e d i a r i e s .   I n   t h e 
t h r e e   y e a r s   s i n c e   t h e   C I P   c a m e   i n   f o r c e ,   t h e   E I F   h a s   s i g n e d 
25 deals with 21 financial inter mediar ies (see Table 2 ). At the 
end  o f  20 09 ,  the  tot al   g uarantee   c a p  a mount 58  of  th ese  guar-
a n t e e   a g r e e m e n t s   s t o o d   a t   1 9 1 , 1   m i l l i o n   e u r o,   r e p r e s e n t i n g 
37 ,5   %   o f  t he  overal l   b udg et  for   t he   S ME G   f ac i lit y.  The   f in an -
cial intermediaries had provided loans to almost 59 000 SMEs, 
re p re s e nt i n g   1 9   %   o f   t h e   t a rg e t   n u m b e r   o f   S M E s.  Ta k i n g   i nto 
account the results from the MAP, the signed guarantee agree -
m e n t s   r e a c h   m o r e   t h a n   h a l f   o f   t h e   t a r g e t   n u m b e r   o f   S M E s 
(57,4 %) if the maximum por tfolio amount is reached for each 
of these agreements 59 (see Figure 3). Therefore, the progress in 
im p le me nt at io n is s ufficient to expe c t th at th e overall  ta rg e t 
of  reac hing  315 750 SMEs  will be  at tai n ed.

57  As provided in the CIP impact 
assessment, SEC(2005) 433.

58  The cap amount represents 
the ceiling of the costs for the 

EU budget and will materialise 

only if the financial intermediary 

reaches the maximum portfolio 

amount and realises the 

expected losses on the loan 

portfolio.

59  For instance under the MAP, 
only two out of 45 financial 

intermediaries reached less than 

90 % of the maximum portfolio 

amount. 

F I G U R E 	 3

O U T P U T S 	 O F 	T H E 	 S M E G 	 FAC I L I T Y 	 U N D E R 	 C I P 	 A S 	 AT 	T H E 	 E N D 	 O F 	2009

37,5 %

Total cap amount of the guarantees signed as a percentage of the overall budget for the SME Guarantee Facility

18,6 %

Number of SMEs already reached as a percentage of the overall target for the SME Guarantee facility

57,4 %

Number of SMEs that could be reached with the currently signed guarantee 
agreements as a percentage of the overall target for the SME Guarantee facility1

42,9 %

20 %

0 %

Time elapsed in percentage terms

40 %

60 %

80 %

100 %

1  Calculated  by the Court assuming the same average costs to the EU budget for reaching one SME as in the MAP programme 
(1 055 euro) and that the maximum portfolio amount is reached for all existing guarantee agreements.

Source: European Court of Auditors.

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37

T h e  f a c i l i T y   r e a c h e S SMe S  w h i c h  l a c k  c o l l a T e r a l; 
i n n o v a T i v e  p r o j e c T S   a r e   S c a r c e

78.	 The SMEG facilit y is designed to enhance access to debt fund-
ing for SMEs that have viable projec ts but are unable to secure 
a l o an f rom co mmercial  l en ders. S uc h a  si tuat ion  can occ ur  if 
an SME does not have sufficient collateral to fulfil the require -
m e n t s   o f   a   co m m e rc i a l   l e n d e r.   A l te r n a t i ve l y,   t h e   S M E   c a n   b e 
denied access to loan financing if the commercial lenders are 
not in a position to easily estimate the viability of the business 
proposition, as might be the case for innovative investments. 
The more novel the investment, the less likely it is that a loan 
wil l  b e granted.

79.	 Bas ed  o n  t he   re sp on ses  to  t he  Cour t ’s   ques ti onn ai re,   t h e  CIP 
financ ial  inter med iar ies  aimed to targ e t pr im ar i ly  S ME s  wi th-
ou t su ffic ient  co ll ateral, second ly  m icro ente r pr i se s  an d th e n 
sta r t-u p s.  The in novative SM Es repre se nt t he  c ateg or y  t hat i s 
l e a s t   t a rg e te d.  Wh i l e   9 0   %   o f   t h e   i nte r m e d i a r i e s   a gre e d   w i t h 
the statement that their CIP- guaranteed produc t was aimed at 
customers that did not have sufficient collateral, only approxi-
m a te l y   h a l f   o f   t h e   i n te r m e d i a r i e s   a gre e d   w i t h   t h e   s t a te m e n t 
t h a t   t h e i r   C I P- g u a r a n t e e d   p r o d u c t   w a s   a i m e d   a t   i n n o v a t i v e 
SM Es ( see Figu r e  4).

F I G U R E 	 4

S U R V E Y 	 O F 	 F I N A N C I A L 	 I N T E R M E D I A R I E S 	 — 	 S M E s	TA R G E T E D 	 BY 	T H E	
G UA R A N T E E / LO A N 	 P R O D U C T

                       Our CIP guaranteed product aims at customers that 
                 do not have sufficient collateral

Our CIP guaranteed product aims at micro enterprises

Our CIP guaranteed product aims at start-up SMEs

90 %

79 %

69 %

Our CIP guaranteed product aims at innovative SMEs

54 %

0 %

20 %

40 %

60 %

80 %

100 %

The CIP financial intemediaries had to indicate on a 5-point scale their level of agreement with these four statements. The percentage 

in the chart indicates the portion of the respondents that either agreed or strongly agreed with the statement. The number of 

responses provided to each of these questions slightly varied from 28 to 30 out of 31 financial intermediaries either participating or 

planning to participate in the CIP. 

Source: ECA questionnaire to the financial intermediaries.

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38

80.  

Th e   a n a l ys i s   o f   t h e   l o a n   s a m p l e   s h ows   t h a t   S M E s   w i t h   a   l a c k 
o f   c o l l a t e r a l   b e n e f i t e d   m o re   o f t e n   t h a n   S M E s   t h a t   we r e   c a r -
r yin g o ut  innovative inves t ment s.  O ut of th e  1 8 1  loa ns  i n  t he 
s a m p l e ,   7 7   l o a n s   ( 4 3   % )   w e r e   p r o v i d e d   t o   S M E s   t h a t   l a c k e d 
sufficient collateral to gain access to finance through existing 
commercial lending. Only 22 loans (12 %) were used to finance 
pro jec ts t hat  had inn ovat ive aspe c ts  (s e e Tab le  5) .

81.   Al t h o u g h   i n n ovat i ve   i nve s t m e nt s   we re   ra re,   t h e   l o a n   s a m p l e 
i n c l u d e d   s o m e   h i g h l y   i n n ovat i ve   i nve s t m e nt s.   H a l f   o f   t h e   i n -
novative projec ts (11 out of 22) were assessed as mar ket-new 
o r   w o r l d - n e w   t y p e s   o f   i n n o v a t i o n .   T h e s e   p r o j e c t s   a i m e d   a t 
c re at i n g   n e w   o r   s i gn i f i c a nt l y   i m p rove d   p ro d u c t s,   p ro d u c t i o n 
pro ces ses   o r  de liver y   meth ods   t hat   we re   ne w  at   l eas t  for   t he 
operating market of the enterprise. For an example of such an 
inves tm ent, se e B ox  5.  The re maining  inn ovative inves tm e nt s 
co u l d   b e   d e s c r i b e d   a s   a   n ove l t y   o n l y   fo r   t h e   e n te r p r i s e   co n -
ce r n e d,   a n d   we re   a l re a d y   b e i n g   i m p l e m e n te d   by   o t h e r   f i r m s 
that  were  dire c tl y co mp eting  w it h  th e  bor rower.

TA B L E 	 5

R E S U LT S 	 O F 	T H E 	 LO A N 	 A N A LYS I S 	 I N 	T E R M S 	 O F 	 N U M B E R 	 O F 	 LO A N S 	 A N D	
P E R C E N TAG E 	 O F 	 S A M P L E 	 S I Z E

SMEs that lack 
sufficient1 collateral

SMEs with sufficient 
collateral

Lack of collateral not 
demonstrated

Loans used to finance innovative 
investments

Loans used to finance projects with-
out significant innovative element

Total

7

4 %

70

39 %

77

43 %

12

7 %

69

38 %

81

45 %

3

2 %

20

11 %

23

13 %

Total

22

12 %

159

88 %

181

100 %

1 

In the cases where a financial intermediary defined the level of sufficient collateral or this level could be implicitly deduced, this 

was applied to determine the ‘sufficiency’ of the collateral. In the remaining cases, an SME was considered to possess sufficient 

collateral if the loan amount did not exceed 70 % of the value of realisable assets. In the latter category, other factors which 

increased the risk profile of the SME were also taken into account (e.g. loans to unemployed) and as a result these SMEs were 

considered as ‘SMEs that lack sufficient collateral’.

Source: European Court of Auditors.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

39

82.  

 However, for 23 loans no assessment could be made regarding 
the repor ted lack of collateral due to the absence of infor ma-
tio n at  the financial  inter mediar i e s. 

83.  

84.  

f i n a n c i a l  i n T e r M e d i a r i e S  S T r i v e  f o r  a d d i T i o n a l  l e n d i n g 
v o l u M e S,  b u T  M o r e   a T T e n T i o n  c o u l d  h a v e  b e e n  p a i d  T o 
d e a d w e i g h T

I n   g u a r a n t e e   s c h e m e s ,  ‘d e a d w e i g h t ’  o c c u r s   i f   t h e   b o r r o w e r 
could have obtained the loan from commercial lenders without 
public suppor t. In such situations, the effec ts, such as cre ation 
o f   j o b s ,   e c o n o m i c   o r   i n n o v a t i o n   a c t i v i t y,   w o u l d   h a v e   b e e n 
r e a l i s e d   a ny w a y.   Pu b l i c l y   s u p p o r t e d   g u a r a n t e e   s c h e m e s   a r e 
most effec tive when the financed investment would other wise 
not   have  be en  car r ied  o ut,  and  th e   d es ired   e f fec t s  would  n ot 
have b een  re alis ed. 

To ensure that the SMEG facilit y provides additional access to 
f i n a n c e   f o r   S M E s ,   t h e   C o m m i s s i o n   h a s   d e v e l o p e d  ‘G u i d a n c e 
o n   e n h a n c e d   a c ce s s   to   f i n a n ce’.  Th i s   a i m s   to   e n s u re   t h a t   t h e 
f i n a n c i a l   i n t e r m e d i a r y   c a n   u s e   t h e   p o r t fo l i o   g u a r a n t e e   o n l y 
a f te r   t h e   a c t u a l   l e n d i n g   vo l u m e   e xce e d s   t h e   l e n d i n g   vo l u m e 
that the inter mediar y would have achieved without the guar -
a nte e.  Th i s   co n ce p t   o f   a d d i t i o n a l i t y   i s   s i m p l e   to   u s e   a n d   c a n 
be  eas ily emb edded  into th e guarante e  agre em ent.

B O X 	 5

E X A M P L E 	 O F 	 A N 	 I N N O VAT I V E 	 P R O J E C T

The entrepreneur did not have sufficient collateral to secure a normal commercial loan of 40 000 euro. 
However, in his previous job as a researcher he had acquired significant knowledge about the produc-
tion of vinegar. He therefore used the guaranteed loan to start up a company producing high-quality 
vinegar. The production process used specifically cultivated bacteria that made the fermentation 
process more stable. The resulting vinegar had a better taste and higher sugar content — qualities 
appreciated by consumers. The company’s operating market was regional and there were no other 
competitors using the same production process.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

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85.   H o w e v e r,   a d d i t i o n a l i t y   d o e s   n o t   e n s u r e   t h a t   t h e   a d d i t i o n a l 
vol u me  at the  level  of th e fin anci al i nte r m ed iar y  i s also  add i-
tional at the level of the economy. I n the contex t of the SMEG 
facilit y, it is considered that deadweight occurs if guarantees 
a re   p rov i d e d   fo r   l o a n s   t o   S M E s   w i t h   s u f f i c i e n t   c o l l a t e r a l   a n d 
without innovative investments. However, when providing as -
s i s t a n c e   o n   a   p o r t f o l i o   b a s i s ,   a   c e r t a i n   l e v e l   o f   d e a d w e i g h t 
i s   i n e v i t a b l e.  Th e   l o a n   a n a l ys i s   re ve a l e d   d e a d we i g ht   i n   m o re 
t h a n   a   t h i rd   o f   t h e   l o a n s   i n   t h e   s a m p l e   ( 3 8   % ,   6 9   o u t   o f   1 8 1 , 
see Table 5). O ther things being equal, these borrowers could 
have obtained the loans from commercial lenders without the 
SM E gu arante e.  A  su r vey of the MAP bor rowe r s con duc te d by 
the  inter im e valuator sh owed a si mi lar  le vel of  de adwei g ht 60.

60   ‘The survey results indicate 
that two out of three companies 

would not have undertaken the 

project without the guaranteed 

loan, or would have done less. 

Only one out of three companies 

surveyed responded that 

they would have either set up 

the business or undertaken 

the project even without the 

guaranteed loan.’

S p e c i f i c  l e n d i n g  c o n d i T i o n S

86.  

Eac h  g ua rantee  agreement   be t we e n  th e  E IF  an d  t he   fi nanc i al 
inter mediar y contains a standard clause listing the pr inciples 
of enhanced access to finance (see paragraph 54) for the ben -
efit of SMEs without collateral or with innovative investments. 
There   is  not   always  a  c l ear  indic at ion   as  to  how   t h e  fi n an c ial 
inter mediar y intends to target them. S ome financial inter me -
diar ies u sed s pec ific l ending  con diti ons  to att rac t s uch  SM E s, 
thu s m inimis ing  d ead weight (s ee  B ox  6) .

B O X 	 6

L E N D I N G 	 CO N D I T I O N S 	TO 	 AT T R AC T 	 E I T H E R 	 I N N O VAT I V E 	 S M E s	 O R 	 S M E s	
W I T H O U T 	 S U F F I C I E N T 	 CO L L AT E R A L	

 ο The guaranteed loans can be provided only to start-ups and SMEs with a short business history

 ο Ceiling on the loan amount

 ο Providing non-monetary benefits to the SMEs 61 so that the guaranteed loans are not cheaper 

than non-guaranteed loans

 ο Higher guarantee rates for investments that are innovative or constitute to some extent a novelty

61  Such as reduced collateral requirements, accelerated credit decisions and fixed interest rates.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

62  The Commission derived 
the legal bases of the CIP from 

Articles 172, 173(3) and 192(1) 

of the Treaty on the Functioning 

of the European Union 

(consolidated version after 

Lisbon Treaty).

63  CIP Decision, recital 62.

64  COM(2005) 121 final, 6.4.2005.

65  SEC(2005) 433, 6.4.2005.

41

87.   While the first three lending conditions will lead to automatic 
p re fe re n ce   fo r   b o r rowe r s   t h a t   l a c k   co l l a t e r a l,   t h e   l a s t   c o n d i-
t i o n   w i l l   p r o b a b l y   i n c r e a s e   t h e   i n t e r e s t   o f   i n n o v a t i v e   S M E s . 
T h e   r e l a t i v e   a b s e n c e   o f   l e n d i n g   c o n d i t i o n s   g e a r e d   t o w a r d s 
i n n o v a t i v e   S M E s   m a y   e x p l a i n   t h e   l o w   n u m b e r   o f   i n n o v a t i v e 
inves tm ents fo und in th e sample  (s ee  Tab le  5) .

E U R O P E A N 	 A D D E D 	VA LU E

88.   A s   a l l   t h e   f i e l d s   c o ve re d   b y   t h e   C I P   a re   t h e   s h a re d   re s p o n s i-
b i l i t y   o f   t h e   M e m b e r   S t a t e s   a n d   t h e   Co m m u n i t y 6 2,   t h e   S M E G 
facility also has to respec t the subsidiarity principle stipulated 
i n   A r t i c l e   5   o f   t h e   Tr e a t y.   E U   a c t i o n s   n o t   f a l l i n g   w i t h i n   t h e 
exclusive competence of the Union, such as the SMEG facilit y, 
sho ul d   b e  u nder taken  o nl y   if,  an d  i n  s o  far,   a s  t he   obj e c ti ve s 
of the proposed ac tion cannot be sufficiently achieved by the 
Member States, but can rather, by reason of the scale or effects 
of  the  p rop o sed ac tio n,  be bette r  ac h ie ved  at  th e  E U le vel.

89.  

The concept of subsidiarit y is reiterated in a recital preceding 
the  C IP  dec is ion 63,  in t he CI P  propos al 64 and  in  th e CIP impac t 
assessment 65. I n essence, the arguments used by the Commis -
sion in favour of the EU dimension of the financial instruments 
can b e  grou p ed u nder  t wo  head in g s:

 ο en su r ing  co he ren ce in implement ati on ;  an d 

 ο t he g l ob al  nat ure of  co mpetitio n  and  in n ovat ion .

T h e SMeg  f a c i l i T y   M a y  h a v e  S i z e a b l e  n o n- M o n e T a r y 
b e n e f i T S   f o r  a n  i n T e r M e d i a r y ;  h o w e v e r   c o n S i S T e n c y  o f 
i M p l e M e n T a T i o n  i S  n o T  a c T i v e l y  S T r i v e n  f o r

90.  

I n   i t s   C I P   p r e p a r a t o r y   d o c u m e n t s ,   t h e   C o m m i s s i o n   a r g u e d 
that  t he Euro p ean dimens io n  wo uld  e n sure  di f fusi on  of  g ood 
prac tice in the deliver y of financial instruments, including the 
SM EG  facilit y.   Al thou gh   s imilar   m ea sure s  exis t  i n  som e  M e m-
ber States, the Communit y inter vention will contr ibute to the 
con siste nc y  of  im p lement ation .

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Special Report No 4/2011 – The audit of the SME Guarantee facility

66  Intermediaries that 
participate or plan to participate 

under CIP.

67  CIP Decision, Article 2.

42

	91.  

92.  

93.  

S e veral   c ases   were  foun d  in  wh ic h   th e   fi n an ci ng   f rom   t he   E U 
budget was crucial, not only as a par tial coverage of the credit 
l o s s e s ,   b u t   a l s o   b e c a u s e   i t   a l l o w e d   t h e   i n t e r m e d i a r y   t o   t r y 
something new. In two instances the SMEG facility helped with 
the  de velo p ment o f g uarantee or  len d in g  produc t s t hat were 
n e w   to   t h e   i nte r m e d i a r y.   Fo r   o n e   o f   t h e m ,   m u l t i p l e   at te m p t s 
had to be made until the product gained sufficient recognition 
fro m t he o n-l ending b ank s and  t he  c lie nts. I t  c an  be as sume d 
that the product would not have been developed if the EIF and 
the Commission had not repeatedly collaborated with that in -
termediar y. Fur thermore, cooperation with the EU institutions 
m a y   h e l p   s m a l l e r   p r i v a t e   f i n a n c i a l   i n t e r m e d i a r i e s   e s p e c i a l l y 
to gain recognition among the on-lending banks and/or their 
cli ents. 

This is corroborated by the result of the questionnaire sent to 
the financial intermediaries. Six out of 31 CIP intermediaries 66  
have  de vel o pe d  a  new   l o an  or  guarante e   produc t  an d  1 6   out 
o f   3 1   h a v e   s i g n i f i c a n t l y   m o d i f i e d   t h e i r   e x i s t i n g   p r o d u c t s   t o 
par t icip ate in the C IP. 

The SMEG facilit y increases the visibilit y of EU suppor t among 
f i n a n c i a l   i nte r m e d i a r i e s.  Th e   a u d i t   v i s i t s   s h owe d   t h at   awa re -
n e s s   o f   t h e   E U   g u a r a n t e e s   a m o n g   S M E s   w a s   n o t   v e r y   h i g h . 
H o w e v e r,   a c t i v e l y   d r i v e n   a t t e m p t s   t o   e n s u r e   c o n s i s t e n c y 
b e t w e e n   t h e   p r a c t i c e s   o f   d i f f e r e n t   i n t e r m e d i a r i e s   w e r e   n o t 
o b s e r ve d.  T h e   E I F   s i m p l y   c o l l e c t s   t h e   i n fo r m a t i o n   a b o u t   t h e 
p ra c t i ce s   o f   t h e   f i n a n c i a l   i nte r m e d i a r i e s,   b u t   d o e s   n o t   q u e s -
tion these prac tices. As has been shown in the case of lending 
conditions (see paragraph 86), a more ac tive approach by the 
EIF might improve take -up of the facility by SMEs with innova-
tive  p ro je c ts  o r  insu ffic ient  collate ral.

T h e SMeg  f a c i l i T y   i n c r e a S e S  T h e  c o M p e T i T i v e n e S S  o f 
i n d i v i d u a l  e n T e r p r i S e S;  T h i S  d o e S  n o T  i M p l y  T h a T  eu  a d d e d 
v a l u e  i S  d e l i v e r e d

94.  

This aspec t of EU added value is direc tly related to one of the 
CIP global objec tives: ‘ to foster the competitiveness of enter -
pr ises, in par ticular of SMEs’ 67. I n the preparator y documents, 
the   Com mis sion   argu ed  th at  th e  compet it ion   Europea n  f ir ms 
face  is  incre asingl y  g lo b al   and  in n ovat ion   i s  s e en   as   a  g lobal 
phenomenon that is not successful and sustainable in a closed 
env iro nme nt.

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95.  

Th e   l o a n   a n a l ys i s   s h owe d   t h at   t h e   S M E G   f a c i l i t y   d o e s   i n d e e d 
help individual enter pr ises to increase their competitiveness. 
I t   w a s   f o u n d   t h a t   7 4   o u t   o f   1 8 1   l o a n s   ( 4 1   % )   w e r e   d i r e c t l y 
used to increase the enterprise’s competitiveness 68. The SMEG 
facilit y delivers many other valuable results in relation to the 
creatio n of  a mo re com pet it ive e nv ironm ent. I t en able s sm all 
s t a r t - u p s   —   m a i n l y   i n   t h e   s e r v i c e   s e c t o r   —   t o   e m e r g e .   O u t 
o f   t h e   1 8 1   l o a n s   i n   t h e   s a m p l e,   2 6   l o a n s   ( 1 4   % )   we re   u s e d   to 
sta r t   a  ne w  busi ness   and  15   loans   ( 8   % )   were   us ed   to  f in an ce 
p o s t - s t a r t - u p   e x p a n s i o n s   o f   t h e   b u s i n e s s 6 9.   I t   a l s o   h e l p s   t o 
m a i n t a i n   t h e   c o m p e t i t i v e   l a n d s c a p e   a l l o w i n g   i n d i v i d u a l s   t o 
b e c o m e   e n t re p re n e u r s   b y   b u y i n g   a n   e x i s t i n g   S M E   ( 4 7   l o a n s, 
26  %).

96.   H o w e ve r,   t h e   E U   a d d e d   v a l u e   o f   t h e s e   r e s u l t s   i s   n o t   c o n c l u -
sive as t he same ef fec t s cou l d be  ach i eve d wi th  fun din g  from 
nat ion al   b udg et s.   Fo r  inst an ce,   th e  Commi ss i on 70  give s  th ree 
suggestions on how an EU polic y may impac t competitiveness 
at  th e EU  l evel 71.  The E U po lic y  m ight :

 ο have   an  impac t   on  th e  co mpetit i ve   po sit io n  o f   E U  f ir m s  in 

co mp ar iso n wit h t heir non -E U r ival s ;

 ο stimulate cross-border investment flows, including reloca -

t ion  of  eco nomi c ac tivit y ;  o r 

68  The enterprise’s 
competitiveness was deemed 

to have increased if the business 

plan included information that 

the investment would either:
• 

 increase the enterprise’s 

production capacity of goods 

or services; or make it more 

efficient;

 increase its market share;

 increase its exports;

 increase the performance/

training of its staff;

 lead to more productive use 

of information technology; or

 improve the marketing of its 

• 
• 
• 

• 

• 

products or services.

Start-ups were considered 

separately as always increasing 

the competitive landscape.

69  Post start-up expansion 
means an expansion of the 

business within three years after 

the start-up.

70  Commission Staff Working 
Paper ‘Impact assessment: 

 ο b e   n e c e s s a r y   t o   c o r r e c t   u n d e s i r a b l e   o u t c o m e s   o f   m a r k e t 

Next steps — In support of 

p ro cesse s in Euro p ean mar kets.

97.   None of these effects were obser ved during the audit. The loan 
an al ysis co nfir m ed that most  of t he  SM E s are ope rati ng  in  lo -
c a l,   re g i o n a l   o r   n a t i o n a l   m a r k e t s.   N i n e t e e n   o u t   o f   1 8 1   l o a n s 
(1 0 %)  we re provided  to  SMEs  th at  h ad s ome  c ros s- borde r  ac -
tivities and 13 loans (7 %) were used for investments that had 
a significant cross-border element 72. The scarcit y of cross-bor-
d e r   a c t i v i t i e s   i s   n o t   s u r p r i s i n g   gi ve n   t h e   t y p e s   o f   b u s i n e s s e s 
of   th e  SMEs  in   the  s amp l e  ( for   an   ove r v ie w,  se e  Fi gu re  5 ) :  17 
re s t a u ra n t s,   e i g h t   t a x i   d r i ve r s,   4 1   s m a l l   re t a i l   s h o p s   ( b a k e r y, 
butcher, newspaper shop or supermarket) or 17 craftsmen (car-
penter, elec trician, mason or roofer). Given these examples of 
borrowers whose businesses are usually local, the need for EU 
inte r ve nt io n is not s uff ic iently d em ons trate d.

competitiveness and sustainable 

development’, SEC(2004) 1377.

71  Also mentioned in SEC(2005) 
791.

72  The cross-border element was 
deemed significant if the aim of 

the investment was to increase 

production abroad, expand into 

markets abroad or create new 

business relations with foreign 

counterparts (e.g. suppliers).

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98.  

I n d e e d,   t h e   s c a l e   o f   t h e   i n d i v i d u a l   g u a ra nte e   d e a l s   d o e s   n o t 
go beyond national borders. In essence the SMEG facility oper-
ates as a set of national guarantee schemes, because there are 
s i gn i f i c a n t   d i f fe re n ce s   b e t we e n   t h e   n a t i o n a l   d e b t   m a r k e t s 7 3. 
Thes e  differences  are  cau sed  by   cultural  a s  well   as   leg al  con -
s t r a i n t s   a n d   a r e   s o   s i g n i f i c a n t   t h a t   t h e   d e b t   m a r k e t s   c a n   b e 
con sidered  to  be  p urel y  nation al.

73  Also noted for instance by the 
ECB, ‘The financing of small and 

medium-sized enterprises in the 

Euro area’, ECB Monthly Bulletin, 

August 2007, p. 77.

F I G U R E 	 5

LO A N 	 A N A LYS I S 	 — 	T Y P E S 	 O F 	 B U S I N E S S E S	 	

19 %

5 %

12 %

26 %

24 %

Manufacturing

Retail

Hotels, Restaurants, Catering

Individual Craftsmen & Construction 
companies

Taxi & Transportation

14 %

Other

Source: European Court of Auditors.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

CONCLUSIONS AND 
RECOMMENDATIONS

45

d e S i g n  o f  T h e SMeg  f a c i l i T y

99.   Although no explicit inter vention logic was provided in the CIP 
preparator y documents for the SMEG facility, an implicit inter-
vention logic can be found in the different preparator y docu -
m e n t s   o f   t h e   C I P   D e c i s i o n .   H o w e v e r,   t h e r e   i s   n o   c o n c e p  t u a l 
l i n k   b e t we e n   t h e   p ro b l e m   a t   s t a k e   a n d   t h e   e x p e c t e d   re s u l t s 
and impac ts as presented before the star t of the inter vention. 
Although the objec tives are now more precise than under the 
previous MAP programme, they are only specific, measurable, 
achie vab l e and  timed  in rel ation  to  th e  ex pec te d outputs. 

R E C O M M E N D AT I O N 	 1

F u t u r e   S M E   s u p p o r t   p r o g r a m m e s   s h o u l d   b e   b a s e d   u p o n 
an  e x p li ci t   inte r ve nti o n  l o gi c   link i n g  th e  i np u t s   to  th e   e x-
p e c te d o u t p u t s ,  re su l t s  an d imp a c t s .

S e T T i n g  T h e  M a n a g e M e n T   S T r u c T u r e

100.  O verall an appropriate framework has been established for the 
manag e ment   o f  t he  SMEG  facilit y.  Th e   fee   st r uc ture   has   be en 
improved compared to MAP by adding per for mance -tr iggered 
incentives. However, delays in the planning of the facilit y pre -
ve n t e d   e f fe c t i ve   b u d g e t   a l l o c a t i o n   d u r i n g   t h e   f i r s t   y e a r   a n d 
c a u s e d   a n   i n t e r r u p t i o n   o f   t h e   s u p p o r t   fo r   s o m e   f i n a n c i a l   i n -
ter med iar ies.

R E C O M M E N D AT I O N 	 2

F o r   t h e   p u r p o s e   o f   p l a n n i n g   a n y   s u b s e q u e n t   f a c i l i t y,   t h e 
Co ur t   re co mm e n ds   f inalisin g  th e   l e g al  b asis  an d   th e   m an -
a g e m e nt   a g r e e m e nt   w e l l   b e f o r e   t h e   e f f e c t i ve   s t a r t   o f   t h e 
p r o g r a m m i n g   p e r i o d   i n   o r d e r   t o   h a v e   t i m e   t o   s e l e c t   a d -
e q u a te   f i n a n c i a l   i n te r m e d i a r i e s   a n d   to   co m p l e t e   co n t r a c t 
n e g o t i a t i o n s   w i t h   t h e m   b y   t h e   e f f e c t i v e   s t a r t   o f   t h e   p r o -
gr ammin g p er io d, thus avoidin g th e n e e d to have re co ur s e 
to  any  re t ro a c ti v i t y  cl aus e in th e  f u ture.

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S e l e c T i o n  o f  f i n a n c i a l  i n T e r M e d i a r i e S

101.	The Commission devised appropriate procedures for the selec -
tion of financial intermediaries. However, no scoring standards 
we re   e s t a b l i s h e d   t o   r a t e   t h e   a p p l i c a t i o n s   f ro m   t h e   d i f fe re n t 
p o t e n t i a l   i n t e r m e d i a r i e s   a n d   n o   m i n i m u m   r e q u i r e m e n t s   a r e 
d e f i n e d   fo r   t h e   d i f fe re nt   s e l e c t i o n   c r i te r i a .  We a k n e s s e s   we re 
foun d  in  t he  do cu mentatio n  of   th e   param ete r s  se tt in g   i n  th e 
gu ara nte e agre ements w ith fin an ci al i nte r m ed iar ie s.

R E C O M M E N D AT I O N 	 3

To enhance the transparenc y of the selec tion, a scoring s ys-
te m   f o r   th e   ass e ssm e nt   o f   p o te nt ia l   i nte r m e d i a r y   a p p li c a -
ti o ns  sh o u l d b e p u t  in p l a ce f o r  any su cce ss o r  p ro g r amm e. 
Minimum re quirement s should b e de f ine d for the sele c tion 
o f   f i n a n c i a l   i n t e r m e d i a r i e s .   T h e   c a l c u l a t i o n   o f   t h e   p a r a m -
e te r s  in  th e  gu ar ante e  a g re e m e nt s   sh o ul d  b e  d o cum e nte d 
in g re ate r  d e t ail . 

p e r f o r M a n c e   M o n i T o r i n g  a n d  r e p o r T i n g 

102.  Sufficient output indicators were established which were used 
t o   r e p o r t   o n     S M E G ’s   i m p l e m e n t a t i o n .  T h e   d a t a   f o r   t h e   o n l y 
imp ac t  indic ato r  w hich  refers   to   t he  ‘numbe r   o f  jobs  c reate d ’ 
is difficult to collec t and, due to var ying calculation methods, 
n o t   c o m p a r a b l e   b e t we e n   c o u n t r i e s.   R e p o r t i n g   re q u i re m e n t s 
a re   c l e a r   a n d   n o t   p e rce i ve d   a s   a   b u rd e n   by   a   m a j o r i t y   o f   t h e 
fina ncial inte r mediar ies p ar tic ipati ng  in  S ME G .

R E C O M M E N D AT I O N 	 4

T he Commission should consider the scop e for creating ad -
ditional or b e t ter p er for mance indic ator s in order to m oni -
to r b e t ter th e achievem ent s of th e f acilit y ’s o bj e c ti ves an d 
d r aw  ap p ro p r iate co n clusi o ns . 

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Special Report No 4/2011 – The audit of the SME Guarantee facility

74  ‘Response by the European 
Court of Auditors to the 

Commission’s communication 

‘Reforming the budget, 

Changing Europe’ (paragraphs 

7 to 9), and Opinion 1/2010 

‘Improving the financial 

management of the European 

Union budget: Risks and 

challenges’ (paragraphs 18 and 

19).

47

a c h i e v e M e n T S  o f  T h e SMeg  f a c i l i T y

103.  Th e   o n l y   q u a nt i f i e d   t a rg e t,   t h at   o f   re a c h i n g   3 1 5   7 5 0   S M E s,   i s 
l i k e l y   t o   b e   a c h i e v e d .   T h e   a n a l y s i s   o f   t h e   C o u r t ’s   s a m p l e   o f 
loans showed that less than half of the loans (43 %) were given 
to  SMEs   t hat   had  a  l ac k  o f  suffic ie nt  collate ra l  an d  only   1 2   % 
u s e d   t h e   l o a n s   fo r   i n n ovat i ve   i nve s t m e n t s.  Th e   l o a n   a n a l ys i s 
re ve a l e d   a   d e a d we i g ht   o f   3 8   % ,   i . e.   l o a n s   m a d e   to   S M E s   w i t h 
suf fic ient  co ll ateral  and not usin g  t he m for  in n ovati on .

R E C O M M E N D AT I O N 	 5

T h e  Co mm issi o n sh o u l d in f u t ure  s e t  m o re  sp e ci f i c  t arg e t s 
w hi ch  b e t te r  re f l e c t  th e  o bj e c ti ve s   o f  th e   f in an cial  ins tr u -
m e n t .   D u r i n g   t h e   l i f e t i m e   o f   t h e   i n s t r u m e n t   m o n i t o r i n g 
s h o u l d   m e a s u r e   p r o g r e s s   tow a r d s   a c h i e v i n g   s u c h   t a r g e t s , 
all ow in g   re m e dial   a c ti o n  to  b e  t ake n   as   n e ce ss ar y.  Ap p ro -
p r i ate   m e asu r e s   to   m i n i m is e   d e a d we i g ht   s h o u l d   b e   e nv is -
a g e d ,   d r aw in g  inte r  alia  o n  b e s t   p r a c ti ce s   alre a d y   in   p la ce 
at  ce r t ain inte r m e diar i e s .

104.  T h e   S M E G   f a c i l i t y   e n a b l e d   s o m e   f i n a n c i a l   i n t e r m e d i a r i e s   t o 
develop and offer new lending or guarantee produc ts, but no 
a c t i ve   i d e n t i f i c a t i o n   a n d   d i s s e m i n a t i o n   o f   g o o d   p r a c t i c e s   i s 
under taken. The EU added value of SMEG is not demonstrated 
a s   t h e   r e s u l t s   f r o m   S M E G   m i g h t   a l s o   h a v e   b e e n   a c h i e ve d   b y 
fun ding   und er  nation al   sc heme s.   S ign i fi c ant  cross -bord er   in -
ve st m ent s o r ef fec ts  of t he SM E G l oan s were n ot  obse r ve d.

R E C O M M E N D AT I O N 	 6

A s   t h e   C o u r t   e m p h a s i s e d   i n   t h e   p a s t ,   e x p e n d i t u r e   f r o m 
th e   Uni o n  b u d g e t  mus t   o f f e r   cl e ar   an d   v isib l e  b e n e f i t s  f o r 
th e   EU  an d  f o r  i t s   ci ti z e ns  w hi ch   co u l d  n ot  b e   a chi eve d  by 
s p e n d i n g   o n l y   a t   n a t i o n a l ,   r e g i o n a l   o r   l o c a l   l e v e l s   74.   T h e 
Budgetar y Authorities and the Commission should therefore 
c o n s i d e r   h o w   EU   a d d e d   v a l u e   c o u l d   b e   m a x i m i s e d   i n   a ny 
su cce ss o r to  th e  SM EG f a cili t y.

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Th i s   re p o r t   w a s   a d o p t e d   b y   C h a m b e r   I V,   h e a d e d   by   M r   I g o r s 
LU D B O R Ž S ,   M e m b e r   o f   t h e   Co u r t   o f   Au d i to r s,   i n   Lu xe m b o u rg 
at  its  me eting  o f 22  M arch 20 11 .

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA
President

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A N N E X 	 I

O V E R V I E W 	 O F 	T H E 	 C I P 	 S T R U C T U R E 	 D O W N 	TO 	T H E 	 S M E 	 G UA R A N T E E	
FAC I L I T Y

CIP structure: 3 pillars
Budget 2007 to 2013: 3 621 million euro

i. 

 EIP: Entrepreneurship and Innovation 
Programme

ii.  IEE: Intelligent Energy Europe

iii. 

 ICT: Information and communication 
technologies policy

EIP: Entrepreneurship and Innovation Programme (2 172 million euro)

i.  Financial instruments 

ii. 

 Enterprise Europe Network: 
Services in support of 
business and innovation

iii. 

 Innovation and eco-
innovation pilot and market 
replication projects

iv. 

 Policy analyses, 
development, coordination 
and twinning

Financial instruments (1 130 million euro)

i.   SMEG facility

ii. 

 High Growth and Innovative facility (GIF)

iii.  Capacity-Building Scheme (CBS) 

SME Guarantee facility (510 million euro) 
4 different guarantee windows:

i.  Loans and leases 

ii.  Microcredit

iii. 

 Equity and quasi-equity 
guarantee

iv.  Securitisation

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A N N E X 	 I I

M O N I TO R I N G 	 BY 	T H E 	 CO M M I S S I O N 	 A N D 	T H E 	 E I F

1. The Commission performs:

 ο monitoring of the EIF to assess the management of the SMEG facility. This includes a review of: 

• 

• 

• 

the EIF checks on portfolio inclusion;

the guarantee calls; and

the EIF’s findings during its on-site visits to financial intermediaries.

 ο monitoring of financial intermediaries and SMEs. This includes:

• 

• 

• 

visits to financial intermediaries. The visits include a review of systems in place in order to ensure 
compliance with the Guarantee Letter and the FMA; a review of the implementation progress of the 
facility by the financial intermediary; review of the systems put in place by the financial intermediary 
to implement the facility; a compliance check of a sample of SME loans or guarantees (transactions);

visits to SMEs; and

a SMEG employment survey, the purpose of which is to check compliance with the requirements 
as per FMA.

 ο other monitoring tasks such as a review of the EIF quarterly fee.

2. The EIF mainly checks:

 ο the data collected from financial intermediaries using plausibility tests;

 ο through on-site monitoring visits to financial intermediaries:

• 

• 

• 

the quality of the reporting process;

the guarantee payment and recovery processes; and

the process relating to the verification of the eligibility criteria for portfolio inclusion.

 ο the financial intermediary’s payment demand by cross-checking the consistency of the data reported by 
the financial intermediary during its quarterly reporting and the information provided in the payment 
demand. Based on a sample, additional substantive tests are performed using supporting documents 
provided by the financial intermediaries to ensure the validity of the defaulted financing.

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A N N E X 	 I I I

R E P O R T I N G 	 BY 	T H E 	 F I N A N C I A L 	 I N T E R M E D I A R I E S 	TO 	T H E 	 E I F

The financial intermediaries’ reporting1 to the EIF is structured as follows:

 ο Part A is related to new operations (quarterly reporting):

•  borrowers — tax code, name, address, postal code, place, region, country, data of establishment, 

economic sector, legal status, current number of employees, comments; and

• 

loans — tax code, loan reference, currency, purpose of financing, investment amount, tangible 
assets, intangible assets, working capital, loan amount, loan maturity, grace period, loan signature 
date, first disbursement date, comment.

 ο Part B is related to the list of information included (quarterly reporting): 

• 

tax code, loan reference, currency, total reduction loan amount, final outstanding loan amount, 
end of disbursement period.

 ο Part C is related to the guarantees calls (quarterly reporting): 

• 

tax code, loan reference, default occurred date, currency, default amount, recoveries amount, interests 
accrued, loss.

 ο Part D is related to the expired loans (quarterly reporting):

• 

tax code, loan reference, repayment date.

 ο Part E is related to cancelled loans (quarterly reporting): 

• 

tax code, loan reference, type of cancellation.

 ο Part F is related to modifications (quarterly reporting).

 ο Part G is related to employment report (yearly reporting).

1  This summary is based on the EIF document ‘Manual for compiling reports under the SMEG facility 2007–2013’.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

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REPLY OF THE 
COMMISSION

EXECUTIVE	SUMMARY

I II .
Th e   S M E G   u n d e r   t h e   Co m p e t i t i ve n e s s   a n d 
I n n o v a t i o n   F r a m e w o r k   P r o g r a m m e   ( C I P ) 
b u i l t   o n   e x t e n s i v e   e x p e r i e n c e   f r o m   t h e 
M u l t i a n n u a l   P r o g r a m m e   f o r   E n t e r p r i s e 
a n d   E n t re p re n e u r s h i p   ( MA P ) ,   v a l i d a te d   by 
ex ter nal evaluators who recommended the 
c o n t i n u a t i o n   o f   t h e   p r o g r a m m e   w i t h   i t s 
d i v e r s i t y   o f   i n s t r u m e n t s .   I t   w a s   t h e r e fo r e 
n o t   c o n s i d e r e d   n e c e s s a r y,   e i t h e r   b y   t h e 
C o m m i s s i o n   o r   t h e   B u d g e t a r y   A u t h o r i t y, 
e x p l i c i t l y   t o   s t a t e   t h e   i n t e r v e n t i o n   l o g i c , 
s i n c e   l o a n   g u a r a n t e e s   a r e   a c c e p t e d   t o 
b e   a   h i g h l y   e f fe c t i v e   a n d   e f f i c i e n t   w a y   t o 
addres s th e polic y  obj ec tive s.

T h e r e   i s   n o   d o u b t   t h a t   t h e   b e s t   p r a c -
t i c e s   f o r   e x t e n d e d   i m p a c t   a s s e s s m e n t s 
h ave   e vo l ve d   s i n ce   t h e   t i m e   w h e n   t h e   C I P 
e x t e n d e d   i m p a c t   a s s e s s m e n t   w a s   c a r r i e d 
o u t ,   b a c k   i n   2 0 0 5 .   T h e   C o m m i s s i o n   s e r -
v i ce s   w i l l   s t r i ve   to   a p p l y   h i g h e r   s t a n d a rd s 
a n d   to   a d d re s s   t h e   Co u r t ' s   co n ce r n s   i n   t h e 
prepar at ion  of any  succes sor  to S ME G.

The Commission is fully aware of the bene -
f i t   o f   c l e a r   a n d   m e a n i n g f u l   i n d i c a to r s   a n d 
i n   2 0 0 9   c o m m i s s i o n e d   a n   e v a l u a t i o n   t o 
re v i e w   t h e   i n d i c ato r s.  Th e   p ro p o s a l s   m a d e 
—   b a s e d   o n   a   t h o r o u g h   r e v i e w   o f   t h e 
i n t e r v e n t i o n   l o g i c   —   h a v e   a l r e a d y   b e e n 
i m p l e m e n t e d   a n d   c o n s t i t u t e   a n   i m p r o v e -
m e n t   t h a t   s h o u l d   a d d r e s s   s o m e   o f   t h e 
Cour t's  concer ns.

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Th e   Co m m i s s i o n   t a k e s   n o te   o f   t h e   Co u r t ' s 
f i g u r e s .   A c c o r d i n g   t o   r e c e n t   t e l e p h o n e 
i n t e r v i e w s   o f   S M E G   b e n e f i c i a r i e s ,   c a r r i e d 
out in the contex t of the ongoing EIP eval-
u at i o n ,   t h e   p e rce nt a g e   o f   t h o s e   w h o   i n n o -
vated  is significantly  high er.

T h e   C o m m i s s i o n   b e l i e v e s   t h a t   t h e r e   i s   a 
s t ro n g   p re s u m p t i o n   i n   f avo u r   o f   E U   a d d e d 
v a l u e   b e i n g   p r e s e n t ,   a s   o b s e r v e d   b y   t h e 
i n d e p e n d e n t   e v a l u a t i o n   o f   S M E G   u n d e r 
t h e   MA P   ( f i n a l   e v a l u a t i o n ) .  T h i s   p re s u m p -
t i o n   w a s   a l s o   a c c e p t e d   b y   t h e   B u d g e t a r y 
Author it y and confir med by its adoption of 
th e lega l basis.

V II .
The Commission accepts the recommenda-
tion that in any similar future inter vention 
t h e   E U   a d d e d   v a l u e   s h o u l d   b e   m a x i m i s e d. 
I t   i s   a l r e a d y   b e i n g   t a k e n   i n t o   a c c o u n t   i n 
t h e   d i s c u s s i o n s   a n d   p l a n n i n g   fo r   t h e   n e x t 
g e n e rat i o n   o f   f i n a n c i a l   i n s t r u m e nt s   i n   t h e 
p o s t - 2 0 1 3   M u l t i a n n u a l   F i n a n c i a l   F r a m e -
w o r k ,   w h e r e   ‘e n s u r i n g   E U   a d d e d   v a l u e ’ 
i s   o n e   o f   t h e   k e y   p r i n c i p l e s   t h a t   m u s t   b e 
respec ted by  all proposed inst rum ents. 

IV.
T h e   C o m m i s s i o n   w e l c o m e s   t h e   C o u r t ' s 
p o s i t i ve   e va l u at i o n   o f   t h e   m a n a g e m e nt   o f 
daily  operat ions.

T h e   C o m m i s s i o n   w i l l   f u r t h e r   c o n s i d e r 
w h e t h e r   i t   w o u l d   b e   a p p r o p r i a t e   f o r   t h e 
E I F   t o   u s e   a   s c o r i n g   s y s t e m   i n   o r d e r   t o 
define a minimum s core l evel.

H o w e v e r,   i n   t h e   p r e - s e l e c t i o n   p r o c e s s   o f 
a s s e s s i n g   a n   a p p l i c a t i o n ,   t h e   E I F   re q u i re s 
intermediaries to meet minimum standards 
a s   r e g a r d s   t h e   s u f f i c i e n c y   o f   i n f o r m a t i o n 
provided. 

VI.
T h e   C o m m i s s i o n   s h a r e s   t h e   C o u r t ’s   v i e w 
t h a t   t h e   t a r g e t   n u m b e r   o f   S M E s   t o   b e 
rea ched  is  att ainab l e.

‘D eadweight ’ should not be seen as synon -
ymous  wit h ine fficient  b u dg et a l l o cat io n. 

S M E G   g u a r a n t e e s   a r e   p r o v i d e d   o n   a   p o r t-
f o l i o   b a s i s ,   a s   o p p o s e d   t o   a   l o a n - b y - l o a n 
gua rantee.

T h e   C I P   p r o g r a m m e   i s   a d d r e s s i n g   p o t e n -
t i a l   d e a d w e i g h t   i s s u e s   i n   i t s   d e s i g n   b y 
requir ing a n inter mediar y to d o  m o re  th an 
i t   w o u l d   d o   w i t h o u t   t h e   C I P   g u a r a n t e e , 
a s   t h e   g u a r a n t e e   i s   c o n d i t i o n a l   u p o n   t h e 
i nte r m e d i a r y   exce e d i n g   t h e   re fe re n ce   vo l -
ume. The latter is defined as the estimated 
v o l u m e   o f   f i n a n c e   t h a t   t h e   i n t e r  m e d i a r y 
w o u l d   p r o v i d e   i n   t h e   a b s e n c e   o f   t h e   C I P 
g u a r a n t e e .   T h e   C o m m i s s i o n   n o n e t h e l e s s 
a g re e s   t h a t   a p p ro p r i a t e   m e a s u re s   t o   m i n -
i m i s e   d e a d w e i g h t   ( s e e   p o i n t   V I I   b e l o w ) 
s h o u l d   b e   e nv i s a g e d   i n   a ny   s u cce s s o r   p ro -
gramme. 

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AUDIT	FINDINGS

17.
T h e   S M E G   u n d e r   C I P   b u i l t   o n   e x t e n s i v e 
e x p e r i e n c e   f r o m   a   p r e v i o u s   p r o g r a m m e 
( M A P ) ,   v a l i d a t e d   b y   e x t e r n a l   e v a l u a t o r s 
w h o   r e c o m m e n d e d   t h e   c o n t i n u a t i o n   o f 
the programme with its diversit y of instru-
m e n t s   e xc e p t   t h e   I C T   l o a n   w i n d o w   w h i c h 
w a s   c l o s e d .   I t   w a s   n o t   c o n s i d e r e d   n e c e s -
s a r y ,   e i t h e r   b y   t h e   C o m m i s s i o n   o r   t h e 
Budgetar y Author it y, to explicitly state the 
i n t e r v e n t i o n   l o g i c ,   s i n c e   l o a n   g u a r a n t e e s 
a r e   a c c e p t e d   t o   b e   a   h i g h l y   e f fe c t i v e   a n d 
e f f i c i e n t   w ay   t o   a d d re s s   t h e   p o l i c y   o b j e c -
tives.

2 2.
T h e   S M E G   u n d e r   C I P   b u i l t   o n   e x t e n s i v e 
e x p e r i e n c e   f r o m   a   p r e v i o u s   p r o g r a m m e 
( M A P ) ,   v a l i d a t e d   b y   e x t e r n a l   e v a l u a t o r s . 
There fore,  it  was  felt  th at,  for  th e   f i n anc i al 
i n s t r u m e n t s ,   t h e   C I P   i m p a c t   a s s e s s m e n t 
w a s   s u f f i c i e n t ,   g i v e n   t h a t   t h e s e   i n s t r u -
m e n t s   w e r e   e f f e c t i v e l y   a   c o n t i n u a t i o n   o f 
a   s u c c e s s f u l   p r e d e c e s s o r   p r o g r a m m e   a n d 
t h e re   w a s   a l re a d y   b ro a d   s u p p o r t   fo r   t h e m 
w i t h i n   t h e   B u d g e t a r y   A u t h o r i t y.   I n   t h i s 
c o n t e x t   i t   i s   n o t   c l e a r   w h y   a n   e v e n   m o r e 
e x t e n s i v e   i m p a c t   a s s e s s m e n t   w o u l d   h a v e 
added  value.

19.
P l e a s e   s e e   r e p l y   t o   o b s e r v a t i o n   1 7 .   T h e 
SMEG seeks to improve the financial envir-
o n m e n t   f o r   S M E s ,   e x p a n d   t h e   v o l u m e   o f 
l e n d i n g   t o   S M E s   a n d ,   a s   f a r   a s   p o s s i b l e , 
p rov i d e   b e t te r   l o a n   co n d i t i o n s   t h a n   wo u l d 
ot her wise  be  p os s ib le. 

I t   i s   t r u e   t h a t   f o r   h i g h   g r o w t h   a n d   t e c h -
n o l o g y   a n d   r e s e a r c h - o r i e n t a t e d   n e w l y 
e s t a b l i s h e d   e n t e r p r i s e s   e q u i t y   f i n a n c i n g 
i s   t h e   p re fe r re d   i n s t r u m e nt.   H owe ve r,   l o a n 
financing is an appropr iate complement to 
e q u i t y   f i n a n c i n g   t o   o p t i m i s e   t h e   g r o w t h 
o f   t h e   s p e c i f i c   e n t e r p r i s e.   M o re o ve r,   l o a n 
f i n a n c i n g   i s   m o r e   r e l e v a n t   t o   m o s t   e n t e r -
p r i s e s   t h a n   e q u i t y ,   s i n c e   i t   i s   u s u a l l y 
c h e a p e r,   l e s s   d i f f i c u l t   t o   a c c e s s   a n d   d o e s 
n o t   r e q u i r e   t h e   e n t r e p r e n e u r   t o   g i v e   u p 
par tial control of the enter pr ise. Therefore, 
t h i s   d i ve r s i t y   o f   i n s t r u m e nt s   i s   b a s e d   o n   a 
n o t i o n   o f   co m p l e m e nt a r y   n at u re   o f   i n s t r u -
ment s  over t he  l ife c ycl e of an enter pr ise.

T h e r e   i s   n o   d o u b t   t h a t   t h e   b e s t   p r a c -
t i c e s   f o r   e x t e n d e d   i m p a c t   a s s e s s m e n t s 
h a v e   e v o l v e d   s i n c e   t h e   t i m e   w h e n   t h e 
C I P   e x t e n d e d   i m p a c t   a s s e s s m e n t   w a s   c a r-
r i e d   o u t ,   b a c k   i n   2 0 0 5 .   I t   i s   e q u a l l y   c l e a r 
t h at   t h e   Co m m i s s i o n   s e r v i ce s   w i l l   s t r i ve   to 
a p p l y   h i g h e r   s t a n d a rd s   a n d   to   a d d re s s   t h e 
Co u r t ' s   co n ce r n s   i n   t h e   p re p a rat i o n   o f   t h e 
CIP  successor  programme.

Th e   Co m m i s s i o n   i s   f u l l y   aw a re   o f   t h e   b e n -
e f i t   o f   c l e a r   a n d   m e a n i n g f u l   i n d i c a t o r s 
a n d   i n   2 0 0 9   c o m m i s s i o n e d   a n   e v a l u a t i o n 
t o   r e v i e w   t h e   i n d i c a t o r s .   T h e   p r o p o s a l s 
made — based on a thorough review of the 
i n t e r v e n t i o n   l o g i c   —   h a v e   a l r e a d y   b e e n 
i m p l e m e n t e d   a n d   c o n s t i t u t e   a n   i m p r o v e -
m e n t   t h a t   s h o u l d   a d d r e s s   s o m e   o f   t h e 
Cour t's  concer ns.

2 5.
T h e   C o m m i s s i o n   s h a r e s   t h e   v i e w   o f   t h e 
C o u r t   t h a t   t h e   f a c i l i t y   w i l l   s u p p o r t   m o r e 
t h a n   3 1 5   7 5 0   S M E s.   G i ve n   t h e   c u r re nt   h i g h 
t a k e   u p   o f   t h e   f a c i l i t y,   t h i s   t a r g e t   m i g h t 
even  be exceeded.

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3 3.
T h e   a v e r a g e   p e r i o d   d o e s   n o t   r e f l e c t   t h e 
ave ra g e   d u rat i o n   o f   t h e   w h o l e   p ro ce s s   fo r 
a l l   i n t e r m e d i a r i e s ,   b u t   i s   b a s e d   o n   n i n e 
i n t e r m e d i a r i e s   w h o s e   a p p l i c a t i o n s   w e r e 
p r o c e s s e d   b y   t h e   E I F   a t   t h e   s t a r t   o f   t h e 
p r o g r a m m e.   I t   i s   t r u e   t h a t   t h e   f i r s t   a p p l i -
c a t i o n s   w e r e   t r e a t e d   o v e r   a   r e l a t i v e l y 
l o n g   p e r i o d ,   fo r   a   n u m b e r   o f   r e a s o n s   ( fo r 
ex ample, modification of an initial applica-
tion in close cooperation with the FI; wait-
i n g   f o r   F I s   t o   r e p l y   o r   s u b m i t   r e q u e s t e d 
i n f o r m a t i o n ;   n e g o t i a t i o n s   o f   t h e   g u a r a n -
t e e   a g re e m e n t   b e t we e n   t h e   E I F   a n d   F I ) .   I t 
s h o u l d   b e   n o t e d ,   h o w e v e r,   t h a t   o n c e   t h e 
i n i t i a l   b a c k l o g   w a s   c l e a r e d ,   t h e   a p p l i c a -
tions were expedited in a shor t timeframe. 
I n 2010, the average time from application 
to   s i gn at u re   d ro p p e d   a n d   i s   s i x   m o nt h s   o n 
averag e.

I n   a d d i t i o n ,   t h e   Co m m i s s i o n   wo u l d   l i k e   to 
p o i n t   o u t   t h a t   a p p l i c a t i o n - t o - s i g n a t u r e 
p e r i o d s   d o   n o t   r e f l e c t   c e r t a i n   k e y   f a c t o r s 
r e l e v a n t   f o r   t h e   a s s e s s m e n t   o f   t h e   e f f i -
cienc y  of th e application  process:

1 . T h e   i n i t i a l   a p p l i c a t i o n   o f   a n   i n t e r m e d i -
a r y   i s   ra re l y   a   b a s i s   fo r   f u r t h e r   co n c re te 
w o r k   —   m o r e   i n f o r m a t i o n   n e e d s   t o   b e 
received from intermediaries to continue 
due diligence and advance concrete work 
fur t her.

2 . Regarding the requirement for enhanced 
a c c e s s   t o   f i n a n c e ,   i t   s h o u l d   b e   n o t e d 
t h a t ,   o f t e n ,   t h e   p o r t f o l i o   p r o p o s e d   b y 
t h e   i n te r m e d i a r y   u n d e rg o e s   s u b s t a n t i a l 
changes during the deal analysis and ne -
gotiation, which can absorb considerable 
addit ion al time.

26.
T h e   o b j e c t i ve s   we re   s e t   b y   t h e   l e g i s l a t i ve 
a u t h o r i t y   i n   a   w a y   t h a t   a l l o w s   i m p l e m e n -
t a t i o n   i n   a   n u m b e r   o f   i n d i v i d u a l   m a r k e t s 
w i t h   d i f f e r i n g   n e e d s   ( f o r   e x a m p l e ,   f o c u s 
o n   s t a r t - u p s ,   i n c r e a s e d   l e n d i n g ,   e t c . ) ,   a s 
well as the  fl exib il it y  to res p o nd  to  c ha n g -
ing mar ket conditions dur ing the program -
m i n g   p e r i o d .   T h e   c o n c e p t   o f   i n n o v a t i o n 
reflec ts the best prac tices according to the 
OECD Oslo M anual as referenced in the CIP 
D ecision.

29.
T h e   C o m m i s s i o n   w e l c o m e s   t h e   C o u r t ' s 
appreciat ion o f the E IF' s  exp er t i s e.

31.
I n 2006 and 2007, the Commission debated 
i n t e r n a l l y   a   n u m b e r   o f   k e y   i s s u e s   re l a t i n g 
t o   t h e   p e r fo r m a n c e   o f   t h e   f a c i l i t y   i n c l u d -
i n g   t h e   p a r a m e te r s   o f   e n h a n ce d   a cce s s   to 
finan ce. 

B oth the Commission and EIF found it nec-
e s s a r y   t o   a d d r e s s   i n   d e t a i l   a n d   r e a s s e s s 
a   l a r g e   p a r t   o f   t h e   d e l i v e r y   o f   t h e   f a c i l -
i t y   a n d   t h e s e   n e w   m e a s u r e s   a r e   r e f l e c t e d 
i n   t h e   FM A   u n d e r   t h e   C I P   S M E   G u a r a n t e e 
facilit y. 

However, MAP agreements could be signed 
u n t i l   t h e   e n d   o f   2 0 0 6   w i t h   a v a i l a b i l i t y 
 p e r i o d s   l a s t i n g   u p   t o   D e c e m b e r   2 0 0 8 , 
w h i c h   fo r   m a ny   i n t e r m e d i a r i e s   c ove re d   a t 
least par t of the gap bet ween MAP and CIP.

32.
Please see  o u r rep l y  to  ob ser vat i o n   31 . 

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Special Report No 4/2011 – The audit of the SME Guarantee facility

3. I n t e r m e d i a r i e s   o f t e n   n e e d   a d d i t i o n a l 
t i m e   t o   s e t   u p   t h e   o p e r a t i o n a l   i m p l e -
m e n t a t i o n   —   t h e   s i g n a t u re   d a t e   c a n   b e 
d e l a y e d   b y   a g r e e m e n t   i n   o r d e r   t o   g i v e 
them time  to  prepare befo re th e st ar t  of 
t h e   p e r i o d   d u r i n g   w h i c h   S M E   l o a n s   c a n 
b e   i n c l u d e d   i n t o   t h e   p o r t fo l i o   ( re fe r re d 
to as t he  avail ab il it y p er io d).

34.
Th e   Co m m i s s i o n   a n d   t h e   E I F   h ave   n o   i n d i -
c a t i o n s   t h a t   t h e   f a c i l i t y   h a s   s u f f e r e d   a s 
a   r e s u l t   o f   t h e   d e l a y   i n   l a u n c h i n g   i t .   O n 
t h e   c o n t r a r y,   t h e   i m p r o v e d   m a n a g e m e n t 
s t r u c t u r e s ,   t o g e t h e r   w i t h   e f f o r t s   u n d e r -
t a k e n   t o   s t re a m l i n e   t h e   a p p ro v a l   p ro c e s s, 
h a v e   y i e l d e d   p o s i t i v e   r e s u l t s   i n   t e r m s   o f 
smoot her p rocess ing o f EI F  su b mi s s i on s.

36.
Th e   re t ro a c t i v i t y   c l a u s e   wa s   i nt ro d u ce d   to 
m i n i m i s e   t h e   t i m e   g a p   b e t w e e n   M A P   a n d 
C I P   f o r   t h e   i n t e r m e d i a r i e s   w h o   w a n t e d 
t o   c o n t i n u e   w i t h   t h e i r   S M E   p r o g r a m m e s 
u n d e r   t h e   C I P   p r o g r a m m e   ( w h i c h   w a s 
a l r e a d y   p u b l i s h e d ) .   T h e   c o n c e p t   o f   e q u a l 
t r e a t m e n t   i s   o n l y   a p p l i c a b l e   t o   e q u a l 
c a s e s .   I t   d o e s   n o t   e n t a i l   t h e   s a m e   t r e a t -
m e n t   o f   c a s e s   t h a t   a r e   o b j e c t i v e l y   d i f -
f e r e n t .   A s   r e g a r d s   n e w   f i n a n c i a l   i n t e r -
m e d i a r i e s,   t h e r e   w a s   n o   s u c h   t i m e   g a p   t o 
b e   c o v e r e d   b y   a   r e t r o a c t i v e   i n c l u s i o n   o f 
l o a n s.  Th e   Co m m i s s i o n   ex a m i n e d   t h e   l e g a l 
i m p l i c a t i o n   o f   t h e   p o s s i b i l i t y   o f   a   r e t r o -
a c t i v e   a p p l i c a t i o n   o f   t h e   C I P   S M E G ,   a n d 
c o n c l u d e d   t h a t   e q u a l   t r e a t m e n t   f o r   n e w 
f i n a n c i a l   i nte r m e d i a r i e s   i s   e n s u re d   v i a   t h e 
availa bilit y per iods  of the same  d u rat ion . 

41.
The Commission welcomes the Cour t's pos -
itive assessment of the management struc-
ture.

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4 5.
Fo l l o w i n g   t h e   f i n a n c i a l   c r i s i s ,   t h e r e   h a v e 
b e e n   a l m o s t   n o   s e c u r i t i s a t i o n   t r a n s a c -
t i o n s   s i n c e   2 0 0 8 .   I t   i s   t h e r e f o r e   n o t   s u r -
p r i s i n g   t h a t   t h e   d e m a n d   f o r   t h i s   s p e c i f i c 
SMEG window has been non- existent. How -
e ve r,   n ow   t h at   t h e   s e c u r i t i s at i o n   m a r k e t   i s 
p i c k i n g   u p   s l i g h t l y,   a   f i r s t   C I P   s e c u r i t i s a -
t i o n   i s   b e i n g   ex a m i n e d   by   t h e   E I F   a n d   o n e 
national promotional bank is ask ing for CIP 
par ticipation to open up the secur itisation 
market for SME loan por tfolios. I n addition, 
t h e   f i r s t   t ra n s a c t i o n   u n d e r   t h e   e q u i t y   w i n -
d o w   w a s   a p p r o v e d   i n   S e p t e m b e r   2 0 1 0   b y 
t h e   E I F   b o a rd   a n d   i n   O c t o b e r   2 0 1 0   b y   t h e 
Commission .

5 0.
T h e   E I F   w o r k s   w i t h   c l e a r   s e l e c t i o n   g u i d e -
l i n e s   a s   a g r e e d   w i t h   t h e   C o m m i s s i o n 
( A n n e x   1   t o   t h e   F M A )   t o   i m p l e m e n t   t h e 
m a n d a t e   u n d e r   a n   o p e n   c a l l   a n d,   a s   m e n -
t i o n e d   b y   t h e   C o u r t   i n   p a r a g r a p h   2 9 ,   t h e 
E IF h as th e n ecessar y  exper tise.

T h e   C o m m i s s i o n   w i s h e s   t o   p o i n t   o u t   t h a t 
i n   t h e   p r e - s e l e c t i o n   p r o c e s s   o f   a s s e s s -
i n g   a n   a p p l i c a t i o n   t h e   E I F   r e q u i r e s   i n t e r -
m e d i a r i e s   t o   m e e t   m i n i m u m   s t a n d a r d s   a s 
regards the sufficienc y of infor mation pro -
vided  as desc r ibed below.

T h e   p r e - s e l e c t i o n   p r o c e d u r e   i s   a   f o r m a l 
s e l e c t i o n   b y   t h e   g u a r a n t e e   t r a n s a c t i o n 
t e a m   b a s e d   e s s e n t i a l l y   o n   t h e   q u a l i t y   o f 
t h e   a p p l i c a t i o n   w i t h   r e s p e c t   t o   t h e   e l i g i -
b i l i t y   a n d   s e l e c t i o n   c r i t e r i a .   Fu r t h e r m o re, 
e a c h   p r o p o s a l   i s   s u b j e c t   t o   a n   i n d e p e n d -
e n t   o p i n i o n   f r o m   t h e   E I F ’s   r i s k   m a n a g e -
m e n t ,   a   c o m p l i a n c e   o p i n i o n   a n d   a   fo r m a l 
pre -B oard review meeting including all rel -
evant  EIF ser vices. 

T h e   C o m m i s s i o n ,   h o w e v e r,   w i l l   f u r t h e r 
co n s i d e r   w h e t h e r   i t   wo u l d   b e   a p p ro p r i a te 
fo r   t h e   E I F   t o   u s e   a   s c o r i n g   s y s t e m   i n   t h i s 
k i n d   o f   c a l l   p ro ce d u re   i n   o rd e r   to   d e f i n e   a 
minimum score level for any successor pro -
gram me.

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5 5.
T h e   g u a r a n t e e   t e r m s   a r e   i n   c o m p l i a n c e 
with the Fiduciar y and M anagement Agree -
ment bet ween the Commission and the EIF 
( F M A )   w h i c h   r e f l e c t s   t h e   b r o a d e r   o b j e c -
t i ve s   o f   t h e   l e g a l   b a s i s.  Th e   ex a m p l e s   p ro -
v i d e d   b y   t h e   Co u r t   re f l e c t   s p e c i f i c   a g re e -
ments  for  th es e deals.

T h e   C I P   o b j e c t i v e s   i n c l u d e :  ‘ t o   f o s t e r   t h e 
c o m p e t i t i v e n e s s   o f   e n t e r p r i s e s ,   i n   p a r -
t i c u l a r   S M E s ’ ;   a n d   ‘ t o   p r o m o t e   a l l   f o r m s 
o f   i n n o v a t i o n   i n c l u d i n g   e c o - i n n o v a t i o n’. 
Fu r t h e r m o r e ,   S M E G   i s   m e a n t   t o :   i m p r o v e 
a c c e s s   b y   e x i s t i n g   S M E s   t o   l o a n   f i n a n c e ; 
r e s p o n d   t o   t h e   c h a n g i n g   f i n a n c i n g   n e e d s 
o f   S M E s ;   s u p p o r t   a cce s s   to   f i n a n ce   fo r   t h e 
s t a r t - u p   a n d   g r o w t h   o f   S M E s   a n d   i n v e s t -
m e nt   i n   i n n ovat i o n   a c t i v i t i e s ;   a n d   s u p p o r t 
t h e   c r o s s - b o r d e r   e x p a n s i o n   o f   t h e i r   b u s i -
n ess ac t ivit ies.

The introduc tion of too restr ic tive require -
m e n t s   r e g a r d i n g   t h e   f i n a l   b e n e f i c i a r i e s 
w o u l d   n o t   b e   c o n s i s t e n t   w i t h   t h e   b r o a d 
p o l i c y   o b j e c t i v e s   a n d   w o u l d   b e   d e t r i -
m e n t a l   t o   t h e   i m p l e m e n t a t i o n   o f   t h e 
p r o g r a m m e .   I t   m i g h t   a l s o   h a v e   a d v e r s e 
consequences for the efficienc y of the pro -
gram me:

1 . c u m b e r s o m e   p r o c e d u r e s   f o r   t h e   l e n d -
i n g   i n s t i t u t i o n   t o   r i g o ro u s l y   s c re e n   a n d 
document  th e lac k  of collate ral;

2 . the foregoing of the benefits of por tfolio 

( of  loa ns)  diver sification ;

3 . th e in cre ase in d ef ault probabili ti e s  an d 
expected losses resulting in higher budg -
e t   n e e d s,   l owe r   l e ve ra g e   a n d   l owe r   e f f i -
c ienc y. 

53.
T h e   C I P   a p p r o v a l   r e q u e s t s   c o n t a i n   a 
d e t a i l e d   a n a l y s i s   o f   t h e   v o l u m e s   a n d   t h e 
b a s i s   a n d   m e t h o d o l o g y   o f   d e t e r m i n i n g 
t h e   p r o p o s e d   c a p   r a t e   ( s e e   a l s o   r e p l y   t o 
p a r a g r a p h   6 3   b e l ow ) .  Th e s e   a re   t h e   re s u l t 
o f   e x t e n s i v e   e x c h a n g e s   w i t h   t h e   i n t e r -
mediar y, inter alia, as the exac t additional -
i t y   i s   b e i n g   r e f i n e d   a n d   t h e   r e l e v a n t   p a s t 
v o l u m e s   a n d   l o s s e s   n e e d   t o   b e   e x t r a c t e d 
by the inter mediar y. This also includes vol -
u m e s   a c h i e ve d   a n d   l o s s e s   re p o r t e d   u n d e r 
p r i o r   a g r e e m e n t s ,   i f   a ny,   w h i c h   a r e   a v a i l -
able within t he  EI F.

I n   a d d i t i o n ,   t h i s   i s   o n l y   o n e   i n p u t ,   a s   t h e 
c a p   r a t e   n e e d s   t o   c o n s i d e r   f u t u r e   d e v e l -
o p m e n t s   ( e . g .   e f f e c t s   o f   a d d i t i o n a l i t y 
o n   e x p e c t e d   l o s s e s ,   e x p e c t e d   e c o n o m i c 
c h a n g e s ) .   T h i s   i s   d e t a i l e d   i n   t h e   r e q u e s t 
f o r   a p p r o v a l   t o   t h e   E I F ` s   B o a r d   o f   D i r e c -
tors.

The EIF per for ms plausibilit y checks on the 
i n f o r m a t i o n   p r o v i d e d   b y   i n t e r m e d i  a r i e s 
a n d   d raws   o n   i t s   ex te n s i ve   S M E   c re d i t   r i s k 
k n o w l e d g e   i n   v a r i o u s   E u r o p e a n   m a r k e t s . 
As many inter mediar ies have been wor k ing 
w i t h   t h e   E I F   f o r   a   n u m b e r   o f   y e a r s   u n d e r 
previous SMEG agreements, EIF has volume 
a n d   l o s s   d a t a   a v a i l a b l e   f o r   t h e s e   i n t e r -
m e d i a r i e s,   a l t h o u g h   t h e s e   a re   n o t   t h e   s o l e 
paramete rs co ns id ered by t he EI F.

Th e   Co m m i s s i o n   w i l l   co n s i d e r   w i t h   t h e   E I F 
h o w   t h e   d o c u m e n t a t i o n   o f   t h e   s e t t i n g   o f 
t h e   p a ra m e te r s   co u l d   b e   f u r t h e r   i m p rove d 
for any  successo r p ro gramm e.

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Special Report No 4/2011 – The audit of the SME Guarantee facility

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6 7.
D u e   t o   d i f f e r i n g   m a r k e t   a n d   a d m i n i s t r a -
t i v e   r e a l i t i e s   t h e   E I F   m a y   n o t   i m p o s e   o n e 
s ys te m   fo r   co l l e c t i n g   s u c h   d a t a .  Th e   Co m-
mission considers that employment data in 
such a programme is better assessed in the 
contex t of an  e valuat ion .

A n   a n a l y s i s   o f   e m p l o y m e n t   d a t a   w a s   c a r -
r i e d   o u t   by   t h e   i n d e p e n d e n t   e v a l u a to r s   i n 
t h e   c o n t e x t   o f   t h e   i n t e r i m   e v a l u a t i o n   o f 
t h e   E n t re p re n e u r s h i p   a n d   I n n ov a t i o n   Pro -
gra m m e   u n d e r   C I P   ( d a t a   o n   MA P   b e n e f i c i -
ar ies) and concluded that there was a 17 % 
grow t h   i n   e m p l oy m e nt   s i n ce   re ce i v i n g   t h e 
loan  guaranteed  by th e p - rogram m e.

6 8.
T h e   a s s e s s m e n t   o f   c a u s a l i t y   b e t w e e n   t h e 
j o b s   a n d   t h e   n e w   f i n a n c i n g   r e c e i v e d   b y 
t h e   S M E   i s   i n d e e d   a   c o m p l e x   i s s u e   a n d 
t h e   C o m m i s s i o n   a g r e e s   t h a t   t h i s   i s   b e s t 
addres sed in t he contex t of an  e valu ati on . 

7 9.
T h e   C I P   o b j e c t i v e s   i n c l u d e :  ‘ t o   f o s t e r   t h e 
c o m p e t i t i v e n e s s   o f   e n t e r p r i s e s ,   i n   p a r -
t i c u l a r   S M E s’ ;   a n d  ‘ to   p ro m o te   a l l   fo r m s   o f 
i n n ovat i o n   i n c l u d i n g   e co - i n n ovat i o n’.   Fu r -
th er m ore, S M EG is meant to

1 . ‘improve access by existing SMEs to loan 
fin ance s  for   ac tivit ies   th at  su ppor t   t he i r 
c o m p e t i t i v e n e s s   a n d   g r o w t h   p o t e n t i a l ’ 
( recit al 27  of th e  legal bas is), 

2 . ‘respond to the changing financing needs 

of S ME s’ ( recit al 2 9 ),

3 . s u p p o r t  ‘a c c e s s   t o   f i n a n c e   fo r   t h e   s t a r t -
up and growth of SMEs and investment in 
in novation ac tivities’ (Ar tic le  10 .2 ( a))

4 . s u p p o r t  ‘ t h e   c r o s s - b o r d e r   e x p a n s i o n   o f 
th eir  busin ess ac t ivities’ (Ar tic le  1 7 . 1 )

62.
T h e   c h a n g e   o f   i n d i c a t o r s   h a s   b e e n 
r e q u e s t e d   b y   t h e   r e p r e s e n t a t i v e s   o f   t h e 
M e m b e r   S t a t e s   a t   t h e   E I P   m a n a g e m e n t 
c o m m i t t e e   a n d   t h e   Co m m i s s i o n   c o m p l i e d 
w i t h   t h i s   re q u e s t .   I n   a d d i t i o n   p l e a s e   n o t e 
t h a t   t h e   e x   a n t e   e v a l u a t i o n   c l e a r l y   s t a t e s 
t h at   t h e s e   i n d i c ato r s   a re   s u b j e c t   to   re v i e w 
and  updat ing.

63.
T h e   C o m m i s s i o n   a s s e s s e s   t h e   d e v e l o p -
m e n t   o f   t h e   p r o g r a m m e   n o t   o n l y   o n   t h e 
basis of the indicators, but also tak ing into 
a cco u nt   t h e   n u m b e r   o f   co u nt r i e s   cove re d, 
t h e   n u m b e r   o f   i nte r m e d i a r i e s   s i gn e d   e a c h 
y e a r,   t h e   v o l u m e   o f   t h e   u n d e r l y i n g   p o r t -
folios and significant amount of additional 
i n fo r m at i o n   p rov i d e d   i n   t h e   co ntex t   o f   E I F 
repor ting.

As the EIP management committee is regu -
l a r l y   u p d a t e d   o n   t h e   a b o v e ,   t h e   m o n i t o r -
i n g   o f   t h e   d e ve l o p m e nt   o f   t h e   p ro gra m m e 
i s   e n s u r e d .   T h e   C o m m i s s i o n   c o n s i d e r s 
t h a t   r a t h e r   t h a n   s e t t i n g   y e a r l y   t a r g e t s ,   i t 
i s   m o r e   i m p o r t a n t   t o   s e e   t h e   l o n g - t e r m 
d e v e l o p m e n t   a n d ,   a s   t h e   C o u r t   s t a t e s   i n 
p a r a g r a p h   1 0 3 ,   t h e   t a r g e t   r e g a r d i n g   t h e 
n u m b e r   o f   S M E s   r e a c h e d   ‘ i s   l i k e l y   t o   b e 
ach ieved ’.

64.
T h e   C o m m i s s i o n   a c c e p t s   t h a t   t h e r e   i s   a 
n e e d   f o r   b e t t e r   m e a s u r e m e n t   o f   t h e   s u c -
c e s s   o f   t h e   p r o g r a m m e .   T h e   C o m m i s s i o n 
h a s   a c c e p t e d   t h e   i n d i c a t o r s   s u g g e s t e d   by 
t h e   e v a l u a t o r s   a n d   h a s   c o m m i s s i o n e d   a 
sur vey in the framewor k of the final evalu-
a t i o n   o f   t h e   E I P.   R e s u l t s   w i l l   b e   d e l i v e r e d 
in mid-2011.

Special Report No 4/2011 – The audit of the SME Guarantee facility

Special Report No 4/2011 – The audit of the SME Guarantee facility

T h e   C o m m i s s i o n   i s   p l e a s e d   t o   n o t e   t h a t 
t h e   va s t   m a j o r i t y   ( 9 0   % )   o f   s u r ve ye d   i nte r-
m e d i a r i e s   a g r e e d   t h a t   C I P   S M E G   g u a r a n -
te e s   a re   a i m e d   at   c u s to m e r s   w i t h   a   l a c k   o f 
co l l ate ra l   w h i c h   i s   i n   a cco rd a n ce   w i t h   Ar t -
icle 1 9.2 firs t indent. 

80.
T h e   s t r u c t u r e   o f   Ta b l e   5   a p p e a r s   t o   b e 
b a s e d   o n   t h e   a s s u m p t i o n   t h a t   fo r   a n   S M E 
to   b e n e f i t   f ro m   S M E G   i t   s h o u l d   e i t h e r   l a c k 
c o l l a t e r a l   o r   b e   i n n o v a t i v e .   T h i s   i s   b a s e d 
o n   A r t i c l e   1 9   o f   t h e   l e g a l   b a s i s   t a k e n   i n 
i s o l a t i o n .  T h e   C o m m i s s i o n   c o n s i d e r s   t h a t 
t h e   c o m b i n e d   r e a d i n g   o f   r e c i t a l s   2 0 ,   2 2 
a n d   2 7   s h o w s   t h a t   t h e   p r o g r a m m e   h a s   a 
b r o a d e r   s c o p e   a n d   a i m s   a t   a   w i d e   r a n g e 
of SMEs, incl u ding  their f ul l  l ife   c ycle  (Ar t-
icles 10 and 17 o f the l eg al  b asi s ).

T h e   C o m m i s s i o n   c o n s i d e r s   t h a t ,   f r o m   a 
l e g a l   p o i n t   o f   v i e w,   t h e   S M E   G u a r a n t e e 
f a c i l i t y   m u s t   b e   i m p l e m e n t e d   i n   s u c h   a 
w a y   t o   c o v e r   a   w i d e   r a n g e   o f   S M E s ,   a n d 
n o t   o n l y   i n n ovat i ve   S M E s,   i n   o rd e r   to   f u l l y 
comply w ith t he l egal  b asis.

I n n o v a t i o n   i s   o n e   o f   t h e   o b j e c t i v e s 
d e s c r i b e d   i n   t h e   C I P   l e g a l   b a s i s ,   a n d   t h e 
r e s u l t s   o f   t h e   s u r v e y   c l e a r l y   s h o w   t h a t 
SMEG has suppor ted innovation and this to 
a   h i g h   d e g r e e.   O n   t h e   o t h e r   h a n d ,   i n n o v -
a t i o n   i s   n o t   t h e   s o l e   o b j e c t i v e   a n d   t h e r e 
i s   n o   s p e c i f i c   q u o t a   o r   t a rg e t   gi ve n   i n   t h e 
l e g a l   b a s i s   n o r   a ny   m a n d ate   re g a rd i n g   t h e 
p e rce nt a g e   o f   i nve s t m e nt s   t h at   s h o u l d   b e 
made in s upp o r t  of innovatio n.

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A s   r e g a r d s   Ta b l e   5 ,   i t   i s   v e r y   d i f f i c u l t   i n 
a n y   p u b l i c   p r o g r a m m e   t o   r e a c h   e x a c t l y 
and only the predefined clients. One would 
t h e r e f o r e   a l s o   e x p e c t   s o m e   d e a d w e i g h t 
i n   a   p r o g r a m m e   l i k e   S M E G .   T h e   u s e   t h a t 
c a n   b e   m a d e   o f   t h e   f i g u r e s   p r e s e n t e d   o n 
t h e   S M E s   t h a t   l a c k e d   s u f f i c i e n t   c o l l a t e r a l 
i s   l i m i t e d   b y   t h e   f a c t   t h a t   i t   i s   a s s u m e d 
t h a t   t h e   d o c u m e n t a t i o n   a t   t h e   f i n a n c i a l 
i n t e r m e d i a r y   l e v e l   w a s   c o m p r e h e n s i v e 
a n d   t h e re fo re   f u l l y   re p re s e nte d   t h e   a c t u a l 
f i n a n c i a l   s i t u a t i o n   o f   t h e   S M E s   e x a m i n e d. 
I t   s e e m s   a t   l e a s t   d e b a t a b l e   w h e t h e r   a 
r e q u e s t   f o r   a p p r o v a l   w o u l d   c o n t a i n   a n y 
d e t a i l e d   a n a l ys i s   o f   a s s e t s   t h a t   wo u l d   n o t 
be propos ed as collateral  for  t he  l oan .

Fi n a l l y,   i n   t h e   c o n t e x t   o f   t h e   o n g o i n g   E I P 
e v a l u a t i o n 1,   e x t e r n a l   e v a l u a t o r s   h ave   c a r-
r i e d   o u t   te l e p h o n e   i nte r v i e ws   o f   2 0 0   S M E s 
u n d e r   t h e   C I P   S M E G   l o a n   g u a r a n t e e   w i n -
dow. According to the draf t repor t, 65 % of 
the SMEG beneficiar ies indicated that they 
h a v e   i n n o v a t e d   w i t h   r e s p e c t   t o   s t r a t e g y 
a n d   b u s i n e s s   p r a c t i c e s   i n   t h e   p a s t   t h r e e 
years, 61 % responded that they have been 
involved in produc t and/or ser vice innova -
tion  an d 5 0 %  in  proces s in n ovati on. 

8 1.
W h i l e   i n n o v a t i o n   i s   o n l y   o n e   o f   m u l t i -
p l e   o b j e c t i v e s   o f   C I P,   i t   i s   p o s i t i v e   t o   s e e 
t h a t   t h e r e   w e r e   a   n u m b e r   o f   m a r k e t - n e w 
a n d   wo r l d - n e w   i nve s t m e n t s   s u p p o r t e d   by 
S ME G.

T h e   i n n o v a t i o n   g o a l s   o f   S M E G   a r e   n o t 
 l i m i te d   to   m a r k e t- n e w   o r   wo r l d - n e w   t y p e s 
o f   i n n ovat i o n   a n d   t h e   i m p o r t a n ce   o f   f i r m -
o n l y   i n n o v a t i o n   s h o u l d   n o t   b e   u n d e r -
stated. I ndeed, such innovation enables an 
e nte r p r i s e   to   a d va n ce   i n   l i n e   w i t h   i t s   co m -
p e t i to r s,   t h e re fo re   a c h i e v i n g   a   co re   o b j e c-
tive of C IP  (competitivenes s) . 

1 

‘Final evaluation of the Entrepreneurship and Innovation 

Programme, First findings and recommendations report’, February 

2011.

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8 6.
T h e   c l a u s e   o n   t h e   p r i n c i p l e s   o f   e n h a n c e d 
a c c e s s   t o   f i n a n c e   s e t s   o u t   ( m i r r o r i n g   t h e 
F M A )   t h e   m a i n   o b j e c t i v e s   o f   t h e   f a c i l -
i t y,   n a m e l y   e n h a n c i n g   a c c e s s   t o   f i n a n c e 
f o r   S M E s ,   h e l p i n g   i n   c a s e s   o f   l a c k   o f   s u f -
f i c i e n t   c o l l a t e r a l   o r   i n n o v a t i v e   p r o j e c t s 
and stimulating job creation and growth of 
S M E s   t h ro u g h   a d d i t i o n a l   p rov i s i o n   o f   d e b t 
fin ancin g.

T h e   c l a u s e   i s   i n t e r p r e t i v e ,   n o t   p r e s c r i p -
t i v e   —   t h e   s p e c i f i c   a d d i t i o n a l i t y   r e q u i r e -
m e n t s   a r e   s e t   o u t   i n   t h e   i n t e r m e d i a r y 
ter ms. I n line with the FMA, there is always 
a n   i n c r e a s e   i n   v o l u m e   r e q u e s t e d   a n d , 
a c c o r d i n g   t o   t h e   s p e c i f i c s   o f   t h e   p r o j e c t 
s e t   u p   t o g e t h e r   w i t h   t h e   i n t e r m e d i a r y , 
t h e re   m a y   b e   m o re   s p e c i f i c   c l a u s e s   i n   t h e 
i n t e r m e d i a r y   t e r m s ,   f o r   e x a m p l e   q u a l i t a -
t i v e   a d d i t i o n a l i t y   u n d e r t a k i n g s   b y   t h e 
inter medi ar ies to provide finance to r isk ier 
categor ie s of S M Es,  such  as  star t- ups.

8 7.
P l e a s e   s e e   a b o v e   r e p l i e s   r e g a r d i n g   d e a d -
w e i g h t   ( p a r a g r a p h   8 5 )   a n d   r e g a r d i n g 
o b j e c t i v e s   o f   t h e   p r o g r a m m e   ( p a r a g r a p h 
2 6) .

9 3.
Th e   E I F   d o e s   s p re a d   g o o d   p ra c t i ce s,   e s p e -
c i a l l y   i n   c o u n t r i e s   w i t h   d e v e l o p i n g   f i n a n -
c i a l   m a r k e t s   a n d   d e v e l o p i n g   g u a r a n t e e 
s c h e m e s.   I t   i s   n o t   i n t e n d e d   t h a t   t h e   Co m -
m i s s i o n   a n d   t h e   E I F   u n i l a t e r a l l y   i m p o s e 
g u a r a n t e e   c o n d i t i o n s / p r a c t i c e s .   A l l   t h e 
re l e va nt   i n fo r m at i o n   i s   c a re f u l l y   e va l u ate d 
a n d   t a i l o r- m a d e   s o l u t i o n s   a re   p ro p o s e d   to 
fit the economic situation, taxation regime 
and business prac tices in the relevant mar-
k et. 

82.
T h e   d o c u m e n t a t i o n   r e l a t i n g   t o   t h e   d e c i -
s i o n   o f   t h e   o n - l e n d i n g   b a n k   m e n t i o n s   t h e 
co l l a te r a l   o f fe re d   to   s e c u re   t h e   f i n a n c i n g. 
I t   s h o u l d   b e   n o t e d   t h a t   i t   i s   i n   t h e   b e s t 
i n t e r e s t   o f   t h e   l o a n   a p p l i c a n t   t o   o f f e r   a s 
m u c h   c o l l a t e r a l   a s   p o s s i b l e   t o   i n c r e a s e 
c h a n c e s   o f   a   p o s i t i v e   f i n a n c i n g   d e c i s i o n 
from the bank . 

83.
Please see  re pl y to o b ser vatio n 8 5 .

85.
‘D eadweight ’ should not be seen as synon -
ymous  with  inef ficient b udg et a l l o c at ion . 

S M E G   g u a r a n t e e s   a r e   p r o v i d e d   o n   a   p o r t-
f o l i o   b a s i s ,   a s   o p p o s e d   t o   a   l o a n - b y - l o a n 
gua rantee.

T h e   C I P   p r o g r a m m e   i s   a d d r e s s i n g   p o t e n -
t i a l   d e a d w e i g h t   i s s u e s   i n   i t s   d e s i g n   b y 
requir ing  an inter mediar y  to d o  m ore  th an 
i t   w o u l d   d o   w i t h o u t   t h e   C I P   g u a r a n t e e , 
a s   t h e   g u a r a n t e e   i s   c o n d i t i o n a l   u p o n   t h e 
i nte r m e d i a r y   exce e d i n g   t h e   re fe re n ce   vo l -
ume. The latter is defined as the estimated 
v o l u m e   o f   f i n a n c e   t h a t   t h e   i n t e r m e d i a r y 
w o u l d   p r o v i d e   i n   t h e   a b s e n c e   o f   t h e   C I P 
gua rantee.

Fu r t h e r m o r e ,   a p a r t   f r o m   t h e   m i c r o   i s s u e 
o f   w h e t h e r   o r   n o t   a n   i n d i v i d u a l   S M E   h a s 
e n o u g h   c o l l a t e r a l   o r   i s   i n n o v a t i v e ,   t h e r e 
i s   t h e   m a c r o   i s s u e   o f   w h e t h e r   o r   n o t   t h e 
i n t e r m e d i a r y   w i l l   e x c e e d   t h e   r e f e r e n c e 
v o l u m e   s e t .   I f   t h e   i n t e r m e d i a r y   d o e s   n o t 
exceed this target, the facilit y will not pro -
vide guarantee suppor t to the ‘deadweight ’ 
component o f th e p or tfol io.

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CONCLUSIONS	AND	
RECOMMENDATIONS

9 9.
T h e   S M E G   u n d e r   C I P   b u i l t   o n   e x t e n s i v e 
e x p e r i e n c e   f r o m   a   p r e v i o u s   p r o g r a m m e 
( M A P ) ,   v a l i d a t e d   b y   e x t e r n a l   e v a l u a t o r s 
w h o   r e c o m m e n d e d   t h e   c o n t i n u a t i o n   o f 
the programme with its diversit y of instru-
m e n t s   ( e xce p t   t h e   I C T   l o a n   w i n d ow   w h i c h 
w a s   t h e r e f o r e   c l o s e d ) .   I t   w a s   n o t   c o n s i d -
e re d   n e c e s s a r y,   e i t h e r   by   t h e   Co m m i s s i o n 
o r   t h e   B u d g e t a r y   A u t h o r i t y,   t o   e x p l i c i t l y 
s t a t e   t h e   i n t e r v e n t i o n   l o g i c ,   s i n c e   l o a n 
g u a r a n t e e s   a r e   a c c e p t e d   t o   b e   a   h i g h l y 
e f fe c t i ve   a n d   e f f i c i e n t   w ay   t o   a d d re s s   t h e 
polic y  objec tive s.

T h e r e   i s   n o   d o u b t   t h a t   t h e   b e s t   p r a c -
t i c e s   f o r   e x t e n d e d   i m p a c t   a s s e s s m e n t s 
h a v e   e v o l v e d   s i n c e   t h e   t i m e   w h e n   t h e 
C I P   e x t e n d e d   i m p a c t   a s s e s s m e n t   w a s   c a r -
r i e d   o u t ,   b a c k   i n   2 0 0 5 .   I t   i s   e q u a l l y   c l e a r 
t h at   t h e   Co m m i s s i o n   s e r v i ce s   w i l l   s t r i ve   to 
a p p l y   h i g h e r   s t a n d a rd s   a n d   to   a d d re s s   t h e 
Co u r t ' s   co n ce r n s   i n   t h e   p re p a rat i o n   o f   t h e 
CIP  successor  programme.

The Commission is fully aware of the bene -
fit  of  clear  an d  meaning f ul  in dicator s.  Th is 
i s   i l l u s t rate d   by   t h e   f a c t   t h at   t h e   Co m m i s -
s i o n   s e r v i ce s   to o k   t h e   i n i t i at i ve   i n   2 0 0 9   to 
c o m m i s s i o n   a n   e v a l u a t i o n   t o   r e v i e w   t h e 
i n d i c a t o r s .   T h e   p r o p o s a l s   m a d e   —   b a s e d 
o n   a   t h o r o u g h   r e v i e w   o f   t h e   i n t e r v e n t i o n 
l o g i c   —   h a v e   a l r e a d y   b e e n   i m p l e m e n t e d 
a n d   c o n s t i t u t e   a n   i m p r o v e m e n t   t h a t 
s h o u l d   a d d r e s s   s o m e   o f   t h e   C o u r t ' s   c o n -
cer ns.

Recommendatio n	1
T h e   C o m m i s s i o n   a c c e p t s   t h i s   r e c o m m e n -
d a t i o n ,   w h i c h   i s   a l r e a d y   b e i n g   t a k e n   i n t o 
a c c o u n t   i n   t h e   d i s c u s s i o n s   a n d   p l a n n i n g 
for  th e  n ex t   gene ration  of  fin an c ial  ins tr u -
ments in the post-2013 M ultiannual Finan-
cial Fram ewor k .

A s   r e g a r d s   v i s i b i l i t y ,   t h e   C o m m i s s i o n 
h a s   c a r r i e d   o u t   i n f o r m a t i o n   a c t i v i t i e s 
i n   a l m o s t   a l l   p a r t i c i p a t i n g   c o u n t r i e s   t o 
i n c r e a s e   a w a r e n e s s   o f   t h e   S M E G   a n d   G I F. 
SME Finance Days were organised in 28 CIP 
p a r t i c i p a t i n g   c o u n t r i e s,   re a c h i n g   o u t   t o   a 
b r o a d   a u d i e n c e   o f   i n t e r m e d i a r i e s ,   S M E s 
and  mu lt ipl iers. 

Common	reply	for	96, 	97	a nd	98
T h e   C o m m i s s i o n   b e l i e v e s   t h a t   t h e r e   i s   a 
s t ro n g   p re s u m p t i o n   i n   f avo u r   o f   E U   a d d e d 
v a l u e   b e i n g   p r e s e n t ,   a s   o b s e r v e d   b y   t h e 
MA P fin al e val uation. 

T h e   2 0 0 4   e x t e r n a l   e v a l u a t i o n   o f   t h e   M A P 
c o n c l u d e d   t h a t :  ‘ B o t h   i n s t r u m e n t s   d e m o n -
s t ra t e   c l e a r   E u r o p e a n   a d d e d   va l u e   w h i c h   i s 
b o t h   q ua n t i t a t i ve :   t h e y   h a ve   a l l owe d   f i n a n -
cial intermediaries to take more risk through 
i n v e s t i n g   ( E T F   S t a r t - u p )   a n d   g u a r a n t e e i n g 
( S M E G )   l a r g e r   v o l u m e s ;   a n d   q u a l i t a t i v e : 
M A P   s u p p o r t   a n d   E I F   s i g n a t u r e   h a v e   g i v e n 
“legitimac y ” to funds supp or ted and to some 
e x te n t   to   S M E   f i n a l   b e n e f i c i a r i e s   ( E T F   S t a r t -
up), and helped micro - enterprises to become 
“ban kable” (S ME G M icro - c redit)’.

I t   s h o u l d   b e   f u r t h e r   n o t e d   t h a t   t h e   s a m e 
ex ter n al e val u atio n co nc l uded  t hat :

‘ [ … ]   i n   c o u n t r i e s   w h e r e   E I F   h a s   w o r k e d 
w i t h   p owe r f u l   n a t i o n a l   f i n a n c i a l   i n te r m e d i-
a r i e s , [ … ]   t h e r e   h a v e   b e e n   s t r o n g   c o m p l e -
m e n t a r i t i e s   l e a d i n g   t o   p a r t i c u l a r l y   h i g h 
added value [… ] a nd  cross-fer t ili s at i on’;

T h e   o u t c o m e   o f   t h i s   s e l e c t i o n   o f   c a s e s 
c o u l d   a l s o   b e   a   r e f l e c t i o n   o f   t h e   f i n a n -
c i a l   a n d   e c o n o m i c   c r i s i s   i n   2 0 0 8 – 1 0   ( w i t h 
t h e   m o s t   s e ve re   re ce s s i o n   s i n ce   t h e   G re a t 
D e p re s s i o n ) .  Th e   re ce s s i o n   h a s   m e a nt   t h at 
r i s k   l e v e l s   h a v e   i n c r e a s e d   a n d   l e d   t o   l e s s 
invest ment in innovatio n by SM E s. 

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REPLY OF THE 
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1 01 .
T h e   E I F   w o r k s   w i t h   c l e a r   s e l e c t i o n   g u i d e -
l i n e s   a s   a g r e e d   w i t h   t h e   C o m m i s s i o n 
( A n n e x   1   t o   t h e   F M A )   t o   i m p l e m e n t   t h e 
m a n d a t e   u n d e r   a n   o p e n   c a l l   a n d,   a s   m e n -
t i o n e d   b y   t h e   C o u r t   i n   p a r a g r a p h   2 9 ,   t h e 
E IF h as th e n ecessar y  exper tise.

I n   t h e   p r e - s e l e c t i o n   p r o c e s s   o f   a s s e s s -
i n g   a n   a p p l i c a t i o n ,   t h e   E I F   re q u i re s   i n t e r -
m e d i a r i e s   t o   m e e t   m i n i m u m   s t a n d a r d s   a s 
regards the sufficienc y of infor mation pro -
vided  as desc r ibed below.

T h e   p r e - s e l e c t i o n   p r o c e d u r e   i s   a   f o r m a l 
s e l e c t i o n   b y   t h e   g u a r a n t e e   t r a n s a c t i o n 
t e a m   b a s e d   e s s e n t i a l l y   o n   t h e   q u a l i t y   o f 
t h e   a p p l i c a t i o n   w i t h   r e s p e c t   t o   t h e   e l i g i -
b i l i t y   a n d   s e l e c t i o n   c r i t e r i a .   Fu r t h e r m o re, 
e a c h   p r o p o s a l   i s   s u b j e c t   t o   a n   i n d e p e n d -
e n t   o p i n i o n   f r o m   E I F ’s   r i s k   m a n a g e m e n t , 
a   c o m p l i a n c e   o p i n i o n ,   a n d   a   f o r m a l   p r e -
B o a r d   r e v i e w   m e e t i n g   i n c l u d i n g   a l l   r e l e -
vant E IF ser vices. 

The Commission, however, will fur ther con -
s i d e r   w h e t h e r   i t   wo u l d   b e   a p p ro p r i a t e   fo r 
the EIF to use a scor ing system for any suc -
ce s s o r   p ro gra m m e   i n   t h i s   k i n d   o f   c a l l   p ro -
cedure in  order to defin e a  min i mum score 
level.

Recommendatio n	3
T h e   C o m m i s s i o n   w i l l   f u r t h e r   c o n s i d e r 
w h e t h e r   i t   w o u l d   b e   a p p r o p r i a t e   f o r   t h e 
E I F   to   u s e   a   s co r i n g   s ys te m   fo r   a ny   s u cce s -
s o r   p r o g r a m m e   i n   o r d e r   t o   d e f i n e   a   m i n i -
mum score level.

A s   r e g a r d s   d o c u m e n t a t i o n   o f   g u a r a n t e e 
p a r a m e t e r s ,   t h e   C o m m i s s i o n   w i l l   f u r t h e r 
c o n s i d e r   t h e   n e e d   f o r   a n y   c l a r i f i c a t i o n   o f 
r e q u i r e m e n t s ,   a s   w e l l   a s   a n y   a d d i t i o n a l 
m e a s u re s,   re g a rd i n g   t h e   E I F ’s   d o c u m e n t a-
t i o n   re l at i n g   to   c a l c u l at i o n s   o f   p a ra m e te r s 
for t he g uarantee agreements.

100.
I n 2006 and 2007, the Commission debated 
i n t e r n a l l y   a   n u m b e r   o f   k e y   i s s u e s   re l a t i n g 
to   t h e   p e r fo r m a n ce   o f   t h e   f a c i l i t y,   i n c l u d-
i n g   t h e   p a r a m e t e r s   o f   e n h a n c e d   a c c e s s 
t o   f i n a n c e .   B o t h   t h e   C o m m i s s i o n   a n d   t h e 
E I F   fo u n d   i t   n e ce s s a r y   to   a d d re s s   i n   d e t a i l 
a n d   r e a s s e s s   a   l a r g e   p a r t   o f   t h e   d e l i v e r y 
o f   t h e   f a c i l i t y   a n d   t h e s e   n e w   m e a s u re s   a re 
r e f l e c t e d   i n   t h e   F M A   u n d e r   t h e   C I P   S M E 
G u a r a n t e e   f a c i l i t y.   H o w e v e r,   M A P   a g r e e -
m e n t s   c o u l d   b e   s i g n e d   u n t i l   t h e   e n d   o f 
2 0 0 6   w i t h   a v a i l a b i l i t y   p e r i o d s   l a s t i n g   u p 
t o   D e c e m b e r   2 0 0 8 ,   w h i c h   fo r   m a ny   i n t e r -
m e d i a r i e s   cove re d   at   l e a s t   p a r t   o f   t h e   g a p 
bet ween MAP  and C IP.

I n   a d d i t i o n ,   t h e   C o m m i s s i o n   a n d   t h e   E I F 
h a v e   n o   i n d i c a t i o n s   t h a t   t h e   f a c i l i t y   h a s 
s u f fe re d   a s   a   re s u l t   o f   t h e   d e l ay   i n   l a u n c h-
i n g   i t.   O n   t h e   co nt ra r y,   t h e   i m p rove d   m a n -
a g e m e n t   s t r u c t u re s,   to g e t h e r   w i t h   e f fo r t s 
u n d e r t a k e n   t o   s t r e a m l i n e   t h e   a p p r o v a l 
p r o c e s s ,   h a v e   y i e l d e d   p o s i t i v e   r e s u l t s   i n 
t e r m s   o f   s m o o t h e r   p r o c e s s i n g   o f   E I F   s u b -
mis sions.

Recomme ndat ion	2
The Commission fully understands the rea -
s o n i n g   b e h i n d   t h i s   r e c o m m e n d a t i o n   a n d 
a g r e e s   t h a t   i t   w o u l d   b e   d e s i r a b l e   t o   p r o -
c e e d   i n   t h e   w a y   s u g g e s t e d   b y   t h e   C o u r t . 
H owe ve r,   t h e   t i m e t a b l e   o f   t h e   co - d e c i s i o n 
p ro ce s s   fo r   t h e   l e g a l   b a s i s   m e a n s   t h at   t h e 
f i n a l   c o n t e n t   o f   t h e   l e g a l   b a s i s   i s   u s u a l l y 
n o t   k n o w n   u n t i l   s h o r t l y   b e f o r e   i t s   e n t r y 
i nto   fo rce.   Fo r   t h i s   re a s o n ,   w h i l e   t h e   Co m -
m i s s i o n   w i l l   d o   a   s i g n i f i c a n t   a m o u n t   o f 
p re p a rato r y   wo r k   i n   a d va n ce,   i t   c a n n o t   b e 
s u r e   w h e t h e r   o r   n o t   i t   h a s   f u l l y   c o v e r e d 
a l l   a s p e c t s   o f   t h e   l e g a l   b a s i s   u n t i l   t h e   l a t-
te r   i s   fo r m a l l y   a d o p te d.  Th e   a i m   w i l l   b e   to 
h a v e   a   p o s s i b l y   f o r t h c o m i n g   p r o g r a m m e 
o p e rat i o n a l   at   t h e   s t a r t   o f   t h e   p ro gra m m e 
per iod.

Special Report No 4/2011 – The audit of the SME Guarantee facility

Special Report No 4/2011 – The audit of the SME Guarantee facility

6363

REPLY OF THE 
COMMISSION

T h e   C I P   p r o g r a m m e   i s   a d d r e s s i n g   p o t e n -
t i a l   d e a d w e i g h t   i s s u e s   i n   i t s   d e s i g n   b y 
requir in g an  inter m ediar y  to do more  th an 
i t   w o u l d   d o   w i t h o u t   t h e   C I P   g u a r a n t e e , 
a s   t h e   g u a r a n t e e   i s   c o n d i t i o n a l   u p o n   t h e 
i nte r m e d i a r y   exce e d i n g   t h e   re fe re n ce   vo l -
ume. The latter is defined as the estimated 
v o l u m e   o f   f i n a n c e   t h a t   t h e   i n t e r m e d i a r y 
w o u l d   p r o v i d e   i n   t h e   a b s e n c e   o f   t h e   C I P 
g u a r a n t e e .   T h e   C o m m i s s i o n   n o n e t h e l e s s 
a gre e s   t h at   a p p ro p r i ate   m e a s u re s   to   m i n i -
m i s e   d e a d w e i g h t   s h o u l d   b e   e n v i s a g e d   i n 
any  successor  program me.

Recommendatio n	5
The Commission accepts this recommenda -
t i o n ,   w h i c h   w i l l   b e   t a k e n   i n t o   a c c o u n t   fo r 
any  successor  program me  to  th e  SM E G.

1 04 .
T h e   E I F   d o e s   s p re a d   g o o d   p r a c t i c e s   e s p e -
c i a l l y   i n   c o u n t r i e s   w i t h   d e ve l o p i n g   f i n a n -
c i a l   m a r k e t s   a n d   d e v e l o p i n g   g u a r a n t e e 
s c h e m e s.   I t   i s   n o t   i n t e n d e d   t h a t   t h e   Co m -
m i s s i o n   a n d   t h e   E I F   u n i l a t e r a l l y   i m p o s e 
g u a r a n t e e   c o n d i t i o n s / p r a c t i c e s .   A l l   t h e 
relevant infor mation is carefully evaluated 
a n d   t a i l o r- m a d e   s o l u t i o n s   a re   p ro p o s e d   to 
fit the economic situation, taxation regime 
and business prac tices in the relevant mar-
k et.

T h e   C o m m i s s i o n   b e l i e v e s   t h a t   t h e r e   i s   a 
s t ro n g   p re s u m p t i o n   i n   f avo u r   o f   E U   a d d e d 
v a l u e   b e i n g   p r e s e n t ,   a s   o b s e r v e d   b y   t h e 
MAP  final evaluation . 

102.
T h e   C o m m i s s i o n   a g r e e s   t h a t   t h e  ‘n u m b e r 
o f   j o b s   c r e a t e d ’  i s   t h e   m o r e   a p p r o p r i a t e 
i n d i c a t o r   t o   c o l l e c t   i n   t h e   l i g h t   o f   e v a l u -
ation of t he pro gram me.

Recomme ndat ion	4
The Commission accepts this recommenda -
t i o n ,   w h i c h   w i l l   b e   t a k e n   i n t o   a c c o u n t   fo r 
any su cces sor p ro gramme to the  SME G.

103.
I n n o v a t i o n   i s   o n e   o f   t h e   o b j e c t i v e s 
d e s c r i b e d   i n   t h e   l e g a l   b a s i s ,   a n d   t h e 
r e s u l t s   o f   t h e   t e l e p h o n e   i n t e r v i e w s   c a r -
r i e d   o u t   i n   t h e   co nte x t   o f   t h e   o n g o i n g   E I P 
e v a l u a t i o n   c l e a r l y   s h o w   t h a t   S M E G   h a s 
s u p p o r te d   i n n ovat i o n .   O n   t h e   o t h e r   h a n d, 
i n n o v a t i o n   i s   n o t   t h e   s o l e   o b j e c t i v e   a n d 
t h e re   i s   n o   s p e c i f i c   q u o t a   o r   t a rg e t   s p e c i -
f i e d   i n   t h e   l e g a l   b a s i s   n o r   a n y   m a n d a t e 
r e g a r d i n g   t h e   p e r c e n t a g e   o f   i n v e s t m e n t s 
t h at   s h o u l d   b e   m a d e   i n   s u p p o r t   o f   i n n ova -
tion.

T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   a   c o m -
b i n e d   r e a d i n g   o f   r e c i t a l s   2 0 ,   2 2   a n d   2 7 
s h o w s   t h a t   t h e   p r o g r a m m e   h a s   a   b r o a d e r 
s c o p e   t h a n   t h a t   i n d i c a t e d   b y   t h e   C o u r t . 
SMEG aims at a wide range of SMEs includ -
i n g   t h e i r   f u l l   l i fe   c yc l e   (A r t i c l e s   1 0   a n d   1 7 
o f   t h e   l e g a l   b a s i s )   a n d   n o t   o n l y   at   i n n ova -
t i ve   S M E s   o r   t h o s e   l a c k i n g   c o l l a t e r a l.  T h i s 
is reflec ted in it s  imp lem entat io n . 

‘D eadweight ’ should not be seen as synon -
y m o u s   w i t h   i n e f f i c i e n t   b u d g e t   a l l o c a t i o n . 
S M E G   g u a r a n t e e s   a r e   p r o v i d e d   o n   a   p o r t-
f o l i o   b a s i s   a s   o p p o s e d   t o   a   l o a n - b y - l o a n 
gua rantee.

Special Report No 4/2011 – The audit of the SME Guarantee facility

Special Report No 4/2011 – The audit of the SME Guarantee facility

64

REPLY OF THE 
COMMISSION

T h e   2 0 0 4   e x t e r n a l   e v a l u a t i o n   o f   t h e   M A P 
co n c l u d e d   t h at :  ‘ B o t h   i n s t r u m e nt s   d e m o n -
s t r a t e   c l e a r   E u r o p e a n   a d d e d   v a l u e   w h i c h 
i s   b o t h   q u a n t i t a t i v e :   t h e y   h a v e   a l l o w e d 
f i n a n c i a l   i n t e r m e d i a r i e s   t o   t a k e   m o re   r i s k 
through investing (E TF Star t-up) and guar-
anteeing (SMEG) larger volumes; and quali-
tative: MAP suppor t and EIF signature have 
gi ve n  “ l e gi t i m a c y ”  to   f u n d s   s u p p o r te d   a n d 
t o   s o m e   e x t e n t   t o   S M E   f i n a l   b e n e f i c i a r i e s 
( E T F   S t a r t - u p ) ,   a n d   h e l p e d   m i c r o e n t e r -
p r i s e s   to   b e co m e  “ b a n k a b l e”  ( S M E G   M i c ro -
credit)’.

I t   s h o u l d   b e   f u r t h e r   n o t e d   t h a t   t h e   s a m e 
ex ter n al e va luat ion  con cl uded  t hat :

‘ [ … ]   i n   c o u n t r i e s   w h e r e   E I F   h a s   w o r k e d 
w i t h   p owe r f u l   n a t i o n a l   f i n a n c i a l   i n te r m e d i-
a r i e s , [ … ]   t h e r e   h a v e   b e e n   s t r o n g   c o m p l e -
m e n t a r i t i e s   l e a d i n g   t o   p a r t i c u l a r l y   h i g h 
added valu e […] an d c ros s-fer t ili s at ion’;

T h e   o u t c o m e   o f   t h i s   s e l e c t i o n   o f   c a s e s 
c o u l d   a l s o   b e   a   r e f l e c t i o n   o f   t h e   f i n a n -
c i a l   a n d   e c o n o m i c   c r i s i s   i n   2 0 0 8 – 1 0   ( w i t h 
t h e   m o s t   s e ve re   re ce s s i o n   s i n ce   t h e   G re a t 
D e p re s s i o n ) .  Th e   re ce s s i o n   h a s   m e a nt   t h at 
r i s k   l e v e l s   h a v e   i n c r e a s e d   a n d   l e d   t o   l e s s 
invest me nt  in innovation by SM E s. 

Recomme ndatio n	6
T h e   C o m m i s s i o n   a c c e p t s   t h i s   r e c o m m e n -
d a t i o n ,   w h i c h   i s   a l r e a d y   b e i n g   t a k e n   i n t o 
a c c o u n t   i n   t h e   d i s c u s s i o n s   a n d   p l a n n i n g 
for  t he  nex t   generat ion  of  financ i a l   i n st r u -
ments in the post-2013 M ultiannual Finan-
c i a l   Fra m e wo r k ,   w h e re  ‘e n s u r i n g   E U   a d d e d 
v a l u e ’  i s   o n e   o f   t h e   k e y   p r i n c i p l e s   t h a t 
m u s t   b e   re s p e c te d   by   a l l   p ro p o s e d   i n s t r u -
ment s. 

Special Report No 4/2011 – The audit of the SME Guarantee facility

European Court of Auditors

Special	Report	No	4/2011

The	audit	of	the	SME	guarantee	facility

Luxembourg: Publications Office of the European Union

2011 — 64 pp. — 21 × 29.7 cm

ISBN 978-92-9237-157-9

doi:10.2865/24926

Special Report No 4/2011 – The audit of the SME Guarantee facility

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Q
J
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A
B
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1
1
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0
0
2
-
E
N

-
C

ONE  OF  THE  FINANCIAL  INSTRUMENTS  ESTABLISHED  UNDER  THE 

COMPETITIVENESS  AND  INNOVATION  FRAMEWORK  PROGRAMME 

OF  THE  EUROPEAN  UNION  IS  THE  SME  GUARANTEE  FACILITY.  IN  THIS 

REPORT, THE COURT EXAMINES THE FACILITY‘S DESIGN AND PLANNING, 

THE  MANAGEMENT  OF  ITS  OPERATIONS  AND  THE  ACHIEVEMENT  OF 

ITS  OBJECTIVES  IN  ORDER  TO  ASSESS  ITS  EFFECTIVENESS.  WHILE  THE 

COMMISSION HAS ALREADY MADE SIGNIFICANT PROGRESS COMPARED 

TO  THE  PREVIOUS  PROGRAMMES,  FURTHER  IMPROVEMENTS  ARE 

RECOMMENDED  CONCERNING  THE  DESIGN  AND  THE  OPERATIONAL 

MANAGEMENT AND FOR MEASURING THE ACHIEVEMENTS OF THE FACILITY.   

EUROPEAN COURT OF AUDITORS