COMMISSION STAFF WORKING DOCUMENT Activities relating to financial instruments Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on financial instruments supported by the general budget according to Art. 140.8 of the Financial Regulation as at 31 December 2014
Date: 2015-11-13
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU aid, EU financial instrument, EU programme, aid to undertakings, eligibility criteria, financial management, general budget (EU), small and medium-sized enterprises

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 13.11.2015  SWD(2015) 206 final   COMMISSION STAFF WORKING DOCUMENT Activities relating to financial instruments  Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on financial instruments supported by the general budget according to Art. 140.8 of the Financial Regulation as at 31 December 2014 {COM(2015) 565 final}  
 
 
Table of Contents 
I. INTRODUCTION .......................................................................................................................................... 4 

II. OVERVIEW TABLE .................................................................................................................................... 6 

III. GENERAL CONTEXT ............................................................................................................................. 13 

1.  The EU Economy in 2014 ............................................................................................................................ 13 

2.  Strategic Target Groups ............................................................................................................................... 16 

2.1.  EU SMES ............................................................................................................................................. 16 

2.2.  EU Midcaps ......................................................................................................................................... 29 

2.3.  EU Micro-enterprises ........................................................................................................................... 29 

3.  Strategic Sectors ........................................................................................................................................... 32 

3.1.  Research and Innovation ...................................................................................................................... 33 

3.2.  Transport .............................................................................................................................................. 34 

3.3.  Energy Infrastructure and Energy Efficiency ...................................................................................... 36 

3.4. 

ICT/Broadband .................................................................................................................................... 37 

3.5.  Social Enterprises................................................................................................................................. 38 

3.6.  Education ............................................................................................................................................. 40 

4.  Strategic Non-EU Regions ........................................................................................................................... 41 

4.1.  Enlargement Countries......................................................................................................................... 41 

4.2.  Neighbourhood Countries .................................................................................................................... 42 

4.3.  Countries covered by the Development Cooperation Instrument (DCI) ............................................. 43 

5.  Conclusion .................................................................................................................................................... 43 

6.  Annex-Additional Information on the European Equity Market ................................................................. 44 

6.1.  The structure of the European Equity Market ...................................................................................... 44 

6.2.  Regulatory framework for the Venture Capital market ....................................................................... 45 

IV.  INFORMATION  ON  FINANCIAL  INSTRUMENTS  according  to  Article  140.8  of  the  Financial 
Regulation .................................................................................................................................................. 47 

1.  Equity Instruments ....................................................................................................................................... 47 

1.1.  The  High  Growth  and  Innovative  SME  Facility  (GIF)  under  the  Competitiveness  and  Innovation 
Framework Programme (CIP) .................................................................................................................. 47 

1.2.  Equity Facility under COSME ............................................................................................................. 56 

1.3. 

InnovFin SME Venture Capital (Horizon 2020) ................................................................................. 60 

2.  Guarantee Instruments .................................................................................................................................. 65 

2.1.  The  SME  Guarantee  Facility  (SMEG07)  under  the  Competitiveness  and  Innovation  Framework 
Programme (CIP) ...................................................................................................................................... 65 

2.2.  European Progress Microfinance Guarantee Facility (EPMF – G) ..................................................... 73 

2.3.  EaSI Microfinance and Social Entrepreneurship ................................................................................. 79 

2 

 
 
2.4.  Loan Guarantee Facility under COSME .............................................................................................. 83 

2.5.  RSI (Pilot guarantee facility for R&I-driven SMEs and Small Midcaps) under FP7 .......................... 88 

2.6.  SMEs & Small Midcaps R&I Loans Service under Horizon 2020 ..................................................... 91 

2.7.  The Cultural and Creative Sectors Guarantee Facility ........................................................................ 96 

2.8.  Student Loan Guarantee Facility - ERASMUS+ ................................................................................. 99 

2.9.  Private Finance for Energy Efficiency Instruments (PF4EE) ............................................................ 102 

3.  Risk Sharing Instruments ........................................................................................................................... 106 

3.1.  Risk-Sharing Finance Facility under the FP7 (RSFF) ....................................................................... 106 

3.2.  Horizon 2020 Loan Services for R&I Facility ................................................................................... 110 

3.3.  Loan Guarantee Instrument (LGTT) .................................................................................................. 115 

3.4.  Project Bond Initiative ....................................................................................................................... 122 

3.5.  Risk sharing debt instrument under the Connecting Europe Facility (CEF DI) ................................ 130 

3.6.  Natural Capital Financing Facility (NCFF) ....................................................................................... 134 

3.7.  EU SME Initiative.............................................................................................................................. 138 

4.  Dedicated Investment Vehicles .................................................................................................................. 144 

4.1.  The European Progress Microfinance FCP-FIS (PMF FCP-FIS) ...................................................... 144 

4.2.  The 2020 European Fund for Energy, Climate Change and Infrastructure – (Marguerite) ............... 150 

4.3.  European Energy Efficiency Fund (EEEF) ........................................................................................ 158 

5.  Financial Instruments in the Enlargement Countries ................................................................................. 165 

5.1.  Guarantee Facility under the Western Balkans Enterprise Development and Innovation Facility ... 165 

5.2.  Enterprise  Expansion  Fund  (ENEF)  under  the  Western  Balkans  Enterprise  Development  and 
Innovation Facility (EDIF) ..................................................................................................................... 170 

5.3.  Enterprise  Innovation  Fund  (ENIF)  under  the  Western  Balkans  Enterprise  Development  and 
Innovation Facility (EDIF) ..................................................................................................................... 175 

5.4.  European Fund for Southeast Europe (EFSE) ................................................................................... 181 

5.5.  Green for Growth Fund (GGF) .......................................................................................................... 185 

5.6.  SME Recovery Support Loan for Turkey (RSL) ............................................................................... 191 

6.  Financial Instruments in Neighbourhood and Countries covered by the DCI ........................................... 195 

6.1.  Neighbourhood Investment Facility (NIF) ........................................................................................ 195 

6.2. 

Investment Facility for Central Asia (IFCA) & Asian Investment Facility (AIF) ............................ 203 

6.3.  Latin America Investment Facility (LAIF) ........................................................................................ 213 

6.4.  Support to the Facility for Euro-Mediterranean Investment Partnership (FEMIP) ........................... 221 

6.5.  Global Energy Efficiency and Renewable Energy Fund (GEEREF) ................................................ 227 

V. REFERENCES.......................................................................................................................................... 235 

VI. LIST OF ACRONYMS ........................................................................................................................... 239 

3 

 
 
I. INTRODUCTION 

This Staff Working Document (SWD) constitutes an Annex to the report of the Commission to the European 
Parliament  and  the  Council  on  financial  instruments  supported  by  the  general  budget  according  to  Article 
140(8) of the Financial Regulation1 as at 31 December 2014. Complementing the information given in the 
main  report,  it  provides  additional  specific  information  on  individual  financial  instruments,  on  progress 
made in their implementation and on the environment in which they operate.2 
In many Member States access to finance for SMEs remains challenging and may jeopardise the economic 
recovery. At the same time, infrastructure investment needs for transport, energy and broadband networks 
are  estimated  at  EUR  1  trillion  through  2020.  Hence,  the  risk  of  a  funding  gap  in  Europe  remains  acute, 
against  the  backdrop  of  continuing  deleveraging  pressures  and  still  significant  fragmentation  in  financial 
markets across Member States. 
In this context, the real economy in the Union and beyond can benefit from EU financial instruments, which 
aim  to  alleviate  financial  market  failures  –  as  identified  in  the  relevant  ex-ante  evaluations  –  while  at  the 
same time leveraging on the positive effects of EU-wide actions.  
In  general,  funds  available  for  public  policy  are  limited  and  therefore  additional  resources  are  needed  to 
pursue public objectives more effectively. For this reason, financial instruments can play a very useful role 
in  catalysing  private  and  public  funds  by  sharing  some  of  the  financing  risks  through  limited  Union 
resources,  thus  providing  financial  leverage.  Financial  instruments  also  ensure  policy  leverage  by 
incentivising  financial  intermediaries  to  pursue  common  objectives  through  alignment  of  interest,  and 
institutional  leverage  by  mobilising  EU  policy  expertise  of  the  institutional  actors  involved  in  the 
implementation chain. 
Based  on  this  rationale,  financial  instruments  have  already  played  a  significant  role  by  reaching  out  to 
important  target  groups  such  as  SMEs,  innovative  enterprises  and  microenterprises,  and  supporting  high-
value projects in strategic sectors like transport and energy. They helped address market failures and were 
able  to  mobilise  significant  additional  resources  from  the  private  and  the  public  sector.  For  example,  the 
main  EU-level  2007-2013  financial  instruments  dedicated  to  SME  support  (CIP-GIF,  CIP-SMEG  07  and 
RSI)  and  micro-SME  support  (EPMF)  with  an  overall  contribution  of  more  than  EUR  1,6  billion 
(commitments from Union budget), by the end of 2014 supported lending of over EUR 20 billion and also 
mobilised equity investments of about EUR 1 billion, thus enhancing access to finance for almost 373 000 
SMEs. 
With the experience gained in the course of implementation, and in the context of programme evaluations, 
audits  and  consultations  with  a  wide  range  of  stakeholders,  several  lessons  have  been  learned  on  how  to 
further  improve  the  design  and  management  of  financial  instruments.  In  particular,  the  following  best 
practices have been capitalised for the design of the 2014-2020 facilities. 
First, more consistency has been achieved in the governance, supervision and control of these instruments 
through the regulatory framework established in the Financial Regulation, and via standardised contractual 
arrangements  with  entrusted  entities  (Financial  and  Administrative  Framework  Agreements,  Template  for 
Delegation Agreements, etc.). These efforts have been largely supported by the Financial Instruments Inter-
service  Expert  Group  at  the  Commission  level3  and  by  the  Commission  Expert  Group  'EU  Platform  for 
Blending in External Cooperation' (EUBEC). 
Secondly, Financial Instruments will now cover all main types of final recipients over the full funding cycle 
and will include offer of both pro- and counter-cyclical products to respond flexibly to market needs, based 
on demand-driven implementation.  

1 Regulation (EU, EURATOM) No 966/2012 of the European Parliament and of the Council of 25 October 2012, (OJ L298/1, 

26.10.2012). 

2 Reports on Financial Instruments implemented by Managing Authorities in the Member States under shared management, and 

instruments under the EDF will be prepared separately. 

3 Commission-internal group established for the purpose of cross-policy coordination among Commission services in view of the 

design and management of 2014-2020 financial instruments. 

4 

 
                                                 
Thirdly,  effectiveness  and  efficiency  have  been  enhanced  through  fewer  instruments  with  larger  volumes, 
ensuring critical mass in full consistency with State aid rules. Further, alignment of interest with entrusted 
entities and financial intermediaries is ensured through risk sharing and fees and incentives. 
Financial instruments are thus a proven way to achieve EU policy objectives. They use EU funds to support 
economically viable projects and attract significant volumes of additional public and private financing. By 
injecting money into the real economy, financial instruments contribute to the achievement of the EU policy 
objectives  enshrined  in  the  Europe  2020  Strategy,  notably  in  terms  of  employment,  innovation,  climate 
change and energy sustainability, education and social inclusion. 
In  consequence  of  the  expanded  role  of  financial  instruments,  this  SWD  not  only  provides  quantitative 
information  on performance  of financial instruments such as leverage and volume of  financing supported, 
but  also  analyses  the  macro-financial  context  of  potential  final  recipients  and  financial  intermediaries, 
outlining  general  market  developments  in  the  EU  policy  areas  supported  and  their  implications  for  the 
financial ecosystem. 
Compared to last year, the present SWD has been enriched, notably with further information on instrument 
performance, volume of financing supported and fiduciary accounts. 
The SWD is divided into six parts. After the present Introduction (Part I), it offers an overview table (Part II) 
of the financial instruments covered. 
Thereupon, with the aim to provide a rationale for use of financial instruments in a given policy area, the 
general context (Part III) describes the EU economic environment in 2014 taking into consideration strategic 
target groups, sectors, and non-EU regions.  
Thereafter, Part IV provides detailed information on each financial instrument. This part is divided into six 
chapters  dealing  with  equity  instruments,  guarantee  instruments,  risk-sharing  instruments,  and  dedicated 
investment vehicles, as well as instruments in the enlargement and neighbourhood countries and in countries 
covered by the Development Cooperation Instrument. 
Finally, Parts V and VI contain references and acronym lists, respectively. 

5 

 
II. OVERVIEW TABLE 

Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

GIF (CIP)6 

E7 Old8 

Dec N°  
1639/2006/EC 

GROW 
ECFIN 

EIF 

EFG 
(COSME) 

E New9 

Reg. N° 
1287/2013 

GROW 

EIF 

InnovFin 
SME 
Venture 
Capital(H202
0) 

E New 

Reg. N°  
1291/2013; 
1290/2013 

RTD 

EIF 

Increase the 
supply of equity 
for innovative 
SMEs 

Increase the 
supply of equity 
for SMEs 

Improve access to 
risk finance by 
early-stage R&I-
driven SMEs and 
small midcaps 

SMEs 

SMEs 

Innovative 
SMEs & 
Small 
Midcaps 

SMEs with no 
specific sector 
/ 
innovative 

SMEs with no 
specific sector 
focus 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

605,70 

625,20 

358 

984* 
3 204** 

371* 

19,5 

18,5 

633,00 

51,67 

32.50 

2 600 to 3 
900*** 

360 to 
540*** 

n/a 

1,4 

R&I 

430,00 

n/a 

n/a 

n/a 

n/a 

n/a 

n/a 

SMEG07 
(CIP) 

G10Old 

Dec 
N°1639/2006/
EC 

GROW 
ECFIN 

EIF 

Increase the 
supply of debt 
financed to SMEs 

SMEs 

SMEs with no 
specific sector 
focus 

637,80 

649,90 

336.15 

18 600* 
25 445** 

356 589* 

12,1 

17,08 

4 Implementing Body in charge 
5 Note: Including management fees 
6 The executed budget is computed including EFTA contributions and third countries contribution paid by Participating Countries and/or regularised interest, the same applies also to SMEG07 (CIP) and EMPF-G. 
7 Equity 
8 2007-2020 financial instruments 
9 2014-2020 financial instruments 
10 Guarantee 

 
 
  
 
 
                                                 
Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

EPMF-G 

G Old 

Dec 
N° 283/2010/E
U 

EMPL 
ECFIN 

EIF 

Enhances access 
to microfinance 
by reducing 
microfinance 
providers' risk 

Micro-
enterprises/ 
Households 

Micro-
finance/no 
specific focus 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

23,60 

23,87 

18,47 

160,26* 
279,03** 

14 448* 

0,27 

1,84 

EaSI-G 

G New 

Reg. (EU) N ° 
1296/ 2013 

EMPL 

n/a 

Microfinance for 
vulnerable 
groups/ Support 
social enterprises 

Micro-
enterprises/ 
Households 

Micro-finance 

190,0011 

28,40 

0 

528*** 

1 350*** 
Soc. Entr. 
and 
41 000*** 
Microfin. 

n/a 

n/a 

Loan 
Guarantee 
Facility 
(COSME) 

G New 

Reg. (EU) N°  
1287/ 2013 

GROW 

EIF 

Increase the 
supply of debt 
financed to SMEs 

SMEs 

SMEs with no 
specific sector 
focus 

686,00 

89,13 

41,74 

14 300 to 
21500* 

330 000* 

n/a 

2,45 

RSI (2007-
2013) 

G Old 

Reg. (EU) N ° 
1291/ 2013; 
1290/ 2013 

RTD 

EIF 

Address the 
financing gap for 
innovative SMEs 
and 
Small Midcaps 

Innovative 
SMEs & 
Small 
Midcaps 

R&I 

270,00 

270,00 

270,00 

831* 
3 301** 

1 376* 

1,32 

12,6 

InnovFin 
SME 
Guarantee  
(H2020) 

G New 

Reg. (EU) N°  
1291/ 2013; 
1290/ 2013 

RTD 

EIF 

Address the 
financing gap for 
innovative SMEs 
and Small 
Midcaps 

Innovative 
SMEs & 
Small 
Midcaps 

R&I 

1 060,0012 

168,6 

168,6 

11* 
475** 
9 500*** 

21* 

61 000 

4,72 

11 Out of which 96 million reserved for EaSI-G (Guarantee facility) 
12 Estimation depending on the effective contribution of H2020 to the SME Initiative 

 
 
  
 
 
 
 
 
                                                 
Organisation 

Policy Targets 

Implementation 

Financials                       

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

Financial 
Instruments 

The CCS13 
Guarantee 
Facility 

Student Loan 
Guarantee 
Facility 

G New 

Reg. (EU) N°  
1295/ 2013 

EAC 

EIF 

G New 

Reg. (EU) No 
1288/ 2013 

EAC 

EIF 

PF4EE 

G New 

Reg. (EU)N° 
1293/ 2013 

CLIMA 

EIB 

RSFF (2007-
2013) 

RS14 
Old 

Reg. (EU) N° 
1291/ 2013; 
1290/ 2013 

RTD 

EIB 

Strengthen the 
competitiveness 
of the cultural and 
creative sectors 

Support mobility, 
equity and study 
excellence 

Support access to 
finance and/or 
better financing 
conditions to EE 
investors 

Improve access to 
risk finance for 
R&I projects 

InnovFin 
Large 
Projects 
InnovFin 
MidCap 
Growth 
Finance 
InnovFin 
MidCap 
Guarantee 
(H2020) 

RS New 

Reg. (EU) N° 
1291/ 2013; 
1290/ 2013 

RTD 

EIB 

Improve access to 
risk finance for 
R&I projects 

13 Cultural and Creative Sectors 
14 Risk Sharing 

SMEs 

Arts & 
Culture 

121,00 

n/a 

n/a 

690*** 

n/a 

n/a 

n/a 

Students 

Education 

517,00 

28,4 

n/a 

3 000*** 

200 000*** 

n/a 

2 

Private 
individuals,  
associations 
SMEs 

Large firms, 
large & 
medium 
Midcaps, 
Research 
Institutes 

Large firms, 
large & 
medium 
Midcaps, 
Research 
Institutes 

Energy 

80,00 

30 

6 

540*** 

n/a 

n/a 

n/a 

R&I 

960,73 

960,73 

960,73 

9 556* 
11 313** 

98* 

136,11 

79,69 

R&I 

1 060 

483 

483 

1 157,2* 
2 446,4* 
13 250*** 

15* 

None 

15,53 

 
 
  
 
                                                 
Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

LGTT 

RS Old 

Reg. (EC) N° 
680/ 2007; 
670/2012 

MOVE 

EIB 

Project Bond 
Initiative 

RS Old 

Reg. (EU) N° 
670/ 2012; 
1316/ 2013 

MOVE 
ENER 
CONNECT 

EIB 

Risk Sharing 
debt 
instruments 
(CEF) 

RS New 

Reg. (EU) N° 
670/ 2012; 
1316/ 2013 

MOVE 
ENER 
CONNECT 

EIB 

Enhance risk-
sharing in 
transport 
infrastructure for 
TEN-T projects 

Stimulate capital 
market financing 
for infrastructure 
projects 

Stimulate capital 
market financing 
for infrastructure 
projects in 
transport, energy, 
broadband 
networks 

Infrastructur
e Projects 

Transport 

250,00 

250,00 

211,88 

Infrastructur
e Projects 

Transport, 
Energy, 
Broadband 

230,00 

230 

146 

497* 
 497** 

493* 
  840** 

6* 

35,4 

2,56 

5* 

7,04 

3,71 

Infrastructur
e Projects 

Transport, 
Energy, 
Broadband 

n/a 

n/a 

n/a 

18 000 to 
45 000*** 

n/a 

n/a 

n/a 

NCFF 

RS New 

Reg. (EU) N° 
1293/ 2013 

ENV  
CLIMA 

EIB 

Promote the 
preservation of 
natural capital 

Infrastructur
e Projects 

Environment 

60,00 

10 

3,25 

100-200*** 

n/a 

n/a 

n/a 

EU SME 
Initiative 

FCP-FIS 
(PMF FCP-
FIS) 

Reg. (EU) N° 
1287/ 
2013;     

RS New 

  12   91/ 2013; 
1303/ 2013 

REGIO 
RTD 
GROW 
ECFIN 

EIF 

Enhance SMEs 
financing 

SMEs 

SMEs with no 
specific sector 
focus 

815 

n/a 

n/a 

5 723*** 

n/a 

n/a 

n/a 

DIV Old 

Dec N° 
283/2010/EU 

EMPL 
ECFIN 

EIF 

Increase access to 
microfinance 

Micro-
enterprises/ 
Households 

Micro-
finance/no 
specific focus 

80,00 

80,00 

63,43 

114* 
292,1** 

16 025* 

Revenues  
8,7  

         Repaym. 

13,4 

3,62 

 
 
  
Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

Marguerite 

DIV Old 

Reg. (EC) N° 
680/2007 

MOVE 

Support 
infrastructure 
investment: 
transport, energy, 

M.A
15 

renewables sectors 

Infrastr. 
Projects 

Transport, 
Energy, 
Environment 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

80,00 

80,00 

31,32 

4 900* 
10 000** 

10* 

n/a 

7,8 

EEEF 

DIV Old 

Reg. (EU) N ° 
1233/ 2010 

ENER 

Deu-
tsche 
Bank 

Guarantee 
Facility 
under the 
WBEDIF16 

EnC17 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIF 

ENEF under 
EDIF 

EnC 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIF 

ENIF under 
EDIF 

EnC 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIB, 
EIF, 
EBR
DKf
W 

Invest in energy 
efficiency, 
renewable energy, 
clean urban 
transport 
Create the 
preconditions for 
the emergence 
and growth of 
innovative and 
high-potential 
companies 

Enhance socio-
economic growth 
of the Western 
Balkans through 
equity 
investments 

Enhance socio-
economic growth 
of the Western 
Balkans through 
equity 
investments 

15 Marguerite Adviser 
16 Western Balkans Enterprise Development and Innovation Facility 
17 Enlargement countries 

Infrastr. 
Projects 

Energy 

146,34 

146,3 

98,55 

SMEs 

SMEs with no 
specific sector 
focus 

21,90 

21,90 

21,90 

200* 
265** 

32,46* 
97,9** 

9* 

n/a 

5,2 

532* 

n/a 

1,35 

SMEs 

R&I 

11,00 

11,00 

10,40 

77** 

10-14** 

n/a 

0,4 

SMEs 

R&I 

21,20 

21,20 

21,20 

n/a 

n/a 

n/a 

n/a 

 
 
  
 
                                                 
Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

EFSE 

EnC 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIF 

GGF 

EnC 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIF 

SME 
Recovery 
Support 
Loan for 
Turkey 

EnC 
Old 

Reg. (EC) 
N°1085/2006 

NEAR 

EIB 

Extend loans to 
local comm.banks 
and micro-finance 
institutions in the 
Western Balkans 

Provide dedicated 
financing for 
energy efficiency 
and renewable 
energy 

Mitigate the crisis 
impact for SMEs 
and contribute to 
the development 
of the Turkish 
economy and 
employment 

Micro-
enterprises/ 
Households 

Microfinance/ 

no specific 
focus 

87,68 

26,23 

26,00 

3 200* 

496 716* 

n/a 

0,55 

Micro-
enterprises/ 
Households 

Energy 

38,60 

38,6 

38,6 

SMEs 

SMEs with no 
specific sector 
focus 

30,00 

30,00 

30,00 

185,1* 

281*** 

299,64* 

299,34** 

11 375* 

n/a 

0,32 

265* 

n/a 

0,36 

NIF 

NDC18 
Old 

Reg. (EC) N° 
1638/ 2006 

NEAR 

EFI
19 

Mobilise 
investments to 
support prosperity 
and good 
neighbour. 

Infrastructur
e Projects, 
SMEs 

IFCA & AIF 

NDC 
Old 

Reg. (EC) N°  
1905/ 2006 

DEVCO 

EFI 

Promote 
investments and 
key infrastructure 

Infrastructur
e Projects 

SMEs, 
Environment., 
Energy, 
Water/Sanit., 
Social Sector, 
Transport 

SMEs, 
Environment, 
Energy, 
Water/Sanit., 
Social Sector, 
Transport 

1 159 

1 159 

448,85 

26 000* 

101* 

n/a 

12,15 

171,57 

171,57 

45,43 

465* 
IFCA 
2 046* 
AIF 

15* IFCA 
13*AIF 

n/a 

4,83 

18 Neighbourhood and other partner countries 
19 Eligible Finance Institutions 

 
 
  
 
 
                                                 
Organisation 

Policy Targets 

Implementation 

Financials                       

Financial 
Instruments 

Type 

Basic Act 

DG in charge 

IB4 

Objective 

Final 
Recipients 

Sector 

LAIF 

NDC 
Old 

Reg. (EC) 
N°1905/2006 

DEVCO 

EFI 

Promote 
investments and 
infrastructures 

Infrastructu-
re Projects, 
SMEs 

SMEs, 
Environment, 
Energy, 
Water/Sanit.,  
Social Sector, 
Transport 

Indicative 
Aggr. 
Budget 
Envelope 
(EUR mln) 

Aggr. 
Commit-
ments 
2007-2014 
(EUR mln) 

Aggr. 
Pay- 
ments 
2007-14 
(EUR mln) 

Financing 
supported 
(EUR mln) 

N° of final 
recipients 
benefited 

Revenues 
and 
Repayments 
(EUR mln) 

Admin 
Expenditure 
(EUR mln) 5  

210,4 

210,4 

104,86 

6 600 * 
1 400-1 
750*** 

27* 

n/a 

3,77 

Support to 
FEMIP 

NDC 
Old 

Reg. (EC) 
N°1638/2006 

NEAR 

EIB 

Provide capital to 
the private sector 
of Mediterranean 
partner countries 

GEEREF 

NDC 
Old 

Reg.(EC) 
N°1905/2006 

DEVCO 

EIB,
EIF 

Promote energy 
efficiency and 
renewable energy 

Further explanations: 

SMEs 

Private Sector 

224,00 

224,00 

224,00 

6 700* 

n/a 

6,8 

23,9 

SMEs 

Energy 

81,1 

81,1 

79,5 

1 000* 

n/a 

n/a 

0,56 

*Financing supported - Target – the amount of finance that the operations envisaged to be signed by the entrusted entity with financial intermediaries (or final recipients) are targeted to provide to eligible 
final recipients. 
**Financing  supported  -  Expected  –  the  amount  of  that  the  operations  already  signed  by  the  entrusted  entity  with  financial  intermediaries  (or  final  recipients)  are  expected  to  provide  to  eligible  final 
recipients. 
***Financing supported - Achieved - the amount of finance that the operations already signed by the entrusted entity with financial intermediaries (or final recipients) have provided to eligible final recipients. 

 
 
  
 
 
 
 
 
III. GENERAL CONTEXT 

1.  The EU Economy in 2014 

In  order  to  outline  the  macroeconomic  background  against  which  EU  financial  instruments 
operated in 2014, the fundamental evolution of key macro-financial variables is sketched out 
below in this section. 

Real GDP 
The economic recovery that had started in the EU and in the euro area in the second quarter of 
2013  continued,  but  it  struggled  to  gather  momentum  in  2014.  The  subdued  pace  of  the 
recovery  was  very  much  in  line  with  expectations  about  the  rebound  following  a  deep 
economic  and  financial  crisis.  But  apart  from  the  crisis-related  factors  behind  the  weak 
growth momentum, in 2014 the uncertainty about the geopolitical situation, commitments to 
future  policy  initiatives  and  energy-price  developments  have  gained  importance.  While  net 
exports  had been  the main growth  driver in  2013, in  2014 private consumption has become 
the main growth factor, whereas investment has moderately recovered.  
In 2014, real GDP grew by 1.4% and 0.9% respectively in the EU and in the euro area, almost 
entirely driven by domestic demand (Figure 1). Looking ahead, with the help of relatively low 
oil prices,  a lower external value of the euro, and policy support, including  the ECB's asset 
purchase  programme  ("quantitative  easing"),  a  broadly  neutral  fiscal  policy  stance,  and  the 
Investment Plan for Europe, economic activity is forecast to accelerate. Real GDP growth is 
expected to increase in the euro area and in the EU to 1.5% and 1.8% respectively in 2015 and 
further to 1.9% and 2.1% in 2016. 

Figure 1: Real GDP, EU 

Figure 2: Labour market, EU 

Note: Figures above horizontal bars are annual growth rates. 
                                                         Source: European Commission (2015) 

Labour market 
Since the start of the recovery in the second quarter of 2013 and in 2014, employment picked 
up comparatively fast and strong in response to output developments.  Unemployment rates 
continued  following  a  moderate  downward  trend  throughout  2014  (Figure  2).  In  December 
2014,  in  the  EU  the  unemployment  rate  stood  at  9.9%,  about  0.5  pps.  lower  than  a  year 

13 

 
 
 
 
 
earlier,  with  significant differences across  Member  States, in  respect  to  unemployment  rate, 
duration and age profile.20 Thus, the situation in the labour market continues to be reason of 
concern,  in  particular  in  the  more  vulnerable  economies.  The  expected  strengthening  of  the 
economic recovery together with structural reforms should trigger stronger net job creation in 
the second half of 2015 and even more so in 2016.  

Public finance 
On the public finance side, the general government deficit in the EU has continued to decline 
further  from  3.2%  of  GDP  to  2.9%  during  2014.  According  to  the  European  Commission 
(2015) forecast, non-consolidated deficits should continue falling in the EU to 2.5% in 2015 
and 2.0% in 2016. The deficit in the euro area  should also continue the decline observed in 
2014 (to 2.4%, from 2.9% in 2013), falling to 2.0% in 2015 and 1.7% in 2016. 

Inflation and the exchange rate 
Prices  were  stable  throughout  2014,  and  declined  mildly  in  December  (-0.1%  in  the 
EU, -0.2% in the euro area). Besides the impact of lower energy prices, the persistence of low 
inflation can also be associated with the remaining slack in the economy and weak domestic 
demand,  as  private  sector  balance  sheets  had to  adjust  further  and  credit  channels  remained 
impaired. 
The depreciation of the trade-weighted euro exchange rate that began in mid-2014 only partly 
offset the decline in US-dollar-denominated oil prices, and therefore only slowed the decline 
in headline inflation in 2014.  

Financial markets 
On the financial side, monetary policy in the euro area has become even more accommodative 
since  mid-2014  and  some  Member  States  outside  the  euro  area  have  also  cut  interest  rates. 
Following the decisions by the ECB Governing Council, short-term money-market rates have 
declined to close to (or below) zero and also longer-term rates have shifted down. Low policy 
interest rates, the announcement of additional "quantitative easing" measures (extended asset 
purchase  programme)  and  reinforced  market  expectations  of  a  stronger  pace  of  asset 
purchases  by  the  ECB  have  supported  the  upward  movement  of  stock  prices  at  the  end  of 
2014.  In  combination  with  expectations  about  the  forthcoming  normalisation  of  monetary 
policy in the US, the external value of the euro declined vis-à-vis the US dollar. 
Investor sentiment towards euro area banks has continued to strengthen amid further progress 
in  bank balance  sheet repair and an improved  macro financial environment. EU banks  have 
increased  their  capital  levels  in  recent  years,  thereby  increasing  their  resilience  to  market 
conditions.  During  2014,  the  build-up  of  capital  buffers  in  anticipation  of  the  ECB's 
comprehensive  assessment  and  the  EBA  Stress  Test  has  exceeded  EUR  100  bn.  Therefore, 
funding conditions have improved, due to the progressive repair of bank balance sheets and 
the reduction in the sovereign spread of more vulnerable Member States.  
Moreover,  by  proceeding  with  the  Banking  Union  in  2014,  progress  has  been  made  in 
weakening  the  links  between  sovereigns  and  banks.  The  establishment  of  the  Single 
Supervisory  Mechanism  and  regulatory  initiatives  –  such  as  new  bail-in  rules  –  have  been 
crucial in this respect. However, the continued significant correlation between the borrowing 
costs  of  euro  area  banks  and  sovereigns  highlights  the  need  for  continued  progress.  Both 
banks  and  governments  continued  to  take  action  in  2014  to  address  legacy  risks  from  the 

20In particular, the unemployment rate of young people, which had started to decline in the second half of 2013,          

has continued to decline in the last months of 2014, being on average in the third quarter of 2014 lower than in 
the third quarter of 2013. 

14 

 
                                                 
crisis.  At  the  same  time,  progress  by  euro  area  governments  in  implementing  fiscal 
consolidation  and  structural  reforms  continued,  although  the  pace  was  uneven  across 
countries.  The  improved  sentiment  has  resulted  in  significantly  declining  yields  on  lower-
rated  euro  area  government  bonds,  which  in  some  cases  reached  levels  last  seen  before  the 
eruption of the euro-area-centred second wave of the global financial crisis in 2010.  
Despite this progress by both banks and governments, financial stability challenges persist.  
The financial stability risks faced by the euro area during 2014 can be divided into two broad 
categories.  First,  “legacy”  issues  from  the  global  financial  crisis,  while  receding  throughout 
the year, remained a concern. For the euro area, these mainly related to insufficient progress 
in  addressing  weaknesses  on  the  part  of  both  the  banking  sector  and  governments. 
Notwithstanding  the  strengthening  of  banks'  balance  sheets,  the  banking  system  was  still  in 
need  to  address  remaining  fragilities  and  uncertainties.  Persistently  weak  bank  profitability 
could become a systemic concern if it limited banks’ ability to improve their shock-absorbing 
capacity via retained earnings and provisioning. This could prevent  banks from engaging in 
new  lending  activities  and  lead  to more  structural  business  model-related  concerns  in  a  low 
growth environment. In such circumstances, banks might have been tempted to take on more 
risk to improve profitability, which in turn could have made them more vulnerable to future 
shocks. 
The  second  broad  sets  of  risks  were  “emerging”  risks,  which  mainly  stemmed  from  a 
continued global search of banks for yield, as noticed above. This has left the financial system 
more vulnerable to an abrupt surge in risk premia, which might involve all asset classes.  

Figure 3: Euro Area interest rates on loans to non-financial entities  

(1-year maturity) 

Source: European Commission 

In this context, the prospect of a gradual normalisation of benchmark interest rates coexisted 
in  2014  with  financial  market  fragmentation  across  Member  States  (Figure  3),  which 
continued  to  reflect  the  sovereign  debt  crisis  and  the  vicious  spiral  between  sovereign  and 
bank  debt:  on  the  one  hand,  Governments  accumulate  debt  to  support  ailing  banks,  on  the 
other EU banks look at treasuries as a preferred asset.  

15 

 
 
The  trend  of  interest  rates  on  loans will  be  analysed  more  in  detail  in  the  next  section  with 
specific focus on SMEs. 

Relevance of the macro-financial context for financial instruments 
The  macro-financial  dynamics  depicted  above  are  bound  to  affect  the  performance  of  EU 
financial  instruments  through  various  channels.  For  example,  the  demand  of  EU  financial 
instruments  by  financial  intermediaries  is  affected  by  overall  economic  activity  and  interest 
rates,  which  inevitably  impact  on  the  final  recipients'  demand  for  loans  and  equity.  In 
addition,  favourable  labour  market  conditions  may  encourage  the  job  creation  targeted  by 
financial  instruments.  As  a  further  example,  public  finance  retrenchment  may  impair  a 
Member  State's  resource  availability,  and  hence  prompt  additional  demand  for  loans  and 
equity on the part of financial instruments' final recipients. Moreover, changes in the internal 
or external value of the currency may affect firms' competitiveness and hence their need for 
EU financing support. 
The following sections analyse in more detail the economic and financial situation of target 
groups  that  are  of  particular  interest  for  policy-making,  underlining  the  rationale  for  their 
support through EU financial instruments. 

2.  Strategic Target Groups 

The EU has identified recipients in the business sector based on firm employment, turnover 
and/or  balance  sheet,  including  SMEs  (i.e.  micro,  small  and  medium-sized  enterprises)  and 
midcaps. 

2.1. EU SMES21 

Small  and  Medium-sized  Enterprises  (SMEs)  in  the  EU  amount  to  almost  22  million,  and 
constitute  the  connective  tissue  of  the  EU  productive  fabric:  they  represent  99.8%  of  EU 
companies, almost 60% of GDP (total value added) and near 70% of the total workforce. 
Yet  despite  their  economic  importance,  SMEs  typically  face  greater  problems  than  larger 
firms  in  several  aspects,  including  access  to  finance,  especially  (but  not  exclusively)  during 
financial crises. 

2.1.1.  SME Loan Market   

2.1.1.1.  Demand for SME loan finance 

According to the UEAPME (2015), the overall business environment for European SMEs in 
the  second  semester  of  2014  improved  by  almost  8.5%  from  the  corresponding  period  in 
2013,  recording  three  consecutive  upticks  since  the  first  semester  2013  (Figure  5).  For  the 
first  time  since  2012,  the  Index  has  risen  above  its  neutral  level  of  70%,  reaching  71.7 
percentage points in the second semester of 2014.   

21 The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer 
than  250  persons  and  which  have  an  annual  turnover  not  exceeding  EUR  50  million,  and/or  an  annual  balance 
sheet  total  not  exceeding  EUR  43  million.  (Commission  Recommendation,  6  May  2003  C(2003/1422),  OJ 
L124/36, 20.5.2003) 

16 

 
                                                 
Figure 5: SME Business Climate Index 

Note:  The  UEAPME  SME  Business  Climate  Index  is  calculated  as  the  average  of  the  current  situation 
and  the  expectations  for  the  next  period,  resulting  from  the  sum  of  positive  and  neutral  (meaning:  no 
change) answers pertaining to the overall situation for the business. For example, for “semester A” with 
25%  positive,  neutral  55%,  and  20%  negative  answers,  the  Index  would  be  (25  +  55  =)  80,  and  for 
“semester B” with 40% positive, 30% neutral, and 30% negative answers, it would fall to (40 + 30 =) 70. 
However,  the  respective  balances  of  positive  minus  negative  answers  would  show  an  opposite  result, 
growing from “semester A” (25 – 20 =) 5% to “semester B” (40 – 30 =) 10%. Therefore, these balances 
should also be examined, and are reported in UEAPME (2014). 

Source: EIF (2014) (based on UEAPME 2014) 

The  trend  for  the  EU  is  rising,  indicating  that  EU  enterprises  envisage  the  beginning  of  a 
recovery (UEAPME 2014). 
Remarkable  progress  can  be  noticed  especially  in  the  countries  of  the  EU  South  and  the 
Periphery  (Croatia,  Cyprus,  Greece,  Ireland,  Italy,  Malta,  Portugal,  Slovenia  and  Spain)  – 
"South" in the graph. The SME Business Climate Index for these countries has increased by 
7.9%  in  2014,  which  is  higher  than  the  increase  in  the  EU  North  and  Centre  (Austria, 
Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, 
Latvia, Lithuania, Luxembourg, Netherlands, Poland, Romania, Slovakia, Sweden and UK) – 
"North”  in  the  graph  (4.5%).  As  a  result,  the  gap  between  the  two  country  groups  has 
narrowed,  with  the  current  wedge  equal  to  11.8%,  which  is  the  lowest  figure  since  the 
beginning of the sovereign debt crisis (UEAPME 2014). 

2.1.1.2. 

Supply of SME loan finance 

The  current  status  of  bank  lending  to  non-financial  corporations  –  including  SMEs  –  is 
analysed in the ECB Bank Lending Survey.  The survey reports the net percentage of banks 
contributing  to  tightening  credit  standards  for  SMEs.  As  shown  by  Figure  6,  a  general 
decrease in net tightening for loans to SMEs has occurred since the first quarter of 2013. In 
January 2014, a negative net tightening (i.e. a net easing) has been attained for the first time 
after  almost  seven  years.  Henceforth,  during  2014  the  overall  SME  net  tightening  of  credit 
standards stayed essentially unchanged, while remaining slightly higher for large enterprises.  

17 

 
 
Figure 6: Changes in credit standards applied to the approval of loans or credit lines to 
enterprises (SMEs versus large enterprises)  

Note:  A  positive  net  percentage  indicates  that a  larger proportion  of  banks  has  tightened  credit standards 
(“net tightening”), whereas a negative net percentage indicates that a larger proportion of banks has eased 
credit standards (“net easing”).  

Source: EIF (2014). 

In  the last  two  quarters  of  2014,  several  factors  including  the  costs  related  to  bank's  capital 
position,  the  expectation  regarding  the  general  economic  outlook  and  access  to  finance 
contributed in net terms to the easing of credit standards for SMEs (Figure 7). It is interesting 
to notice that the expectations concerning the industry (or firm) specific outlook contributed 
in  the  last  quarter  of  2014  to  a  tightening  of  credit  standards,  whereas  the  expectation 
concerning  the  general  economic  outlook  in  the  same  period  contributed  to  the  easing  of 
credit standards. 

Figure 7: Factors contributing to tightening credit standards for SMEs 

Note:  The  net  percentages  for  responses  to  questions  related  to  the  factors  are  defined  as  the  difference 
between  the  percentage  of  banks  reporting  that  the  given  factor  contributed  to  a  tightening  and  the 
percentage reporting that it contributed to an easing. 

Source: EIF (2014). 

18 

 
 
 
2.1.1.3.  Market loan volumes and interest rates 

Volumes of SME loans 
Credit growth and lending conditions for the private sector in general, and SMEs in particular, 
have  not  yet  fully  incorporated  the  change  in  the  business  climate  and  financial  stability. 
This  picture  of  still  difficult  conditions  for  corporate  lending  in  some  Member  States  and 
especially  for  SMEs  has  been  compounded  by  the  continued  grim  situation  in  regard  to 
lending volumes. Using again small loans (below EUR 1 million) as a proxy, new SME loan 
volumes  decreased  continuously  by  36%  from  their  April  2009  peak  until  June  2013,  and 
stayed essentially stable thereafter, remaining by year-end 2014 21% below their 2003 levels. 
In comparison, large loans stand today 6% above their 2003 levels.22 Only small loans up to 
EUR 0,25 million (data available only since June 2010) are increasing. 
Across the Euro Area, new bank lending to SMEs continues to decline from pre-crisis peaks 
through 2014, but at a slower pace (Figure 8). Among the "South" countries, there were some 
signs of pickup in Spain in 2014, where economic recovery is taking hold, and a slight uptick 
in  Italy,  based  on  12-month  cumulative  flows.  In  Greece  and  Cyprus,  where  liquidity 
pressures remain acute and credit quality has significantly deteriorated, new lending to SMEs 
continues  to  decline  sharply.  In  EU  "North"  countries,  lending  volumes  have  slightly 
decreased  during  2014  across  the  board,  except  for  Germany.  Comparing  Figure  8a  with 
Graph 8b, the scale of the volume reduction in the "South" appears much larger than in the 
"North", so that the former countries lie mostly below the average, whereas the latter remain 
above. 

Figure 8: Loan Volumes (New Business)   

Note: End 2004= 100; Loans up to and including EUR 1 million. 
Source: ECB Data Warehouse 

Outside  the  Euro  Area,  new  loans  to  SMEs  in  the  UK  increased  by  over  23%  through 
November  2014  compared  with  the previous  year,  although  in  net  terms,  the  stock  of  loans 
fell as repayments remained larger than new lending.23 

22EIF (2014) 
23 The Bank of England defines SMEs as firms with an annual turnover of up to £25 million. 

19 

 
 
 
 
                                                 
Available data from national central banks on outstanding loans to SMEs – elaborated by IIF 
(2015)24 – reports a decline in outstanding loans in Ireland and Portugal since 2012, while in 
France, loans stocks increased by over 4% from 2012Q1 to 2014Q3.  

Interest rates on SME loans 
For  the  Euro  area  as  a  whole,  medium-size  loans  (from  EUR  0,25m  up  to  EUR  1m)  had  a 
rather stable spread over large loans (over EUR 1m),  averaging  62 basis points (bp) for the 
period June 2010 to April 2014 (Figure 9).  
The interest rate spread between small loans (below EUR 0,25m) and large loans was higher, 
but relatively stable at an average level of 145bp from the start of the time series in June 2010 
until July 2011; in the following months, this spread showed an increasing trend until August 
2012  when  it  reached  a  record  high  of  279bp.  Since  then,  the  spread  has  also  been  rather 
stable, averaging 211bp. Thus, financing conditions remain persistently tighter for SMEs than 
for large firms (ECB 2014), as a consequence of lacking collateral and a supposed divergence 
in firm-specific risks. 

Figure 9: SME Loan Interest Rates 

Source: EIF Small Business Finance Outlook, December 2014 

Interest rates on new loans to businesses up to €1 million have mostly declined since the start 
of 2014, with Ireland as an exception, and the spreads between "North" and "South" countries 
have narrowed, while remaining substantial (Figure 10).  

24 IIF (2015). 

20 

  
 
                                                 
Figure 10: Interest Rates on New Loans to SMEs.  

Comparison EU South and Periphery vs EU North and Centre 

Figure 10a: EU "South" 

Figure 10b: EU "North" 

Source: IIF "Addressing SME Financing Impediments in Europe: A Review of Recent Initiatives" 
Loans up to and including EUR 1 million. 

In  particular,  the  difference  between  the  loan  pricing  conditions  for  small  and  large  firms 
remained high in more vulnerable countries, where SMEs remained more dependent on bank 
funding.25 

2.1.1.4.  Access to loan finance of EU SMEs 

As  a  consequence  of  this  bleak  credit  dynamics,  access  to  finance  is  still  among  the  top 
concerns of the small  and medium sized EU enterprises.  Younger and smaller  firms are the 
most  badly  affected,  according  to  the  latest  "Access  to  Finance"  survey  covering  the  whole 
EU, released by the European Commission and European Central Bank. 
Small  EU  businesses  are  increasingly  optimistic  about  their  growth  prospects  but  many  are 
still concerned about the lack of access to finance: 13% of survey respondents see access to 
finance as the most important problem for their companies.  
Indeed,  more  than  a  third  of  SMEs  surveyed  did  not  manage  to  get  the  full  bank  loan 
financing they needed during 2014. 
In particular, 13% of SME bank loan applications were rejected  a slight increase from 11% 
in 2013  and 18% of companies received less than they applied for. In addition, 4% declined 
the loan offer from the bank because they found the conditions unacceptable and 8% of SMEs 
were even too discouraged to ask, because of anticipated rejection. The fear of rejection was 
most often reported in Greece (29% of SMEs),  Slovenia (22%),  Cyprus (17%)   and Ireland 
(15%). This was particularly the case for young companies: 11% of those who have been in 
business between 2 and 5 years did not apply for a loan because of fear of rejection. 
The  survey  also  shows  that  SMEs  are  confronted  with  higher  rejection  rates  compared  to 
larger corporations, a feature magnified in vulnerable Member States. It is also younger and 
smaller  firms  that  are  more  likely  to  obtain  only  part  of  the  finance  they  request,  or  to  be 
outright  rejected.  The  highest  rejection  rate  was  among  micro  companies  employing  fewer 
than 10 people (20%) and among SMEs, which had been active for less than 2 years (30%).  
While SMEs reported a welcome fall in interest rates for loans, and believe that bank financial 
conditions have improved during 2014 with respect  to loan interest rates, in contrast, SMEs 
reported a substantial net increase in collateral and other loan requirements by banks to which 

25 ECB (2014). Financial Stability Review. November 2014. 

21 

 
 
                                                 
they had applied for loans. Collateral requirements were considered as tightened by SMEs in 
all EU countries, with the highest average increases in Cyprus, Greece and Slovenia, while the 
lowest average  increases were  reported in  Poland, Slovakia and the Czech  Republic. Figure 
11  illustrates  the  change  in  availability  of  bank  loans  for  SMEs  in  the  euro  area. 

Figure 11: Change in availability of bank loans for euro area SMEs 
(over the preceding 6 months; % of respondents) 

Note:  “Net  percentage”  means  the  difference  between  the  percentage  of  firms  reporting  an 
increase (or an improvement) for a given factor and that reporting a decrease (or deterioration). 
             Source: EIF Small Business Finance Outlook, December 2014 

Based on Commission analysis,26 it can be estimated that up to 10% of EU SMEs that have 
had difficulty in accessing loan finance27 are in fact financially viable, in the sense that have 
experienced a positive turnover growth in the previous six months. The difficulty in accessing 
finance is compounded by the fact that a majority of SMEs look at external financing as their 
only source of financing, and bank loans are a relevant source of external finance for 57% of 
SMEs. 
The situation is worse for SMEs undertaking R&I, as banks typically lack the ability to value 
knowledge assets, and are therefore often unwilling to invest in knowledge-based companies 
or do so only with a risk premium. In consequence, many established and innovative SMEs 
find it hard to obtain loans for R&I activities.28 
The above is also valid for cultural and creative sectors SMEs. Due to sector specificities such 
as  importance  of  intangible  assets,  lack  of  uniform  sector  definition,  asymmetries  of 

26 European Commission (2013b). 
27 Note: SMEs that have had difficulty in accessing loan finance are defined as those which: i) have been refused a         
bank loan; ii) have turned down a bank loan, presumably due to the credit conditions; iii) have been discouraged 
from even applying for a bank loan. 
28 European Commission (2013a). 

22 

 
 
 
                                                 
information,  under-capitalisation,  low  investment  readiness,  atypical  cash-flow  plans  and 
project-centric  plans,  the  SMEs  are  perceived  as  riskier.  This  results  in  the  reluctance  of 
financial institutions to finance SMEs from the cultural and creative sector.29 
The above circumstances underline again the importance of the EU programmes and Facilities 
aimed  at  SME  support  and  addressing  market  gaps  or  sub-optimal  market  situations, 
especially with respect to the 'access to finance' issue. 

2.1.2.  SMEs and the European Equity Market 

2.1.2.1. 

SME Demand for equity 

By  looking  at  the  demand  for  equity  financing,  the  latest  Survey  on  Access  to  Finance  of 
Small  and  Medium  Enterprises  in  Europe  (SAFE)  shows  that  SMEs’  needs  for  equity 
financing increased in 2014 compared to 2013, with a net increase from 2% to 7%. However, 
only 20% of SMEs felt confident to discuss financing and obtaining the desired results with 
equity investors and venture capital enterprises, while 32% did not feel confident. Smaller and 
non-innovative firms are less confident in their financial competences. In fact, 25% of SMEs 
considers equity financing not applicable to their firm.  
As a consequence, only 3% of EU SMEs used equity financing in the last six months in 2014, 
registering a decrease from the 5% measured in the 2013 wave (Figure 12).  

Figure 12: SMEs that used equity financing in the last 6 months, Euro Area 

Source: European Commission Elaboration based on SAFE Survey 

Access to equity financing is nearly twice as common among larger businesses (6% of those 
with  250+  employees)  in  the  EU,  reflecting  SMEs'  difficulties  in  accessing  this  specific 
financial instrument. 

2.1.2.2. 

Supply of equity for SMEs  

In 2014, most categories of enterprises reported an increase in the willingness of investors to 
invest  in  equity  or  debt  (Figure  13).  Among  the  47%  of    EU  SMEs  expressing  an  opinion 
about the willingness of investors to invest in equity in the past 6 months, most reported no 
change (31%), 10% reported an improvement while the 6% reported a deterioration. 

29 IDEA (2013). 

23 

 
 
                                                 
Figure 13 : Change over the past six months in the willingness of investors to invest in firm 

equity or debt securities 

Note: The results presented in this figure refer only to those SMEs that considered debt securities, 
equity  capital,  other  loans  or  other  sources  of  financing  relevant  to  their  enterprise.  Among  the 
four  discerned  sectors,  a  negative  net  effect  is  reported  by  construction  only  (-1%)  with  the 
remaining three reporting a positive net effect. 

Source: SAFE 

However,  the  lack  of  equity  finance  in  Europe  is  increasingly  being  recognised  as  a  key 
bottleneck to the provision of further overall SME funding. 
Among the different opportunities of equity financing for SMEs, a crucial role is played by 
Venture  Capital  financing.  Spanning  from  the  seed  to  the  growth  phase  of  companies' 
development,  Venture  Capital  investments  serve  86%  of  European  SMEs  seeking  equity 
financing, and 78.5% in terms of total amounts invested in SMEs.30 
For the purpose of this document, it is thus useful to focus on the Venture Capital market to 
gain a better understanding of the dynamics of equity financing of European SMEs. 

2.1.2.3.  Access to Venture Capital of EU SMEs 

From  a  broad  supply  perspective,  the  structural  challenges  in  the  European  Venture  Capital 
market,  the  difficult  fundraising  environment,  and  the  still  somewhat  risk-averse  market 
sentiment, are all sources of significant problems for fund managers in the access to funding 
in  general,  and  for  new  funds  in  particular.  Moreover,  markets  for  analysis  are 
underdeveloped, and both private and public investors are disadvantaged in accessing credit 
information,  and  therefore  find  it  harder  to  operate  on  an  equal  footing  with  established 

30 EVCA (2015a). Note that EVCA identifies SMEs as enterprises having less than 250 employees, without any 
considerations concerning turnover and/or total assets. 

24 

 
 
                                                 
players  in  the  debt-financing  sector.  This  supports  a  view  that  public  backing  is  necessary, 
especially for the early stage segment of the market. 
The latest available figures from EVCA (2015a) point to the following trends in the European 
Venture Capital sector: 
a) Fundraising 

 Venture  Capital  fundraising  in  Europe  totalled  EUR  4,1  billion  in  2014  which 
represents  a  decrease  of  12%  compared  to  the  EUR  4,6  billion  raised  in  2013  and  is 
broadly  in  line  with  the  lower  volumes  recorded  since  2009  (Figure  14).  Government 
agencies remained the most prominent provider of funding, representing more than 35% 
of the total funds raised (compared to 14% in 2007) 

Figure 14: Venture Capital – Funds raised by type of investor 

Note: Incremental amount raised during the year - % of total 
Source: EVCA 2015a 

 As  regards  the  geographic  breakdown,  46%  of the  funding came  from  France and the 
Benelux  region  (Belgium,  the  Netherlands  and  Luxembourg),  followed  by  13%  from 
North America and 10% from the UK. 

b) Investments 

 The total amount of Venture Capital invested in 2014 reached EUR 3,6 billion, up 6% 
from the total investment volume of EUR 3,4 billion recorded in 2013. This figure is in 
the  same  order  of  magnitude  as  the  volumes  recorded  each  year  since  2009  and 
significantly lower than pre-crisis levels. 

 More  than  3,200  companies  were  backed  by  Venture  Capital  funds  in  2014.  Start-up 
companies were at the centre of Venture Capital funds' attention, as they received 52% 
of  the  total  amounts  invested  and  represented  60%  of  the  total  number  of  supported 
companies. 

25 

  
 
 
 As 

regards  sectors, 

life  sciences,  computer  and  consumer  electronics,  and 

communications accounted over than 70% of all Venture Capital investments. 

 In  terms  of  geographic  breakdown  by  equity  amount  invested  in  2014,  most  of  the 
Venture  Capital  funds'  investment  went  to  France  and  the  Benelux  region  and  to  the 
DACH  region  (Germany,  Austria  and  Switzerland)  with  the  UK  and  Ireland  each 
receiving approx. EUR 1 billion of investments. 

 While  Seed/Start-up/Early  Stage  funds  invested  95%  of  their  capital  in  SMEs 
(representing 99% of their target group, Figure 15)31; Private Equity funds operating in 
the Growth stage only invested 55% of their capital in SMEs (which still constitute 81% 
of their target group). 

Figure 15: Venture Capital – Investment by portfolio company size 

Note: Amount and number of companies 

Source: EVCA 2015a 

c) Divestments 

 Venture Capital divestments decreased to EUR 1,9 billion in 2014, up from the EUR 2,2     
billion in 2013 but still lie well within the range of EUR 1,9 to 2,4 billion recorded since 
2008.  Trade  sales  were  the  most  common  exit  routes,  representing  45%  of  all 
divestments. 

 The number of exited companies stood just above one thousand. 
 The  highest  financial  volumes  earned  in  exits were  realised  in  life  sciences,  computer 
and  consumer  electronics,  and  communications  (Figure  16).  The  volumes  earned  in 
exits in financial services decreased from 18,3% in 2013 to 1,2% in 2014. 

31 EVCA (2014). 

26 

 
 
 
                                                 
Figure 16: Divestments at cost by sector – Venture Capital / Buyout / Growth 

Source: EVCA 2015a 

As shown above, in 2014, around 35% of funding for Venture Capital came from government 
agencies,  according  to  EVCA  (2015a),  and  the  total  amount  raised  from  such  agencies  for 
Venture  Capital  funds  in  Europe  was  just  under  EUR  1,4  billion  with  government  agencies 
significantly stepping up investments over the past few years. 

Figure 17: Government investments and Venture Capital fundraising in EU 

Source: EVCA 2015a 

27 

 
 
 
 
 
However, such efforts target mostly national Venture Capital markets, thus contributing less 
to the emergence of a robust pan-European Venture Capital industry, a crucial factor when it 
comes to the overall innovative and high-growth capacity of the EU economy. 
Importantly,  public  grants  usually  dry  up  as  a  concept  moves  from  the  basic  research  stage 
through to applied research, and then to piloting, while private capital is not available until the 
later stages, when technological and commercial risks have diminished.32 
These  considerations  point  towards  the  importance  of  stepping  up  the  EU  intervention  in 
Venture  Capital  markets  in  its  role  as  a  pan-European  institution  capable  of  supporting  this 
asset  class  by  complementing  funding  sources  at  both  the  private  market  level  and  national 
public level. 

2.1.2.4.  Equity Financing Gap for Innovative SMEs 

A recent study commissioned by the European Parliament's Committee on Industry, Research 
and  Energy  (ITRE)33  draws  on  and  synthesises  the  outputs  of  a  wide  range  of  sources  to 
examine,  amongst  other  topics,  the  interrelated  questions  of  whether  innovative  EU  SMEs 
suffer from an insufficient supply of Venture Capital and if Venture Capital funds suffer from 
a lack of demand for what these funds have to offer. 
The  study  found  that  the  supply  of  Venture  Capital  is  low  in  Europe  because  many 
institutional investors either withdrew from the Venture Capital market following losses from 
the  bursting  of  the  dot.com  bubble  and  have  not  returned,  or,  in  the  wake  of  the  financial 
crisis, have ceased to invest in Venture Capital or have moved their focus from seed and start-
up Venture Capital investments to later-stage Venture Capital or private equity investments. 
Europe lacks a pool of large pension funds, university endowments, foundations and family 
offices  willing  and  able  to  fill  the  gap,  though  public  efforts  have  gone  some  way  to 
compensate,  with  government  agencies  significantly  stepping  up  investments  over  the  past 
few years. 
In  addition,  Europe  suffers  from  a  problem  in  the  quality  of  the  funds  supplying  Venture 
Capital: not many are large enough to attract institutional investors or sufficiently experienced 
in  selecting  promising  companies.  Furthermore,  the  persistent  segmentation  of  the  market 
along  national  lines  reduces  cross-border  operations  and  undermines  attempts  to  achieve 
economies of scale in both fund-raising and investment. 
On the demand  side, the  study found that a common complaint of Venture Capital  funds in 
Europe is the limited number of high-potential firms available for investing in, especially in 
the  early  stages,  and  particularly  firms  that  can be  expected  to  deliver  an  acceptable  rate  of 
return. The causes identified include low relative and absolute levels of R&D expenditure in 
most Member States, disadvantaging the generation of new ideas; insufficient investment in 
mechanisms  supporting  TT  and  commercialisation;  lack  of  business  skills  on  the  part  of 
company  management  teams  and  a  raft  of  framework  conditions  linked  to  IP  rights,  public 
procurement practices, tax regimes, and the flexibility of labour markets. 
In the study on financial instruments accompanying the impact assessment for COSME,34 the 
authors reject the idea of equating the aggregate financing gap in the EU with the amount that 
would be needed to approach the ratio of Venture Capital investments to GDP found in the 
US. They argue that this method overlooks structural differences between the two economies 

32 European Commission (2013a). 
33 European Parliament (2012). This study drew on data from EVCA, NVCA, ECB, EC, EIF, IMF and the VICO 
project's database (http://www.vicoproject.org). 
34 Economisti Associati (2011). 

28 

 
                                                 
and  neglects  issues  of  absorption  capacity,  such  as  difficulties  in  increasing  the  numbers  of 
skilled  Venture  Capital  fund-managers,  or  the  dearth  of  investment  opportunities.  Instead, 
their approach is to target a doubling of the recent level of Venture Capital investments over 
five years, requiring, so the authors estimate, a  progressively gap-filling increment of about 
EUR 800 million per year. 
The above circumstances underline again the importance of the EU programmes and Facilities 
aimed  at  SMEs  support  and  addressing  market  gaps  or  sub-optimal  market  situations, 
especially with respect to the 'access to finance' issue of early-stage enterprises, including in 
their expansion phase. In this context, the equity instruments adopted by the EU represent an 
important  measure  to  address  equity  financing  gaps  by  leveraging  EIB  funds  while 
minimising market distortions. 

2.2. EU Midcaps35 

While SMEs are at the centre of EU policy initiatives, mid-sized companies (usually defined 
as having 250-2999 employees) are increasingly recognised for their important role in growth 
and employment. 
At  this  stage  of  the  economic  cycle  and  following  the  constraints  posed  for  the  whole  EU 
economy by the financial crisis, mid-caps will play a key role in economic recovery, growth 
and employment in Europe. 
Characteristically  mid-sized  or  mid-cap  companies  benefit  from  better  name  recognition, 
longer  credit  history  and  better  product  track  record  than  SMEs.  In  case  of  mid-sized 
companies with a stable growth trajectory, this reduces information asymmetries and allows 
them  to  have  better  access  to  finance  than  SMEs  (1-250  employees),  including  access  to 
capital  market  financing.  But  several  mid-caps  in  the  EU  are  facing  the  challenge  of  being 
obliged to expand and innovate or lose their competitive edge. Those mid-caps need usually 
to  invest  in  research  and  development  (R&D)  and  pursue  a  more  active  internationalisation 
strategy than SMEs, with the corresponding needs for equity and debt finance. 
A recent study (PricewaterhouseCoopers 2012) estimates the number of mid-caps in the EU to 
be around 28 000, with about half of them being innovative midcaps. A great part of them has 
mainly relied on debt finance as their main source of external finance in the recent past. The 
study also suggests that the market gap  in getting access to finance is smaller for mid-sized 
companies  than  for  SMEs.  Most  recent  data36  indicates  that  credit  standards  were  eased  on 
loans to corporations of all sizes. 

2.3. EU Micro-enterprises37 

While SMEs represent 99,8% of EU companies, microenterprises constitute 92% of them. As 
such they are thus decisive for boosting jobs, growth and investment in Europe. In addition, 
they  play  an  even  more  important  role  when  it  comes  to  the  impact  on  job  creation  for 
vulnerable  groups  and  a 
inclusion  effect.  Nevertheless, 
microenterprises  share  the  same  problems  as  other  SMEs,  yet  typically  to  a  higher  degree. 
Thus,  when  looking  at  the  expected  developments  for  turnover  of  SMEs  by  size  classes  in 
2014,  micro-enterprises  show  a  decrease  for  the  last  semester,  which  offsets  the  positive 

resulting  positive  social 

35 At this stage, no EU-wide definition for small midcaps exists. However, for the purpose of Horizon 2020, the 
Commission defined the small midcap as an enterprise within the meaning of Article 1 of the Title I of the Annex 
of  the Commission Recommendation (C2003/1422, OJ L124/36, 20.05.2003) which i) has up to 499 employees  
calculated in accordance with  Articles 3, 4, 5 and 6 of the Title I of the Annex; and (ii) is not a micro, small or 
medium-sized enterprise as defined in this Commission Recommendation). 
36 ECB (2015) [Bank Lending Survey, January 2015]. 

29 

 
                                                 
judgement  of  the  first  semester.  According  to  their  expectations,  micro-enterprises  will 
continue facing more difficulties than other SMEs (Figure 18). 

Figure 18: Overall situation of SMEs by class size 

Source: UEAPME(2015) 

Microenterprises  typically  face  even  more  difficulties  in  obtaining  financing.  Data  from  the 
latest  Survey  on  the  Access  to  Finance  of  Enterprises38  show  that  micro-enterprises  in  the 
Euro area reported “access to finance” as their third most pressing problem, while it is in fifth 
place  for  small  enterprises,  and  sixth  for  the  medium  and  large  ones.  Compared  to  the 
previous  survey  wave,  the  percentage  of  companies  listing  access  to  finance  as  their  most 
pressing problem has increased for all enterprises, except for micro enterprises. 
The main channel of financing of microenterprises is the microfinance market. The European 
microfinance market is as diverse as its actors. To a large extent, this diversity of institutional 
structures  is  related  to  differences  in  the  national  legal  environment  for  loan  provision, 
differences in the established financial systems and the variety of microenterprise promotion 
and  underlying  policy  directions.  The  main  institutional  forms  are  Non-bank  financial 
institutions  (NBFIs),  Non-Governmental  Organisations  (NGOs)  or  Foundations,  Credit 
Unions and Cooperatives, Microfinance Associations and banks (Figure 19). The decrease of 
MFIs surveyed structured as NGOs and corresponding rise of NBFIs might be explained by a 
maturing  of  the  European  microfinance  sector:  existing  NGOs  may  be  scaling  down  their 
business and consequently changing their legal status to NBFI, since NBFIs can offer a wider 
range  of  services  and  access  commercial  sources  of  capital,  as  they  operate  under  a  license 
from the central bank. 

37  Note:  Within  the  SME  category,  a  microenterprise  is  defined  as  an  enterprise  which  employs  fewer  than  10 
persons  and  whose  annual  turnover  and/or  annual  balance  sheet  total  does  not  exceed  EUR  2  million. 
(Commission Recommendation, 6 May 2003, C(2003/1422), OJ L124/36, 20.05.2003). 
38 European Central Bank and European Commission (2014). 

30 

 
 
                                                                                                                                             
Figure 19: Distribution of MFIs by institutional type 

Source: EMN (2014) 

In  addition  to  the  institutional  variety,  the  European  microfinance  markets  are  characterised 
by a large diversification of the products offered, especially the underlying product features: 
current average loan term, average interest rate and the presence of additional fees. Based on 
the  most  recent  EMN39  Overview  Survey,  the  average  micro  loan  was  reported  to  have 
featured an interest rate in the range of 10% with large variations across countries.  
The European microfinance sector provides mainly microloans (up to EUR 25 000) tailored to 
micro-enterprises (92% of all European businesses).40 In 2013, all MFIs covered by the EMN 
Survey disbursed 387 812 microloans (including personal loans) amounting to a total volume 
of around EUR 1 530 million. The EU-based organisations surveyed alone reported 207 335 
loans with a total volume of EUR 1 260 million. Combined with the results of the past EMN 
surveys,  this  indicates  a  steady  growth  of  the  observed  micro-lending  activities  among  the 
MFIs surveyed in Europe since 2009. The number of loans disbursed increased by more than 
400%, and the reported total loan volume has more than doubled since 2009.41 
National  aggregate  results  from  Evers  &  Jung  (2014)  show  that  a  total  volume  of  EUR  2,4 
billion  was  issued  in  the  form  of  microloans  in  the  EU-28  plus  Switzerland,  Norway  and 
Iceland  between  2010  and  2012.  The  aggregate  EU-28  level  demand  for  microloans, 
calculated along clusters of European countries, is estimated up to a total value of EUR 5,1 
billion,  highlighting  a  financing  gap  of  around  EUR  2,7  billion  in  terms  of  total  volume 
issued.  At  the  level  of  general  supply  of  microfinance  in  Europe,  commercial  banks  are 
expected  to  keep  reducing  their  lending  to  small  start-ups  and  micro-enterprises.  If 
commercial banks continue to reduce their already limited exposure to risky small scale loan 
operations over the coming years, the financing gap for micro-financing may be expected to 
widen. 

39 European Microfinance Network 
40  Note:  the  figure  also  includes  people  who  would  like  to  become  self-employed  but  are  facing  difficulties  in 
accessing the traditional banking services (EIF, 2013). 
41 Due to issues of sample representativeness and attrition (change in surveyed MFIs over time), the survey results 
presented here should be interpreted and used cautiously. 

31 

 
 
 
                                                 
Over the past two years, support for microfinance initiatives remained high on the agenda of 
policy  makers  in  many  European  countries.  Especially  in  Western  Europe,  the  provision  of 
microloans  is  regarded  as  a  suitable  tool  for  addressing  financial  exclusion  by  commercial 
banks  and  creating  employment  opportunities  in  the  microenterprise  sector.  After  years  of 
continuous political support, the sector is expected to deliver on a larger scale its promises to 
ease  the  ongoing  situation  of  high  unemployment  rates,  low  economic  growth  and  unstable 
financial sector.42  
Despite success in widening the sector’s outreach, the development of stable funding patterns 
remains a challenge for microfinance providers in many countries. Aside from public sources, 
the availability of affordable funding is limited and prone to external influences. Besides job 
creation, there is a new trend on the agenda – promoted by politicians as well as researchers – 
green microfinance. Around 13% of the responding MFIs stated that they offer specific green 
microloans  to  finance  renewable  energy,  energy  efficiency  and  environmentally  friendly 
activities.  In  addition,  another  37%  mentioned  that  they  cover  such  activities  with  their 
normal microcredit programs.  
The  general  public  support  for  microfinance  provision  is  expected  to  decline  in  the  coming 
years,  due  to  budget  restrictions  and  high  deficits  at  national  and  regional  levels.  MFIs  are 
attempting to prepare for this by developing more efficient and lean processes and reducing 
costs.  Many  of  them  are  already  looking  for  additional  sources  of  funding.  Especially  fast 
growing organisations report a need for additional equity to secure lending operations and to 
collect funding in the formal financial market. In this context, the micro-finance instruments 
adopted by the EU represent an important measure to address microenterprises' financing gaps 
by leveraging public and (possibly) private funds while minimising market distortions. 

3.  Strategic Sectors  

At the sectorial level, the infrastructure sector performs a crucial role in both development and 
sustainable  growth,  in  contexts  where  private  enterprises  of  all  sizes  and  public  entities 
interact to provide the necessary output. Infrastructure improves the productivity of the rest of 
the economy, enabling growth, and facilitates the interconnection of the internal market. 
The  EU  infrastructure  market  has  been  evolving  extremely  quickly.  Whereas  institutional 
investors in Europe were reluctant to enter the long-term infrastructure financing market until 
a  couple  of  years  ago,  recent  months  have  witnessed  an  increased  liquidity  in  the  market 
although  largely  targeted  at  a  restricted  number  of  countries  and  sectors.  In  this  context, 
analysing the existing trends and correctly forecasting the medium-to-long-term orientation of 
the  market  will  be  crucial  for  creating  successful  financial  instruments.  A  fundamental 
challenge  for  the  EU  will  be  to  build  capacity  to  perform  such  tasks  covering  a  variety  of 
sectors. 
Investment needs for transport, energy, and telecom infrastructure networks of EU importance 
– that is, cross-border and of large amounts – are estimated at EUR 1 trillion for the period up 
to  2020.  Significant  investment  will  also  be  needed  in  human  capital  and  in  R&D,  new 
technologies and innovation as well as energy efficiency under the Europe 2020 strategy and 
the  2030  climate  and  energy  package.  Given  the  scale  of  the  investment  required,  the 
reduction in infrastructure investment by the majority of Member States, it is clear that private 
sector financing will be important, and should be complemented by possible interventions at a 
global (e.g., EU) level.  

42 EMN (2014). 

32 

 
                                                 
In  order  to  increase  the  ability  of  the  private  sector  to  undertake  these  investments,  EU 
financial  instruments  can  contribute  to  provide  financing  which  otherwise  would  not  be 
available and absorb some of the risks, which the private sector is not able or willing to take. 
Given  that  one  of  the  key  market  failures  emerging  in  infrastructure  is  the  lack  of  mature 
projects,  efforts  should  be  concentrated  not  only  on  the  development  of  appropriate 
instruments  but  also  on  the  provision  of  technical  assistance  to  assist  national  authorities  to 
prepare eligible projects. In this respect, additional efforts will be made to extend the pipeline 
of  projects  benefiting  from  EU  financial  instruments  outside  of  the  core  sectors  and  core 
geographical markets. 
The long-term financing required to fund infrastructure embodies some key features that the 
policy-maker should take in due consideration: 

 

 

 

It finances productive activities which support growth by reducing costs, diversifying 
means of production and creating jobs in a smart, sustainable and inclusive way; 
It is patient, in that investors take into account the long-term performance and risks of 
their investments, rather than short-term price fluctuations. This long-term perspective 
acts in a counter-cyclical manner and promotes financial stability; 
It  is  committed,  in  that  investors  take  longer-term  aspects  such  as  environmental, 
social, governance issues into account in their investment strategies. 

The climate of uncertainty and risk aversion created by the financial and economic crisis has 
affected both the demand and the supply of long-term financing. On the demand side, this has 
been  evidenced  by  reduced  demand  from  SMEs,  Private  Public  Partnerships  and  other 
investment  projects  requiring  long-term  financing,  resulting  in  a  suboptimal  level  of  long-
term  investment  and  financing.  On  the  supply  side,  the  crisis  has  increased  risk  aversion, 
leading to a preference for liquidity. This, together with bank deleveraging, has affected the 
economy's  ability  to  finance  itself  at  long  maturities.  The  sub-optimal  levels  of  long-term 
financing also reflect market failures and inefficiencies in the intermediation chain. 

3.1. Research and Innovation 

The  financial  crisis  had  a  significant  negative  impact  on  innovation.  Since  2012,  the 
percentage  of  firms  that  managed  to  bring  new  or  improved  products  to  the  market  has 
declined across all industries in the EU-27. There are various reasons for this: 

  public  support  for  innovation  decreased  in  several  countries  because  of  the  priority 

given to fiscal consolidation; 

  a fragile banking sector forced to restore its balance sheets meant that innovating firms 

 

had additional difficulties finding external financing; 
the reduced demand for goods and services, together with greater uncertainty about the 
future, made long-term R&D projects with high sunk costs more risky (OECD 2012). 

The above effects were only partially compensated by other offsetting factors. First, there was 
a shift of focus towards process innovation, aiming at reducing costs and prices. Second, by 
lowering demand, the financial crisis reduced the opportunity costs of spending on innovation 
rather than output (OECD 2012, Barlevy 2007). 
Nonetheless,  EU  Industrial  R&D  Investment  Scoreboard  data  and  PCT  patent  applications 
from  the  WIPO  database  show  that  innovation  activities  declined.  As  compared  with  pre-
recession levels, a large proportion of European firms decreased their spending on innovation 
following the outbreak of the crisis. Indeed, the 2009 Innobarometer also provides evidence of 

33 

 
the  negative  impact  of  the  crisis,  showing  a  substantial  impact  on  firms  in  the  medium  and 
high innovation-intensive sectors.43 
Against  this  backdrop,  an  effective  pursuit  of  the  Europe  2020  Strategy's  objectives  and 
headline targets requires a recovery of R&D activities, and possibly an acceleration to meet 
the 2020 target of 3% R&D expenditure over GDP. To this purpose, the effectiveness of the 
R&I financing can be enhanced by the adoption of dedicated EU financial instruments. 

3.2. Transport 

The  existence  and  quality  of  an  integrated  transport  network  (comprising  road,  rail,  inland 
waterways,  maritime,  airports  and  air  traffic  management)  is  strongly  correlated  with 
international competitiveness of the country,  due to  reduced travel and transportation times, 
better  interconnections  between  the  modes  of  transport,  and  integration  of  regional  and 
national  production  sites  with  distribution  and  selling  channels  targeting  the  national  and 
global markets. 
Transport infrastructure is therefore fundamental for the mobility of persons and goods in the 
internal market, and for the economic, social, and territorial cohesion of the European Union. 
According to DG MOVE data, the EU comprises 5 000 000 km of paved roads, of which circa 
65  000  km  are  motorways,  over  213  000  km  of  rail  lines,  of  which  more  than  110  000  km 
electrified,  and  nearly  43  000  km  of  navigable  inland  waterways.  In  order  to  address  those 
transport  investment  from  a  systemic  perspective,  the  EU  adopted  in  2013  a  regulation  on 
Union  guidelines  for  the  development  of  the  trans-European  transport  network44  (TEN-T 
Guidelines). 
The regulation establishes a legally binding obligation for the Member States to develop the 
so-called "core" and "comprehensive" TEN-T networks. In addition, the regulation identifies 
projects  of  common  interest  and  specifies  the  requirements  to  be  complied  with  in  the 
implementation of such projects. 
The core network overlays the comprehensive network and consists of its strategically most 
important  parts.  It  constitutes  the  backbone  of  the  multi-modal  mobility  network  Europe's 
citizens and businesses need. It concentrates on those components of TEN-T with the highest 
European  added  value:  cross-border  missing  links,  key  bottlenecks  and  multi-modal  nodes. 
The core network is to be in place by 31 December 2030 at the latest. 
The cost of EU transport infrastructure development is estimated at over EUR 1,5 trillion for 
2010-2030. The completion of the TEN-T network alone requires about EUR 550 billion until 
2020 out of which some EUR 215 billion can be referred to the removal of major bottlenecks. 
This compares with total investment on transport infrastructure during the period 2000-2006 
of EUR 859 billion. 
The Connecting Europe Facility (CEF) Regulation45, adopted in December 2013 laid down a 
financial envelope for the period 2014-2020 of EUR 33 billion, of which EUR 26 billion are 
allocated for the transport sector. The overall contribution to the CEF financial instruments is 
up to 10% of the overall financial envelope of the CEF budget.  
The  CEF  regulation  established  detailed  provisions  for  the  design  and  implementation  of 
financial  instruments  in  support  of  TEN  financing  needs.  Due  to  the  proposal  of  the 

43 European  Commission (2014a). 
44 Regulation (EU) No 1315/2013 of the European Parliament and of the Council of 11 December 2013 on Union 
guidelines for the development of the trans-European transport network, OJ L 348, 20/12/2013. 
45  Regulation  (EU)  No  1316/2013  of  the  European  Parliament  and  of  the  Council  of  11  December  2013 
establishing the Connecting Europe Facility, OJ L 348, 20/12/2013 

34 

 
                                                 
Commission on the establishment of the European Fund for Strategic Investments (EFSI), it is 
expected  that  EUR  2,7  billion  will  be  transferred  from  the  Transport  CEF  funding  towards 
this new initiative. 
In  January  2014,  the  Commission  adopted  a  Communication  and  a  delegated  act  (EU)  N° 
275/2014 setting the transport funding priorities for the CEF implementation 2014-2020.  
In July 2014, the Commission concluded the ex-ante assessment required for setting the new 
financial  instruments  under  the  CEF.  The  assessment  led  to  the  design  of  a  new  CEF  Debt 
Instrument, funded with EUR 2,6 billion, in which all previously existing instruments, namely 
PBI  and  LGTT  will  be  merged  into.  As  foreseen  in  the  regulation,  the  Commission  will 
entrust the implementation of the CEF Debt Instrument. The implementation will be entrusted 
with the EIB by means of a new Delegation Agreement. 
In  September  2014,  the  Commission  launched  a  call  for  proposals  for  co-financing  projects 
with EUR 11,9 billion of EU funding to improve European transport connections. This is the 
largest  ever single amount  of EU funding earmarked for transport infrastructure. Applicants 
had  until  3  March  2015  to  submit  their  bids.  Most  of  the  CEF  funds  should  be  focused  on 
major  cross-border projects and  main bottlenecks  on the 9 TEN-T multimodal Corridors, as 
well  as  on  traffic  management  systems,  which  allow  making  the  best  use  of  the  existing 
infrastructure  (European  Rail  Traffic  Management  System  (ERTMS)  for  railways,  and 
deployment  of  new  generation  of  air  traffic  management  technologies  and  procedures 
(SESAR) for aviation).  
The CEF will support primarily projects listed in Part I of the Annex to the CEF Regulation, 
which have been pre-identified by the Commission in consultation and cooperation with the 
Member  States  concerned.  The  transport  infrastructure  investments  require  long  term 
commitments  from  the  national  authorities  in  charge  of  infrastructure  planning  and 
procurements in order to establish the necessary credibility and transparency among all actors 
involved in the planning and financing of infrastructure, including the public and the private 
sectors. 
The transport infrastructure lifecycles, depending on the sector, are very long term (above 30 
years for roads, with necessary maintenance cycles), which in the absence of sufficient supply 
from  long-term  bank  lending  (corresponding  to  the  lifetime  of  the  infrastructure  financing, 
including the spending on the maintenance), or high expectations on the rates of return from 
the  equity  providers,  leads  in  many  cases  to  postponement  of  the  planned  infrastructure 
investments and their upgrades and to a decline in new investments. 
Against  this  backdrop,  several  market  imperfections  have  been  identified  in  the  transport 
sector, requiring the consideration of public intervention:46 

1.  Decline in gross investments and expenditure on maintenance in the transport sector in 

most EU countries since the financial crisis 

2.  Insufficient bank lending for long-term infrastructure assets at the European level 
3.  Lack of a planning framework for the European projects of common interest 
4.  Barriers around the Public Private Partnerships (PPPs) 

In  addition,  there  are  other  reasons,  varying  across  Member  States,  why  most  of  transport 
infrastructure  is  financed  by  the  public  side.47  Public  funding  of  the  basic  transport 

46 European Commission (2014b). 
47 Note: A large share of transport infrastructure is not revenue generating (inland waterway and most of roads) or 
is not generating sufficient revenue (rail). Procurement via PPP structures is more complex and engages the public 

35 

 
                                                 
 
infrastructure has been considered in many European countries as a "service d'intérêt public" 
and expression of the "acquis of the welfare state" and therefore not subject to the user-pays 
principle. It estimated that over the last 20 years, 90-95% of transport investments have been 
financed  through  national  government  budgets.  When  transport  infrastructure  is  privately 
financed,  it  is  usually  based  on  a  public-private  partnership  (PPP)  with  a  project  finance 
underpinning.48  Project  financing  is  well  established  in  the  road,  port  and  airport  sector, 
whereas for inland waterways currently the first PPP projects are in preparation. An exception 
is the rail sector, where projects are often financed on a corporate finance basis by the railway 
infrastructure companies. 
The scarcity of funding, due to slow growth rates and constraints on the public expenditure, 
coupled  with  insufficient  long-term  bank  lending,  has  made  it  necessary  to  consider  other 
infrastructure  financing  possibilities,  including  private-public  partnerships  and  financial 
instruments  possibly at the EU level  to alleviate parts of the risk inherent to the projects. 

3.3. Energy Infrastructure and Energy Efficiency 

Major efforts are needed to modernise and expand Europe's energy infrastructure as well as to 
increase energy efficiency and renewable energy and interconnect networks across borders to 
meet the Union's core energy policy objectives of competitiveness, sustainability, and security 
of supply.  
For the next years to come the EU is projected to invest annually at least some EUR 200bn on 
average in the energy sector, with energy efficiency measures alone amounting to some EUR 
80bn.  Since  the  Commission's  Communication  on  energy  infrastructure  priorities  for  2020 
and  beyond,  adopted  on  17  November  2010,49  the  existing  Trans-European  Networks  for 
Energy  (TEN-E)  policy  and  financing  framework  have  been  overhauled  to  coordinate  and 
optimise network development on a pan-continental scale.  
The  main  aim  is  to  ensure  the  completion  of  the  internal  energy  market  and  the  security  of 
energy  supply,  while  promoting  energy  efficiency  and  energy  saving  as  well  as  the 
development of new and renewable forms of energy.  
The framework for the policy is now defined in the TEN-E guidelines regulation50 adopted in 
April  2013.  It  is  estimated  that  in  electricity  alone  the  transmission  grid  expansion  to 
accommodate these changes would require EUR 104 billion to 2022 (or, extrapolating, EUR 
207 billion to 2030)51 in addition to the normal replacement of assets, estimated at EUR 76 
billion  to  2035.52  In  addition,  approximately  EUR  40  billion will  be  required  by  2020  for  a 
smart  grid  investment  on  the  transmission  level.  Some  EUR  70  billion  will  need  to  be 
invested  by  2020  in  gas  transmission  assets  of  European  importance  such  as  gas 
interconnectors, storages, Liquefied Natural Gas (LNG) reception terminals. These costs will 
be predominantly financed from network fees paid by the energy end-users. 
The projects will be developed by Transmission System Operators (TSOs) i.e. companies set 
up specifically to develop and run the electricity and gas transmission networks. TSOs operate 
in a highly regulated business environment. Although regulations differ from Member State to 

authority in very long-term commitments spanning many years. Finally not all procuring authorities accord high 
priority to whole-life-cost approach that favours sufficient maintenance. 
48 Note: PPP hereby includes also concessions as the common model of financing motorways in certain of Member 
States and airports in general. 
49 European Commission (2010a). 
50 Regulation (EU) 347/2013. 
51 ENTSOE (2012). 
52 IEA (2011). 

36 

 
                                                                                                                                             
Member State, they frequently include aspects such as agreed investment volumes, maximum 
debt  ratios,  maximum  debt  remuneration,  etc.  The  regulatory  approved  revenue  is  normally 
linked  to  the  book  value  of  the  assets  they  operate,  the  so-called  Regulated  Asset  Base 
(RAB).53 
The scale of the undertaking  only partially financed from network fees paid by the energy 
end-users  as well as its cross-country nature and its strategic importance as a public-interest 
infrastructure  warrant  a  substantive  intervention  at  the  EU  level,  which  can  be  effectively 
implemented through financial instruments. 

3.4. ICT/Broadband 

The  Digital  Agenda  for  Europe  (DAE)  recognises  the  role  of  fast  and  ultra-fast  broadband 
access platforms for innovation and growth and sets ambitious targets for broadband coverage 
and  take-up:  (i)  making  basic  broadband  access  available  to  all  EU  by  2013,  (ii)  making 
broadband access at internet speeds of above 30 Mbps54 available to all EU by 2020 and (iii) 
ensuring that by 2020 50% of EU households subscribe to internet broadband of 100 Mbps or 
higher. Full coverage with basic broadband has recently been achieved (with a combination of 
fixed,  mobile  and  satellite  technologies)  and  the  focus  is  now  shifting  to  the  challenges 
associated with the deployment of Next Generation Access (NGA) networks and take-up.  
The second and third broadband targets ("NGA targets") require substantial investments in the 
modernisation  of  access  networks.  Total  investment  needs  are  difficult  to  quantify  with 
precision,  but  indicative  estimates  from  different  sources  suggest that  total  investment  costs 
for NGA may exceed EUR 200 billion. 
Despite  projects  being  initiated  at  various  levels,  current  investment  plans  in  fixed  network 
infrastructure are subject to frequent revisions. However, even if they were fully implemented 
they  would  most  likely  not  be  sufficient  to  achieve  the  necessary  coverage  for  the  Digital 
Agenda NGA targets, especially as far as rural areas are concerned. All in all, the current pace 
of NGA roll-out is likely to leave a sizeable investment gap in the years to 2020. 
Traditionally, the bulk of network investment in telecoms has been shouldered by vertically 
integrated  telecom  network  and  cable  operators  and  to  an  increasing  extent  by  alternative 
telecom carriers and municipalities. Along with these actors, a number of alternative investors 
and new business models have been recently emerging.  
An alternative group of investors is represented by regional or local utilities, especially in the 
energy  sector.  Network  investments  initiated  by  municipalities  or  regional  governments 
represent  another  class  of  projects.  For  instance,  municipal  fibre  networks  account  for  a 
significant  share  of  NGA  coverage  in  Sweden.  Models  with  public  sector  participation  also 
comprise PPP structures for broadband, which have been pioneered, for example, by local and 
regional public authorities in France.  
In  addition,  there  is  a  growing  trend  of  investment  initiatives  from  private  open  access 
providers operating on a purely commercial basis, who provide fibre network services, from 
rolling  out  to  maintenance,  to  municipalities  or  regional  governments.  These  companies 
remain  relatively  small  compared  to  traditional telecom  operators,  provided  they are  mostly 
relying on their own funds to develop. 

53 Note: TSOs build new projects with e.g. the accumulated capital or borrow money against the strength of their 
balance sheets. The value of such new project is added to Regulated Asset Base (RAB) and therefore results in 
increased revenue of that TSO. 
54 Megabits per second (referring to the speed of data transfer). 

37 

 
                                                 
The correlation of NGA investment increasing costs with decreasing population density gives 
rise to a specific issue: a significant part of the EU population lives in areas situated between 
urban clusters (where there is a clear business case for commercially-driven roll-out). In such 
rural regions broadband deployment without public support is often not conceivable, although 
exceptions exist. If a number of conditions are fulfilled, a business case exists for these areas; 
however, this business case is usually not as compelling and clear-cut as in or at the fringe of 
conurbations.  Specifically,  the  question  is  often  whether  expected  revenues  and  cash-flows 
can adequately remunerate the risks associated with the project.  
Equally, there is often a mismatch between the risk-return profile of projects and the type of 
investments  targeted  by  investors  providing  the  bulk  of  financing.  On  the  debt  side,  long 
payback  cycles  combined  with  high  levels  of  construction  and  demand  risk  (at  least  in  the 
early stages of operation) mean that NGA projects may not qualify for standard senior bank 
lending;  where  lenders  are  ready  to  extend  credit,  loan  tenors  often  do  not  match  the  long 
asset lives of telecom networks. At the same time, debt capital market solutions may not be 
available to fill the gap because transaction costs are prohibitive in relation to the relatively 
small size of the projects. 
On the equity side, the weakness of NGA investments is that they do not fit the definition of 
popular asset classes: NGA projects carry greater risk than more traditional infrastructure in 
transport,  energy  or  water  and  are  by  no  means  comparable  to  the  high-risk/high-return 
strategies with short- to medium-term exit of other fund investors.  
The  above  constraints  are  exacerbated  by  additional  factors,  which  impede  the  matching 
process  between  investors  and  candidate  projects.  Both  senior  lenders  and  other  investors 
have difficulties with appraising the risks associated with broadband projects and with valuing 
telecom  network  assets.  Especially,  regulatory  risk  is  perceived  as  a  major  hindrance  in  the 
telecommunications sector, and regulatory uncertainty on potential open access obligations of 
NGA networks severely impedes investment decisions. Moreover, small ticket sizes and lack 
of  standardisation  across  projects  may  further  complicate  the  deal-making  process.  These 
factors drive transaction costs and often prove to be a decisive obstacle. 
Against  this  backdrop,  EU  financial  policies,  facilitating  access  to  well-designed  financing 
solutions  which  optimise  risk  allocation  and  address  the  specific  challenges  associated  with 
NGA investments, can give a decisive boost to the economics of projects and greatly improve 
NGA roll-out dynamics. 

3.5. Social Enterprises 

Traditionally, the European social model has always been characterised by the prominent role 
played  by  a  variety  of  organisations  that  differ  from  mainstream  private  corporations  and 
traditional  non-profit  organizations/social  economy  entities.  These  private  organisations  that 
are grouped under the notion of "social enterprise" pursue an explicit and primary social aim. 
Their main purpose is to achieve measurable, positive social impacts, rather than to generate 
financial  gains  for  their  owners  or  stakeholders.  They  provide  goods  and  services  which 
generate  a  social  return  and/or  employ  methods  of  production  of  goods  or  services  that 
embody  a  social  objective.55  There  are  2  million  social  economy  enterprises  in  Europe, 
representing 10% of all businesses in the EU.  
The  Social  Business  Initiative  of  the  Commission56  in  2011,  which  focussed  on  social 
entrepreneurship,  recognised  the  importance  of  social  economy  organisations  in  this  field: 

55 EaSI Regulation (EU) No 1296/2013  (OJ L 347/238, 20.12.2013) 
56 EC (2011d). 

38 

 
                                                 
"The specific legal statuses of the social economy are particularly suited to social enterprises 
as  their  method  of  governance  favours  participation  and  openness".  The  social  economy 
employs more than 14 million people – about 6.5% of the EU’s employees. Social economy 
organizations  are  traditionally  organized  in  the  legal  forms  of  cooperatives,  mutual 
undertakings,  associations  and  foundations.  They  have  various  objectives  ranging  from 
agriculture and banking to provision of employment and sheltered workshops.  
These  enterprises,  which  have  been  active  in  Europe  for  nearly  two  centuries,  have  been 
recognised  and  regulated  in  many  countries  through  specific  legal  forms  (including  in 
particular  the  cooperative,  the  mutual,  the  foundation  and  the  association,  as  well  as  other 
legal  forms  and  business  models  recently  developing),  have  set  up  their  own  representative 
organisations to interact with public authorities, and have contributed in various ways to the 
social  and  economic  development  of  Europe.  In  fact  recent studies  highlight  the  correlation 
(and at some point the causality) relationship between social capital and economic growth.57 
Moreover, the recent crisis has pointed out the fragility of an economic and financial system 
merely based on the profit maximisation benchmark. 
Social  enterprises  play  an  important  role  in  complementing  the  action  of  public  authorities, 
not least because of their innovative nature. They also create jobs - often more sustainable and 
of  better  quality  than  those  in  the  mainstream  economy.  However,  they  face  a  number  of 
obstacles to growth, notably (but not exclusively) in accessing finance. Particularly in some 
Member States the social enterprise sector is still underdeveloped. 
In the Social Business Initiative,58 the Commission pointed out that “the funding system for 
social  enterprises  is  underdeveloped  in  relation  to  that  used  by  other  businesses”.  This  was 
confirmed by a 2013 study on imperfections in the social investment market59 as well as by a 
number of national studies. For instance,  in  a UK survey with  865 social  enterprises,60  lack 
of/poor access to/affordability of finance (45%) was ranked first among the barriers for start-
ups,  before  cash  flow  (22%),  lack  of  appropriate  skills/experience  (19%)  and  lack  of 
awareness  of  social  enterprise  among  customers  (15%).  As  the  UK  is  one  of  the  most 
developed markets for social entrepreneurship finance, it can be expected that the demand for 
capital is not met in most parts of Europe.  
Another  factor  is  the  investment  readiness  of  social  enterprises.  There  is  often  a  lack  of 
understanding on both sides (supply and demand for social finance), an unwillingness to pay 
interest  rates,  an  orientation  towards  the  so-called  grant  economy  or  a  lack  of  necessary 
documents  such  as  impact  reports  or  business  plans.  Analysing  the  supply  side,  investors 
often  complain  that  they  do  not  have  enough  investment  opportunities.  There  is  thus  a 
mismatch between existing supply and demand. 
A  recent  study61  outlines  several  constraints  to  starting  and  scaling-up  social  enterprise 
activity.  Access  to  finance  was  identified  across  almost  every  European  country  as  a 
significant barrier. For example, over a third of social enterprises in Denmark do not have any 
lines  of  credit  and  in  the  Netherlands  this  figure  is  40%.  Moreover,  a  number  of  Member 
States have highlighted the limited range of financial instruments available to social investors. 
Stakeholders in Hungary noted that financing options available to SMEs (such as investment 
funds  and  state  guarantees)  were  not  available  for  social  enterprises.  In  contrast,  although 

57 Beugelsdijk and van Schaik (2005). 
58 EC (2011d). 
59 Spiess-Knafl, W. (2013) 
60 Social Enterprise UK (2011) 
61 EC (2014d). 

39 

 
                                                 
available private funds are significant in Germany, they are usually conservatively managed 
and not necessarily accessible for innovative social enterprises or start-ups.  
The EU can play an active role in supporting the development of the supply and demand sides 
of the social investment markets and in facilitating the access of social enterprises to funding. 
Through  the  new  Programme  for  "Employment  and  Social  Innovation"  (EaSI),  the 
Commission  aims  to  facilitate  and  improve  the  access  to  finance  for  social  enterprises  by 
providing specific financial support for their development.  
In  addition,  the  ESF  and  ERDF  investment  priorities  promoting  support  to  social 
entrepreneurship,  envisaged  in  the  MFF  2014-2020,  can  be  used  to  raise  awareness  and 
recognition  of  social  enterprises  and  contribute  to  the  development  of  this  sector  within 
Europe. To help mobilise additional public or private investments, these investment priorities 
can be implemented via financial instruments. 

3.6. Education 

Education  and  training  are  at  the  core  of  the  Europe  2020  Strategy  and  of  the  Integrated 
Guidelines for the Economic and Employment Policies of the Member States.62 Arguably none 
of the Europe 2020 objectives and headline targets will be reached without strong investment 
in human capital. 
There  is  a  positive  and  statistically  significant  relationship  between  the  level  of  cognitive 
skills in a population, productivity and economic growth. For example, an average increase of 
25 points in PISA performance across the EU countries could lead to a 3% gain in GDP per 
capita.  The  increase  in  average  educational  attainments  by  emerging  countries  makes  the 
human capital accumulation for EU an even more important challenge in light of international 
competition for growth. The benefits of learning mobility are clear with significant benefits to 
graduate employability as well as personal development.63 This importance is recognised by 
the agreement of the EU and 'Bologna' mobility target that by 2020, at least 20% European 
Higher Education Area graduates should have had a study or training period abroad. 
The  total  amount  of  investment  in  education  over  the  last  years  has  been  dampened  by 
adverse economic and financial conditions on both the demand and supply side. In particular: 
  The financial crisis increased uncertainty and risk aversion, lowering long-term private 

investments in human capital and hampering cross-border student mobility. 

  The sovereign debt crisis led to fiscal consolidations, especially in peripheral countries 
exhibiting low growth / high debt dynamics (such as Greece, Spain, Portugal, Italy), 
jeopardising previous levels of public spending in education. 

The EU could  play an  effective role in  supporting investment in  education, both  on a long-
term  basis  and  as  a  means  to  accelerate  recovery  from  the  current  financial  and  sovereign 
crisis. The use of EU financial instruments, envisaged in this sector for the first time for the 
MFF 2014-2020, is likely to boost student mobility by providing financial support on a larger 
scale than otherwise possible. 

62 European Commission (2010c). 
63 Humburg, van der Velden and Verhagen (2013). 

40 

 
 
                                                 
4.  Strategic Non-EU Regions 

The  European  Union  is  a  global  economic  and  political  player,  with  regional  and  global 
interests  and  responsibilities.  Its  network  of  international  agreements  with  partners  and 
organisations all over the world, not matched by individual Member States, gives all of them 
influence in almost all fields of international relations. 
This  delicate  role  can  be  primarily  developed  by  maintaining  sound  international  relations, 
also in view of the growth of the world's economy, especially through the financial support to 
strategic world economies, with possible gains in terms of trade with Member States. 
Besides this, the EU international role is particularly important to prepare access to the Union 
to Enlargement countries, through economic, technical and administrative support. 

4.1. Enlargement Countries 

Enlargement  countries  are  composed  of  five  candidates,64  one  applicant  which  has  put  the 
accession negotiations on hold65 and two potential candidates.66    

Source: DG NEAR 

64 The former Yugoslav Republic of Macedonia, Montenegro, Serbia, Turkey, Albania. 
65 Iceland has put its accession negotiations on hold and no longer wishes to be considered a candidate, although it 
has not withdrawn its accession application. 
66 Bosnia and Herzegovina, Kosovo. Kosovo's designation is without prejudice to positions on status, and is in line 
with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence. 

41 

 
 
 
                                                 
The  Treaty  on  the  European  Union  states  that  any  European  country  may  apply  for 
membership  if  it  respects  the  democratic  values  of  the  EU  and  is  committed  to  promoting 
them. 
The  first  step  is  for  the  country  to  meet  the  key  criteria  for  accession.  These  were  mainly 
defined  at  the  European  Council  in  Copenhagen  in  1993  and  are  hence  referred  to  as 
'Copenhagen criteria'. Countries wishing to join need to have: 

 stable institutions guaranteeing democracy, the rule of law, human rights and respect for 

and protection of minorities;  

 a  functioning  market  economy  and  the  capacity  to  cope  with  competition  and  market 

forces in the EU;  

 the ability to take on and implement effectively the obligations of membership, including 

adherence to the aims of political, economic and monetary union.  

The EU also needs to be able to integrate new members. 
In  the  case  of  the  countries  of  the  Western  Balkans  additional  conditions  for  membership, 
were set out in the so-called 'Stabilisation and Association process', mostly relating to regional 
cooperation and good neighbourly relations. 
To ensure that enlargement brings maximum benefits to both the EU and to countries in the 
process  of  joining  it,  the  accession  process  needs  to  be  carefully  managed.  Hence  the 
Commission  has  a  stake  in  the  support  of  socio-economic  development  in  enlargement 
candidates  by  providing  both  financial  assistance  through  the  Instrument  for  Pre-Accession 
Assistance  and  technical  assistance,  through  TAIEX,  which  is  the  Commission’s  Technical 
Assistance and Information Exchange instrument.  

4.2. Neighbourhood Countries 

There are 16 neighbourhood countries67 to the East and the South of the EU. The European 
Neighbourhood  Policy  offers  these  partners  political  association  and  economic  integration 
with the EU. Available instruments are of a political, sectorial, and financial nature. 
The ENP rests on two regional dimensions: the Eastern Partnership (EaP) for the East and the 
Partnership for Democracy and Shared Prosperity and the Union for the Mediterranean (UfM) 
in the South.   
The  ENP  builds  upon  the  legal  agreements  in  place  between  the  EU  and  the  partner  in 
question: Partnership and Cooperation Agreements (PCA) or Association Agreements (AA). 
Central to the ENP are the bilateral Action Plans or Association Agendas between the EU and 
each ENP partner (12 of them have been agreed so far). These set out an agenda of political 
and economic reforms with short and medium-term priorities of 3 to 5 years. 
Financial cooperation with European Neighbourhood Partner Countries is one of the key areas 
of interest, where funding focuses on shared political objectives and underpins reforms set out 
in  agreements  or  Action  Plans/Association  Agendas  with  the  partners.  The  bulk  of  funding 
comes from the European Neighbourhood Instrument (ENI), with over €15bn for 2014-2020.  
Apart from providing grants, the EU is also leveraging additional, substantial funding through 
cooperation  with  International  Financial  institutions  (EIB,  EBRD,  WB,  etc),  and  notably 
through a specific mechanism, the Neighbourhood Investment Facility. 
The  Ukraine  crisis,  the  ongoing  Syrian  conflict  and  its  regional  spill-over  effects,  tense 
situations  in  Egypt  and  the  significantly  worsening  state  of  internal  affairs  and  security 

67 The European Neighbourhood includes Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, 
Lebanon, Libya, the Republic of Moldova, Morocco, Palestine, Syria, Tunisia and Ukraine. 

42 

 
                                                 
situation in Libya also underline the need for effective partnerships and will form part of the 
ongoing  review  of  the  European  Neighbourhood  Policy,  launched  by  the  European 
Commission and the External Action Service in early 2015.. 

4.3. Countries covered by the Development Cooperation Instrument (DCI) 

Investment  needs  in  EU  partner  countries  are  huge.  Governments  and  other  public  donors' 
funds are far from sufficient to cover all substantial needs in EU partner countries. In parallel 
global  realities  have  changed  in  the  past  15  years.  Many  emerging  economies  are  now 
thriving,  with  incomes  in  some  upper  middle-income  countries  outscoring  those  of  EU 
countries. At the same time, disparities within developing countries are increasing. 
The strategic role of the EU in sustainable social and economic growth of the DCI countries 
as a condicio sine qua non for poverty reduction lies in its capacity to mobilise a critical mass 
of financial and political support, having a significant impact on a given social or economic 
issue.  The  European  Union,  through  its  common  resources  and  the  available  national 
capabilities, has means, experience and expertise to act efficiently and in a cost-effective way. 
There is a growing importance of EU partner countries due to their increasing share in world 
growth. Financial instruments, such as the EU blending facilites contribute to achieving EU 
development  policy  objectives  in  line  with  regional  and  national  priorities  of  partner 
countries.  In  particular,  the  SME  and  infrastructural  sectors    that  the  EU  already  supports 
domestically    represent  targets  of  interest  also  in  to  reduce  poverty  and  foster  economic 
growth. 
The Agenda for Change emphasises the support of inclusive growth and job creation as a key 
priority of EU external cooperation. In this context blending, combining EU grants with loans 
or with equity from other public and private financiers as a financial instrument, is a useful 
tool to leverage additional resources, increasing the impact of EU aid and driving sustainable 
growth as a basis for poverty reduction. 

5.  Conclusion 

The set of potential recipients, as outlined above, are struggling to finance their activity; each 
country  and  sector  of  the  real  economy  shares  a  common  difficulty  arising  from  the  global 
financial  crisis,  but  also  presents  its  own  financial  issues  and  has  therefore  been  targeted 
through specific financial instruments. 
Addressing  these  issues  is  a  priority  for  Europe.  The  capacity  of  the  European  economy  to 
make long term financing available, reinforcing the competitiveness of the productive sectors, 
depends  on  its  ability  to  channel  savings  through  an  open,  safe  and  competitive  financial 
system. 
In this context, the financial instruments adopted by the EU represent an important measure to 
address  financing  gaps  by  leveraging  public  and  (possibly)  private  funds  while  minimising 
market  distortions.  Indeed,  in  times  of  a  European  crisis,  a  central  EU  intervention  and  the 
combination  and  better  use  of  public  resources  carry  a  strong  political  message  about  the 
European construction that would not only be captured by investors and originators alike and 
contribute to the creation of a broader and more standardised market, but it would also give a 
strong  signal  to  the  public  of  the  joint  effort  to  fight  the  crisis  enforcing  the  message  to 
markets. 
Against  this  backdrop,  the  Commission  has  to  ensure  a  consistent  and  effective  roll-out  of 
centrally-managed financial instruments for the 2014-2020 MFF. 

43 

 
6.  Annex-Additional Information on the European Equity Market 

6.1. The structure of the European Equity Market 

The  European  equity  market  is  composed  of  different  types  of  private  equity  investment 
funds. The nature of such funds depends on the stage of the company's development the funds 
invest  in.  Although  different  definitions  and  terminologies  exist,  a  commonly  accepted 
approach to split equity funds' investments is described in Box 1: 

Box 1: Equity investment stages 

1.  Pre-Seed/Seed:  in  this  phase  the  major  focus  of  the  company's  activities  is  on  research  activities 
and  product  development,  so  as  to  transfer  the  new  idea  into  usable  results,  and  set  up  a  functional 
prototype. It is at this stage that company founders need to prepare a sustainable business plan in order 
to attract potential investors. 
2.  Start-up  and  Early  Stage:  this  phase  includes  the  planning  and  preparation  of  production. 
Targeted  project  management  is  important  in  order  to  keep  control  of  the  market  entry  schedule  as 
well as the cost of R&D projects. 
3.  Emerging  Growth:  this  phase  is  characterised  by  the  establishment  of  the  company  at  both  the 
organisational and institutional level. At this stage it is crucial to establish and expand manufacturing 
capacities and sales channels so as to ensure revenue growth. 
4.  Development:  beyond  the  breakeven  point,  profits  enable  the  company  to  expand  the  product 
portfolio  and  tap  new  markets.  A  company  is  usually  considered  to  be  an  established  company  if  it 
reaches the fifth year after its foundation. 

Further  information  is  contained  in  Figure  20, which  also  links  the  different  stages  of  SME 
development  with  a  set  of  equity  instruments  that  are  the  most  appropriate  to  address  the 
needs of the market. 

Figure 20: Different stages of SME's development and most typical financial sources. 

Source: European Commission (2014), based on EIF (2014) 

Box  2  further  expands  on  the  characteristics  of  the  different  markets  depicted  above  and 
discusses key data on alternative equity financing sources. 

44 

 SME Cash FlowPre-seedSeedStart-upEmerging GrowthDevelopmentTechnology Transfer InstitutionsBusiness angels, CrowdfundingPrivate equity fundsHIGHER RISKLOWER RISKSME Development StagesVenture Capital 
 
Box 2: Characteristics of equity market stages 

Technology Transfer Institutions, Business angels, Crowdfunding 
The  term  Technology  Transfer  Institutions  (TTIs)  is  used  to  describe  organisations68  which  help  the 
staff  at  research  organizations  to  i)  identify  and  manage  the  organization’s  intellectual  assets, 
including  protecting  intellectual  property  and  transferring  or  licensing  rights  to  other  parties  to 
enhance  prospects  for  further  development,  and  ii)  create  new  companies  (spin-offs)  to  develop  or 
commercialise an invention such as Technology Parks and Incubators. 
Business  angels  are  individual  investors,  usually  with  business  experience,  who  provide  capital  for 
firms in early-stage. They are an important source of equity for small firms long before they become 
attractive for venture capital funds. 
The expression crowdfunding refers merely to a channel of financing promoted through internet and 
social media, which can be used in many different ways. Financing can come in the form of donations 
(donation-based  crowdfunding),  or  contributions  based  on  rewards  and/or  product  pre-sales.  Other 
crowdfunding campaigns may also offer some form of financial return, by promising a share of future 
profits. Security-based crowdfunding involves issuing equity or debt to contributors (crowd investing). 
Finally, crowd lending campaigners borrow money from people and promise to pay back the capital 
on specified terms with (or in certain cases without) interests. 

Venture Capital Funds 
Venture Capital (Venture Capital) Funds are typically private partnerships or closely-held corporations 
pooling  money  from  private  and  public  pension  funds,  endowment  funds,  foundations,  corporations 
and wealthy individuals, to provide equity investment for young, rapidly growing companies that have 
the potential to develop into significant economic actors. The equity investment is usually provided to 
companies  placed  between  the  seed  stage  and  the  growth/expansion  stage,  and  it  is  supported  by 
expertise in the form of technical knowledge, business contacts and strategic advice. 

Private equity 
Private  equity  (PE)  refers  to  investments  made  in  companies  whose  shares  are  not  quoted  in  some 
form of stock exchange. Normally, public equity investors make hands-off purchases of shares in these 
listed companies. The investors are not usually involved in providing advice or otherwise assisting the 
owners or managers in the development of the firm. 
PE investment funds are "vehicles" enabling pooled investment by a number of investors in equity and 
equity-related  securities  of  companies.  These  are  generally  private  companies  whose  shares  are  not 
quoted on a stock exchange. These funds may take the form of either a company or an unincorporated 
arrangement such as a Limited Partnership. 

6.2. Regulatory framework for the Venture Capital market 

The regulatory framework varies significantly between Member States, and hence the Venture 
Capital market is  highly  fragmented,  with each country having  created a different operating 
environment  for  Venture  Capital.  Cross-border  fundraising  and  investing,  while  possible,  is 
complex  and  costly,  with  funds  usually  needing  to  set  up  an  additional  legal  entity  in  each 
Member State concerned. 
In  addition,  fund  managers  are  confronted  with  problems  of  double  taxation,  tax-related 
administrative obstacles, and uncertainties over tax treatment. In this context: 
 The European Venture Capital Funds  Regulation69 (EVCFR)  creates an opt-in  regulatory 
regime for fund managers whose funds are below the EUR 500 million threshold requiring 
registration under the Alternative Investment Fund Managers Directive (AIFMD). EVCFR 
introduces the protected designation of "European Venture Capital Fund" (EVCF). 

68 European Commission (2004). 
69 Regulation (EU) No.345/2013 (OJ L115/1, 25.04.2013) 

45 

 
                                                 
After a domestic registration process, a fund manager can market EVCF-qualified funds70 in 
all Member States without further national registration or approval by national regulators. The 
hypothesis is that the implementation  of EVCFR will lead to larger  and more cost-effective 
funds that can also specialise by type of investment or sector, increased competition between 
funds, a wider diversification of funds' investments, and hence to SMEs having greater access 
to equity finance. 

 Despite diminishing obstacles to cross-border fund-raising, EVCFR will not in itself solve 
any taxation problems that funds invested across borders may face, because the Regulation 
does not contain rules on taxation. In 2010 a group of tax experts published a report71 on 
the taxation problems, which might arise when Venture Capital is invested across borders. 
However, the 2012 Commission's public consultation on Venture Capital-related cross-border 
direct tax problems72 did not yield sufficient evidence to conclude either that the potential tax 
problems  identified  occur  in  practice,  or  to  be  able  to  estimate  the  real  extent  of  such 
problems,  the  frequency  with  which  they  occur,  and  their  financial  impact.  Given  this 
outcome, the Commission is currently reflecting on what, if any, steps it could take in the tax 
field. 

 The  prudential  regulation  of  Venture  Capital  investors,  such  as  Solvency  II  for  insurers, 

has increased investors' risk aversion and further constrained fundraising. 
 The  Commission  has  adopted  on  15.1.2014  new  guidelines73  setting  out  the  conditions 
under which Member States can grant aid to facilitate access to finance by European SMEs 
and  companies  with  a  medium  capitalisation  (the  so-called  "midcaps").  These  guidelines 
are  part  of  the  Commission's  State  Aid  Modernisation  (SAM)  strategy,  which  aims  at 
fostering growth in the Single Market. The guidelines will enter into force on 1 July 2014. 

70 Note: Funds must meet certain requirements, such as that 70% of commitments are invested in SMEs. 
71 European Commission (2010d). 
72 European Commission (2012).  
73 OJ C19, 22.01.2014 

46 

 
                                                 
IV.  INFORMATION  ON  FINANCIAL  INSTRUMENTS  according  to 

Article 140.8 of the Financial Regulation 

1.  Equity Instruments 

1.1. The  High Growth  and Innovative SME Facility (GIF) under  the  Competitiveness 

and Innovation Framework Programme (CIP)  

A -  Summary 

Policy DG in charge: 

DG GROW, with participation of DG 
ECFIN for the design of the instruments 

Implementing DG in charge:   

Implementing Body in charge: 

Initial Overall (2007-2013) Programme 
Budget: 

Current Overall (2007-2013) Programme 
Budget**: 

DG ECFIN 

EIF 

EUR 623* million 

EUR 605,7 million 

Executed Budget since beginning until 
31/12/2014***: 

Commitments: EUR 625,2 million **** 

Payments: EUR 358,0 million 

*Initial  commitments  (GIF  550  million  EUR),  including  the  CBS  programme  reallocations  (73  million 
EUR). 
**Including  increase  in  budget  commitments  from  2008  to  2013.  The  initial  split  of  the  Competitiveness 
and  Innovation  Framework  Programme  (CIP)  budget  between  the  GIF  and  SMEG  instruments  was  only 
indicative. During the lifetime of the CIP programme, the share of the SMEG instrument in the total CIP 
budget was increased in line with market needs, therefore leading to a lower current overall programme 
budget for GIF, compared to its initial situation. 
***Including EUR 19,5 million EFTA contributions and third countries contribution paid by Participating 
Countries as well as regularised interest. 
****Including  EUR  19,5  million  EFTA  contributions  and  third  countries  contribution  paid  by 
Participating Countries as well as regularised interest, capital repayments and dividends generated on the 
trust accounts until 31/12/2012. Relevant interest, capital repayments and dividends generated on the trust 
accounts  during  2013  were  not  recovered  to  the  EU  budget  due  to  shortages  in  the  balance  of  the  trust 
account. Relevant interest, capital repayments and dividends generated on the trust accounts during 2014 
were not yet calculated nor recovered on the fiduciary account at writing date. 

The overall objective of GIF is to improve the access to finance for the start-up and growth of 
small  and  medium-sized  enterprises  (SMEs)  in  order  to  support  their  investment  in  (eco-) 
innovation activities, through increasing investment volumes of risk capital funds. GIF used 
94,3%  of  its  allocated  budget  of  EUR  625,2  million,  with  a  leverage  ratio  of  5,5  to  1.  It 

47 

 
 
 
invested in 43 venture capital funds, therefore supporting 433 final recipients74 and creating 
more than 3 000 jobs as of December 2014.   
GIF's  added  value  is  to  contribute  to  the  establishment  and  financing  of  SMEs  and  the 
reduction  of  the  equity  and  risk  capital  market  gap,  which  prevents  SMEs  from  exploiting 
their  growth  potential,  with  a  view  to  improving  the  European  venture  capital  market. 
Moreover, it supports innovative SMEs with high growth potential, including in their cross-
border expansion of their business activities. In this context, GIF provided a critical lifeline of 
public support to the European VC market throughout the recent crisis. The leverage effect of 
more  than  5  means  that  the  impact  of  the  aggregate  budgetary  commitments  on  the  overall 
economy is expected to reach EUR 3 billion of funding to recipient SMEs. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

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)75 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
Financial instruments are part of the Entrepreneurship and Innovation Programme (EIP), one 
of  the  three  specific  programmes  under  the  Competitiveness  and  Innovation  Framework 
Programme (CIP). 
The overall objective of the financial instruments under the CIP is the improvement of access 
to finance for the start-up and growth of small and medium-sized enterprises (SMEs) in order 
to support their investment in innovation activities, including eco-innovation. Under GIF, this 
is done by increasing investment volumes of risk capital funds and other investment vehicles. 

Implementation arrangements 
The High Growth and Innovative SME Facility (GIF) is implemented by the EIF on behalf of 
the Commission. It aims to increase the supply of equity for innovative SMEs in their early 
stages  (GIF1)  and  in  the  expansion  phase  (GIF2).  Investment  proposals  by  financial 
intermediaries are selected based on a notice of implementation (OJ C 302 of 14.12.2007). 
The  total  budgetary  commitments  for  the  CIP  financial  instruments  for  the  whole  period  of 
2007-2013  were  foreseen  to  be  EUR 1,13 billion,  with  an  original  indicative  split  of 
EUR 623 million  for  GIF  (including  eco-innovation)  and  EUR 506 million  for  the  SME 
Guarantee Facility. 
GIF funds equity or quasi-equity investments in intermediaries, which then must provide long 
term  equity  or  quasi-equity  capital  (including  subordinated  or  participating  loans  and 
convertible bonds) to innovative SMEs. Such intermediaries operate in the Member States and 
other  participating  countries  and  target  in  their  investment  policy  more  than  50%  of 
investments in eligible final recipients (SMEs meeting the GIF criteria).  

74 This is the total number of Final Recipients supported through the programme. Out of those, 371 are Eligible 
Final Recipients. 
75 (OJ L 310/15,  9.11.2006) 

48 

 
                                                 
Moreover: 

i)The  GIF  EU  Investments  typically  consist  of  5-12  year  positions  in  intermediaries,  the 
amount committed to a single such vehicle requiring a critical mass and not exceeding EUR 
30 million (or equivalent). At the same time, GIF 1 was required to invest at least 10%, but 
not more than 25% of the total commitments to an intermediary (the maximum limit could 
reach 50% exceptionally, including for eco-innovation focused venture capital funds). GIF 2 
had to invest at least 7,5% and no more than 15% of total commitments to an Intermediary 
(the  maximum  limit  could  reach  25%  exceptionally,  including  for  eco-innovation  focused 
venture capital funds). GIF may co-invest with other EIF-managed resources. 
ii)The GIF EU Investment is required to rank pari passu (i.e. Like Risk, Like Reward) with 
market-oriented  investors  investing  in  the  same  intermediary.  These  will  represent  the 
majority  of  the  capital  invested  in  any  intermediary,  in  order  to  catalyse  private  sector 
investments.  GIF  normally  invests  at  the  first  closing  of  an  intermediary  and  avoids  risk 
capital funds targeting buy-out or replacement capital intended for asset stripping. 

    iii)The  GIF 

targets  commercially-oriented 

independent 
management  teams  combining  the  appropriate  mix  of  skills  and  experience  which 
demonstrate the necessary capability and credibility to manage a risk capital fund. They are 
required to demonstrate a clear strategy, create adequate deal flow, establish appropriate exit 
policies,  and  apply  good  market  practice  in  areas  such  as  legal  structure,  investment 
principles, reporting, and valuation. 

intermediaries  managed  by 

Added value 
The  added  value  of  the  GIF  instrument  consisted  in  addressing  specific  market  needs, 
structuring input, and providing catalytic effects.  
As  response  to  market  needs,  GIF  supported  numerous  first  time  teams,  composed  of 
motivated professionals, to raise their first independent fund. It also addressed regional equity 
and  risk  capital  market  failure,  including  by  developing  an  appropriate  private  equity 
infrastructure in the less-developed Member States and participating countries. 
GIF contributed to filling the sizable gap in access to finance for local young SMEs in their 
development phase, as well as helping companies in their international expansion strategy. It 
also  increased  competition  in  the  market,  spread  best  practices  around  the  region,  and 
highlighted to other private equity teams the support the European Union is providing as well 
as motivated them to raise independent funds of their own. 
In  terms  of  structuring  input,  EIF,  as  entrusted  entity  for  the  GIF  Facility,  assisted  Fund 
Managers  to  fine-tune  their  investment  strategies,  including  by  positioning  themselves  in 
relation  to  current  and  future  competition.  It  also  contributed  to  the  alignment  of  interest 
between  the  LPs  and  the  GPs,  including  by  increasing  the  management  team's  commitment 
and optimising the composition of the Managers' Boards. 
GIF  helped  introduce  and  spread  best  market  practices,  including  standard  LP  protective 
clauses, establishing transparent legal fund structures, and implement AML/KYC procedures. 
In terms of catalytic effects, the GIF provided a strong signalling effect, which helped attract 
private  and  institutional  investors,  therefore  ensuring  viable  and  timely  closings  of  funds, 
which  offered  the  possibility  to  implement  the  envisaged  strategy  and  provide  proper  risk 
diversification and risk-commensurate return expectation. The venture capital funds' reaching 
critical  mass,  enabled  by  the  GIF  investment,  allowed  the  intermediaries  to  support  longer 
their  investee  SMEs,  thus  optimizing  the  exit  timing,  and  therefore  valuations  for  all 
participating investors. 

49 

 
 
(c)  The financial institutions involved in implementation;  

The Commission empowers and mandates the EIF to provide EU venture capital investments 
in  its own name  but  on  behalf of and at the risk of the Commission,  under a Fiduciary  and 
Management Agreement ('FMA', signed 22/11/2007). 
Furthermore,  the  EIF  is  responsible  for  identifying,  evaluating  and  selecting  the  Financial 
Intermediaries  ('FI')  by  applying  selection  criteria  and  processes  set  out  in  the  Investment 
Policy, which is part of the FMA. Under the FMA, the EIF examined, on a continuous basis, 
proposals collected based on a published call for expression of interests. 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014     
Aggregate budgetary payments as at 31/12/2014 

          EUR 625 197 747 
          EUR 358 038 250 

(e)  The performance of the financial instrument, including investments realised; 

Amount of EU Contribution committed to 
financial intermediaries  
and the corresponding number of financial 
intermediaries;  

for risk-sharing instruments, total amount of the 
risk-sharing, including the EU Contribution, 
committed to financial intermediaries, 
and the corresponding number of financial 
intermediaries; 

Amount of financing expected to be provided by 
financial intermediaries to eligible final 
recipients  
And expected number of eligible final 
recipients; 

Amount of financing already provided by 
financial intermediaries to eligible final 
recipients, 
and the corresponding number of eligible final 
recipients;  

Amount of investments already made by eligible 
final recipients due to the received financing, if 
applicable. 

EUR 553  million76 
43  FIs 

N/A 
N/A 

EUR 3 204  million  

850  Eligible FR 

EUR 984 million  

371 Eligible FR 

EUR 984 million  

76  Signed  amounts  between  EIF  and  financial  intermediaries.  In  addition,  a  further  2  million  EUR  (conditional 
amounts as at writing date) have been committed by the EU but not yet signed by the EIF, increasing the GIF net 
commitments up to 555 million EUR. 

50 

 
 
 
 
                                                 
GIF Impact on employment 
In  addition,  for  the  entire  period  as  of  31  December  2014,  GIF  programme  achievements77 

were as follows: 
  Number of employees at final recipients (SMEs) at date of first investment (number 

of jobs created or maintained): 6 844  

  GIF number of employees at the assessment date): 9 908  

The estimated number of jobs created under GIF is over 3 00078; the number of employees in 
GIF-final recipients as at 31 December 2012 was 9 90879. 

Additional GIF operational information 
For  the  period  2007-2013,  EUR  1  275,1  million  of  commitment  appropriations  were  made 
available  for  the  CIP  financial  instruments,  of  which  EUR  625,2  million  for  GIF. 
 The appropriations were fully committed. 
Out  of  the amount  committed,  EUR  358  million  was  paid  for  GIF  to the  fiduciary  account, 
managed by the EIF on behalf of the Commission, for the implementation of the programme. 
Funds  are  drawn  down  from  the  fiduciary  account  when  investments  are  being  made  into 
financial intermediaries. 
By the end of 2014, 43 agreements had been signed by the EIF on behalf of the Commission 
with  financial  intermediaries  (venture  capital  funds)  for  a  total  of  EUR  553  million  in  net 
commitments from the Union budget. Given that the EIF is entitled to fees up to 6% of its net 
commitments to Financial Intermediaries, the maximum amount available for deals under GIF 
is of EUR 588,9 million over the period 2007-2013.  
This implies that the GIF budget had an utilisation rate of 94,3% of commitments available 
for deals.  Out of the fore-mentioned 43 funds, 18 funds have  a multi-country focus and  the 
remaining  25  funds  target  investments  in  specific  countries.  12  venture  capital  funds  are 
investing in eco-innovation, supported by signed EU investments for a total amount of EUR 
200,8 million80. By the end of September 2014, 43381 investees had received equity finance 
facilitated by financial support provided under GIF.82 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

More than 90% of EUR 19,5 million has been used for the venture capital transactions under 
the instrument. 

77 Employment Report as at 31/12/2012 (latest available) 
78 EIF-European Investment Fund (2014a), GIF-High Growth and Innovative SME Facility, Quarterly Report. 30 
September 2014. 
79 Target Intermediary Size, as per EIF (2014a). 
80 Note: Investments in currencies other than EUR are valued at the exchange rate of the reporting date. 
81 This is the total number of Final Recipients supported through the programme. Out of those, 371 are Eligible 
Final Recipients. 
82 EIF-European Investment Fund (2014a), GIF-High Growth and Innovative SME Facility, Quarterly Report. 30 
September 2014. 

51 

 
                                                 
(g)  The balance of the fiduciary account; 

Aggregate balance of the fiduciary account as at 31/12/2014 

EUR 81 554 621 

                                                                                                      In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 
Equity investment (see also point i)83 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

15 072 730 

66 481 891 

66 481 891 

      N/A 

      N/A 

      N/A 

      N/A 

241 451 300 

7 999 

323 013 920 

Aggregate additional resources as at 31/12/2014 

              EUR 19 474 357 

(i)  The value of equity investments, with respect to previous years; 

recipients,  and 

As  at  31  December  2014  a  total  of  EUR  248,8  million84  of  the  GIF  had  been  invested  in 
investment  has  a  valuation  of  EUR  241,5  million. 
final 
The difference between the two figures reflects Realized Investment Gains/Losses on Exits, 
Realized Investment Losses through Write-Offs, and Unrealized Investment Gains/Losses. 

that 

(j)  The accumulated figures on impairments of assets of equity; 

Impairment  losses  on  shares  and  other  variable-
income securities as at 31/12/2014 

EUR  2 775 308 

(k)  The target leverage85 effect, and the achieved leverage86 effect; 

The aggregate budgetary commitments for 2007-2013 amounted to EUR 625,2 million. The 
expected leverage87 effect on GIF is 5 which means that the impact of the aggregate budgetary 
commitments on the overall economy is expected to reach EUR 3 billion of funding to 
recipient SMEs. 

83 Furthermore, non-current assets (such as shares and other variable-income securities) are already reported under 
point (i) ‘the value of equity investments’. 
84 EIF-European Investment Fund (2014b), GIF-High Growth and Innovative SME Facility Annual Report, (Table 
3). 30 September 2014. 
85 Target leverage is based on the amount of finance that the operations envisaged to be signed by the entrusted 
entity  with  financial  intermediaries  (or  final  recipients)  are  targeted  to  provide  to  eligible  final  recipients.  This 
leverage is defined in the basic act, remaining constant throughout the duration of the financial instrument 
86 Achieved leverage is based on the amount of finance that the operations already signed by the entrusted entity 
with financial intermediaries (or final recipients) have provided to eligible final recipients. 
87  Expected leverage is based on the amount of finance that the operations already signed by the entrusted entity 
with financial intermediaries (or final recipients) are expected to provide to eligible final recipients 

52 

 
 
 
 
                                                 
The achieved leverage effect for CIP GIF (Actual intermediary size= actual size of the VC 
funds / GIF net approved capital) is around 5,5.88  

D -Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification89; 

As at the end of 2014, the GIF already contributed to provide nearly 1 billion (984 million) 
EUR of financing to 371 eligible Final Recipients (SMEs) and had thus an important impact 
on the real economy of the EU as described below.   

The impact of the EU's Financial Instruments for SMEs 
In 2014 the GIF component (providing venture capital) of the CIP programme again provided 
an essential contribution to SMEs' support in the eligible participating countries, as outlined 
above  and  confirmed  by  independent  final  evaluation  results90,  summarised  hereafter, 
concerning  relevance,  effectiveness,  efficiency,  utility,  sustainability  and  European  added 
value91. 
As regards Relevance, the EIP final evaluation concluded that the instrument met a clear need 
for  finance  on  the  part  of  the  recipients  and  demonstrated that  gaps  in  SME  finance  can  be 
addressed.  GIF  recipients  stated  in  39%  of  cases  that  this  financing  scheme  was  the  only 
option  available  for  them;  another  23%  stated  that  without  this  instrument  they  would  have 
been  able  to  receive  only  part  of  the  funding  needed.  In  total,  62%  of  the  GIF  recipients 
indicated that the support was crucial to find the finance needed. 
As  regards  Effectiveness,  the  overall  evaluation  conclusion  was  that  the  funds  are  getting 
through to the intended recipients and have the desired effects in terms of innovation, growth 
and  employment.  77%  of  GIF  recipients  stated  that  receiving  the  equity  financing  made  it 
easier to obtain additional financing. More than 90% of the GIF recipients indicated that the 
financial support had a positive or fairly positive impact on their long term growth prospects. 
62% of GIF recipients expected an increase in turnover and in most of these cases, a growth 
of  between  26%  and  100%  was  expected.  83%  of  GIF  recipients  identified  themselves  as 
engaged in product or service innovation. 
Apart from the financial means, GIF recipients also received other support (appointment of a 
non-executive  director,  advice  on  general  business  planning,  access  to  a  network,  financial 
advice, special business advice or mentoring).  
As regards Efficiency, the evaluation noted that general stakeholders have the impression that 
is  not  wasted.  
the 
As regards Utility, a large part of GIF recipients indicated that the financial support received 
was the only option for obtaining the funds needed. 
As regards Sustainability, the evaluators noted that possible improvements raised by EIPC92 
members  and  representatives  of  business  organisations,  related  only  to  more  general  issues 

instruments  are  administered  efficiently  and 

that  money 

88 EIF-European Investment Fund (2014a), GIF-High Growth and Innovative SME Facility, Quarterly Report. 30 
September 2014. 
89  Bain  &  Company,  IIF  (2013);  Go4Venture  Advisers  (2013);  IPSOS  Mori  (2013);  Kraemer-Eis,  Lang  and 
Gvetadze (2013); Unquote" and SL Capital Partner (2013). 
90 CSES (2011), The EIP Final Evaluation, the last evaluation available at the programme level (EIP). 
91 Based on an extensive telephone survey sample, prepared in the context of the evaluation. 
92 Entrepreunership and Innovation Programme Committee 

53 

 
                                                 
and  that  no  improvements  were  suggested  relating  to  the  details  of  the  instruments. 
Finally, as regards European value-added, the evaluation report recognised the leverage effect 
achieved,  the  fact  that  80%  of  GIF  recipients  operate  on  an  international  market  and  that 
venture capital funds i) have a broader geographical focus and ii) operate across boundaries 
Although  the  overall  effect  of  EU  programmes  on  SMEs'  financing  remains  limited  (by 
nature, EU intervention is limited to market gaps or sub-optimal market situations, meaning 
by  far  the  largest  part  of  financing  is  provided  by  banking  and  finance  market  players),  the 
GIF components of CIP contributed very positively to the development and sustainability of 
EU SMEs throughout 2014. 

Graph 2 : Geographical distribution of signatures by the Designated Service under GIF 

Source: ECFIN 

E -Other key points and issues 

 Main issues for implementation: 

o  European  venture  capital  remains  fragmented  and  dependant  on  a  lifeline  from  public 
investors.  The  support  via  EU-level  financial  instruments  is  key  in  tackling  this 
fragmentation,  as  truly  multi-country  funds  often  face  difficulties in  obtaining  support 
from national programmes.  

o  The programmes are also essential to maintain venture capital in Europe and support it 

until it becomes fully sustainable. 

 Main risks: implementation under control, no specific risks identified. 

o  The  monitoring  visits  carried  out  for  GIF  during  2014  by  the  Commission  allowed  to 
confirm  the  eligibility  of  international  financial  intermediaries  (IFI's)  and  final 
recipients,  contractual  compliance  (transposal  of  the  Commission's  requirements  into 
the  contractual  documentation),  process  compliance  (observance  of  processes 
the  Commission)  and  performance  (achievement  of  predefined 
prescribed  by 

54 

Austria2%Belgium6%Bulgaria0%Croatia0%Cyprus0%Czech Republic0%Denmark2%Estonia1%Finland6%France13%Germany16%Greece0%Hungary0%Iceland0%Ireland3%Italy11%Latvia1%Liechtenstein0%Lithuania1%Luxembourg1%Montenegro0%FYR Macedonia0%Malta0%Netherlands5%Norway3%Poland0%Portugal1%Romania1%Serbia0%Slovakia0%Slovenia0%Spain1%Sweden4%Turkey0%United Kingdom10%Multi-country12%Geographical Distribution of GIF Signatures, as of 12/2014 
 
 
targets/objectives).  Compliance reporting covering the situation did  not indicate major 
deviations. 

o  Audits and  internal controls: 

 as  confirmed  in  ECFIN's  AAR  2014,  no  issue  is  pending,  and  ECFIN  received  a 

positive DAS letter by ECA as at 31/3/2014.  

 In February 2012 IAS and ECFIN IAC finalised their audit on the implementation by 
the  EIF  of  the  High  Growth  and  Innovative  SME  Facility.  The  audit  resulted  in  6 
recommendations.   All  recommendations  were  implemented  during  2013.  No 
additional findings or recommendations were made in 2014. 

 During  2014,  the  Designated  Service  continued  to  follow-up  the  implementation  of 
OLAF's  recommendations  in  two  cases  (OF/2011/1176  and  OF/2013/0107),  where 
fraud  was  detected  at  the  level  of  the  fund  manager  and  at  the  level  of  a  final 
beneficiary.    Corrective  actions  for  both  cases  were  progressing  normally  during 
2014.  

 A declaration of assurance has been received from the EIF on 31/3/2015. 

o  Efficiency:  

 number  of  findings/minor  observations  (stemming  from  ECFIN  L2's  monitoring 

activities): for Equity: 0 (out of 0, 100% closed). 

 Number  of  OLAF  inquiries:  2  inquiries  (implementation  of  recommendations 

ongoing).  

 Number of IAC inquiries for Equity: NONE. 
 Number  of  open  recommendations  in  action  plans  established  following  ECA,  IAS, 

IAC or ex-post control recommendations: NONE. 

 Number of operations outside official procedures (2014) : NONE. 
 Number of erroneous operations (2014): NONE. 
 Return to Trust Account (2014) linked to errors : NONE. 
 Results on the checks on the balance of the TA (2014): no errors/discrepancies.  

 General outlook: 

o  demand  for  investments  by  venture  capital  funds  is  larger  than  the  budgets  of  EU-

funded programmes.  

o The  EU  programmes  therefore  need  to  focus  specifically  on  areas,  sectors  and  stages 
where  the  EU  added  value  and  policy  impact  can  be  maximised,  and,  if  possible, 
increase the budgetary contributions to achieve a better critical mass. 

55 

 
 
 
 
 
 
 
 
 
 
 
1.2. Equity Facility for Growth under COSME 

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG GROWTH 

DG GROWTH 

EIF 

EUR 662 million93 

EUR 633 million94 

The  equity  investments  offered  for  funds  investing  into  European  SMEs  at  the  growth-  and 
expansion  stage  will  be  implemented  by  the  EIF  under  the  COSME  Delegation  Agreement 
signed in July 2014. 
The  overall  value  of  risk  capital  investments,  including  venture  capital  and  mezzanine 
finance, such as subordinated and participating loans, to be mobilised by the EU contribution 
will range from EUR 2,6 billion to EUR 3,9 billion. 
According to relevant stakeholders, there is a significant shortage for growth capital and the 
EIF started screening a number of applications which are expected to result in the signature of 
fund agreements in the course of 2015.  

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Equity  Facility  for  Growth  (EFG)  under  the  Programme  for  the  Competitiveness  of 
Enterprises and small and medium-sized enterprises (COSME) – 2014 to 2020 
Regulation  (EU)  No  1287/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December 2013 establishing a Programme for the Competitiveness of Enterprises and small 
and  medium-sized  enterprises  (COSME)  (2014  –  2020)  and  repealing  Decision  No 
1639/2006/EC (O.J. L347 of 20 December 2013) 

(b)  Description of  the financial instrument, implementation arrangements  and the    
added value of the Union contribution; 

Policy objectives and scope 
The overall policy objective of COSME Financial Instruments is to improve access to finance 
for  SMEs  in  the  form  of  equity  and  debt.  Actions  shall  aim  to  stimulate  the  take-up  and 

93  The  Basic  Act  provides  that  no  less  than  60%  of  the  total  financial  envelope  for  the  implementation  of  the 
COSME programme shall be allocated to the financial instruments. The split of the total amount allocated to the 
financial  instrument  is 52%  for  the Loan Guarantee  Facility  (LGF)  and 48%  for  the Equity Facility  for  Growth 
(EFG),  based  on  the  distribution  between  the  loan  guaranteed  and  equity  facility  in  the  legislative  financial 
statement. 
94  This amount, based on the assumptions that the distribution between the COSME financial instruments is 52% 
for  LGF  and  48%  for  EFG,  is  indicative  and  subject  to  change,  in  line  with  Article  17  of  the  Basic  Act  which 
stipulates that the allocation of funds to the loan guarantee and equity facilities shall take into account the demand 
from financial intermediaries. 

56 

 
 
                                                 
supply of both equity and debt finance, which may include seed funding, angel funding and 
quasi-equity financing subject to market demand but excluding asset stripping.  
In line with the above, the Equity Facility for Growth (EFG) provides enhanced access to risk 
capital  for  which  significant  market  gaps  exist  in  Europe  and  support  the  development  of  a 
pan-European  risk  capital  market.  The  later  will  be  achieved  by  focusing  predominantly  on 
those risk capital funds which invest cross-border. 

Implementation arrangements 
The  EFG  is  implemented  as  a  window  of  a  single  Union  equity  financial  instrument 
supporting  EU  enterprises’  growth  and  research  and  innovation  from  the  early  stage, 
including  seed,  up  to  the  growth  stage.  It  focuses  on  funds  that  provide  venture  capital  and 
mezzanine  finance,  such  as  subordinated  and  participating  loans,  to  expansion  and  growth-
stage enterprises, in particular those operating across borders, while having the possibility to 
make  investments  in  early  stage  enterprises  in  conjunction  with  the  equity  facility  for 
Research,  Development  and  Innovation  (RDI)  under  Horizon  2020.  Support  is  given  in  the 
form  of  direct  investments  made  by  the  entrusted  entity  in  financial  intermediaries  that 
provide equity or quasi-equity financing to SMEs.The Delegation Agreement signed with the 
EIF ensures that the EFG is accessible for a broad range of financial intermediaries provided 
that  these  are  professionally  and  independently  managed  and  display  the  capacity  to 
successfully  support  SMEs  in  their  growth  and  expansion  phase.  From  a  technical  point  of 
view,  the  EIF  is  instructed  to  invest  on  a  pari-passu  basis  with  other  private  and  public 
investors.  Target  final  recipients  are  SMEs  of  all  sizes  without  a  specific  sector  focus.  The 
equity instrument is planned to last until 31 December 2034 (until last operations are wound 
down). 

Added value 
The added  value  for the Union of the Financial Instruments lies,  inter  alia, in  strengthening 
the internal market for venture capital and in developing a pan-European SME finance market 
as well as in addressing market failures that cannot be addressed by Member States 

(c)  The financial institutions involved in implementation; 

The implementation of the EFG has been entrusted to the EIF and the Delegation Agreement 
has been signed on 22 July 2014. The related continuous open call for expression of interest 
for 
at 
http://www.eif.org/what_we_do/equity/single_eu_equity_instrument/cosme_efg/index.htm 

intermediaries 

published 

available 

financial 

EIF 

the 

by 

is 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014 
Aggregate budgetary payments as at 31/12/2014 

              EUR 51 657 588 
      EUR 32 500 000 

(e)  The performance of the financial instrument, including investments realised; 

Not yet applicable 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

57 

 
(g)  The balance of the fiduciary account; 

                                                                                              In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 

Equity investment (see also point i)95 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments;  

EUR 0 

1 100 078 

30 000 000 

30 000 000 

1 262 

31 101 340 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

EUR 0 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect indicated in the COSME legal base is in the 1 to 4 – 1 to 6 range 
for  the  equity  instrument  over  the  lifetime  of  the  programme,  with  an  overall  value  of 
venture capital investments mobilised by the EU contribution ranging from EUR 2,6 billion 
to EUR 3,9 billion.  
These  amounts  have  been  computed  on  the  basis  of  the  initially  allocated  budget  for  the 
COSME financial  instruments, which is  60%  of the total amount allocated to the COSME 
programme as set out in the basic act (EUR 2 298 243 000). 
It has been assumed (as documented in the legislative financial statement accompanying the 
basic act)  that the split between the two financial instruments  would be 52%  for the Loan 
the  Equity  Facility  for  Growth  (EFG). 
Guarantee  Facility  (LGF)  and  48%  for 

The achieved leverage effect  
As no operations have been signed in 2014 with financial intermediaries under the EFG, no 
achieved leverage effect can be computed for 2014. 

95  Furthermore,  non-current  assets  (such  as  shares  and  other  variable-income  securities)  are  already  reported 
under point (i) ‘the value of equity investments’. 

58 

 
 
 
 
 
 
 
                                                 
D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

In  line  with  the  Europe  2020  strategy,  the  COSME  programme  is  designed  to  create  the 
conditions for European enterprises to flourish and to ensure that SMEs are able to take full 
advantage  of  the  single  market’s  enormous  potential,  as  well  as  encouraging  them  to  look 
beyond it. There needs to be a special effort to promote the development of SMEs, a major 
source of economic growth and job creation in the Union. 
More specifically, it is recognised that many of the Union’s competitiveness problems involve 
SME’s  difficulties  in  obtaining  access  to  finance  because  they  struggle to  demonstrate  their 
credit-worthiness and have difficulties in gaining access to risk capital. Those difficulties have 
a negative effect on the level and quality of the new enterprises created and on the growth and 
survival  rate  of  enterprises,  as  well  as  on  the  readiness  of  new  entrepreneurs  to  take  over 
viable companies in the context of a transfer of business/succession. 
Corresponding to the specific objective for the financial instruments under COSME which is 
to improve access to finance for SMEs in the form of equity and debt, the EFG has been set 
up  to  provide  enhanced  access  to  risk  capital  for  which  significant  market  gaps  exist  in 
Europe and to support the development of a pan-European risk capital market. The later will 
be achieved by focusing predominantly on those risk capital funds which invest cross-border. 
The overall value of venture capital investments to be mobilised by the EU contribution will 
range  from  EUR  2,6  billion  to  EUR  3,9  billion,  with  a  number  of  firms  receiving  venture 
capital investments ranging from 360 to 540. 
The EFG was launched at the beginning of August 2014 through an open call for expression 
of interest published by the EIF. Since then, the EIF started screening a number of potential 
fund proposals for eligibility under the EFG and approved a first equity operation in March 
2015. The signature of this first operation is expected to take place in the first half of 2015. 

E -  Other key points and issues 

 Main issues for the implementation: 

o  compared to the due diligence required for the signature of guarantee agreements, the 
due  diligence  process  for  equity  is  much  more  complex,  and  necessitates  more  time 
(e.g. due to the fund-raising process involved from various investors).  

  Main risks: 

o  while the EIF was screening in 2014 already a number of potential fund proposals for 
eligibility under the COSME EFG, no due diligence process was completed at the end 
of the year. 
 General outlook: 

o  furthermore,  even  EIF  Board  approval  does  not  necessarily  translate  into  signed 
agreements  as  fund  managers  may  fail  to  raise  the  required  private  capital  in  the 
existing  adverse  market  conditions  to  reach  the  first  closing  of  the  fund.  Industry 
statistics indicate that the fund-raising conditions remain very challenging. 

59 

 
1.3. InnovFin SME Venture Capital (Horizon 2020)96 

A -  Summary 

Policy DG in charge: 

Implementing DG in charge:   

Implementing Body in charge: 

DG RTD 

DG RTD 

EIF 

Initial Overall (2007-2013) Programme Budget: 

EUR million* 

Expected Overall (2014-2020) Programme 
Budget: 

EUR  430 million** 

*See Section 8.1 on GIF 
**This amount includes EFTA appropriations for 2014 and is subject to the outcome of discussions on 
the budget profile. 

The InnovFin SME Venture Capital  succeeds and refines the GIF-1 scheme under CIP97, and 
is part of a  single equity financial  instrument supporting the growth of enterprises and their 
R&I  activities.  It  is  designed  to  improve  access  to  risk  finance  by  early-stage  R&I-driven 
SMEs  and  small  midcaps  through  supporting  early-stage  risk  capital  funds  that  invest,  on  a 
predominantly cross-border basis, in individual enterprises. 
SMEs and small midcaps located in Member States or in Associated Countries will be eligible 
as  final  recipients.  The  COSME  programme's  Equity  Facility  for  Growth  complements  this 
facility, which, supported by a set of accompanying measures, will support the achievement 
of Horizon 2020 policy objectives. 
In terms of Union added value, the InnovFin SME Venture Capital will complement national 
and regional schemes that cannot cater for cross-border investments in R&I. The early-stage 
deals will also have a demonstration effect that can benefit public and private investors across 
Europe. For the growth phase, only at European level is it possible to achieve the necessary 
scale and the strong participation of private investors that are essential to the functioning of a 
self-sustaining venture capital market. 
Current Overall (2014-2020) Programme Budget amounts to EUR 430 million. 

B -  Description98 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EU)  No  1291/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  establishing  Horizon  2020  -  the  Framework  Programme  for  Research  and 
Innovation (2014-2020) and repealing Decision No 1982/2006/EC99 

96 Note: This name for the successor to GIF-1 is a placeholder. A brand-name will be proposed soon. Please note 
that the information provided under this chapter complements the information provided under the  GIF-1 scheme 
under CIP 2007-2013. 
97 European Commission (2013c). 
98 Note: All figures concerning the implementation of GIF-1 for the period 2007-2013 should be made available by 
the DGs responsible for the implementation at that time, DG ENTR and DG ECFIN. All following information 
given refers to the implementation of the successor scheme of GIF-1, the Horizon 2020 Equity Facility for R&I. 
99 (OJ L 347/104, 20.12.2013) 

60 

 
                                                 
Regulation  (EU)  No  1290/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December 2013 laying down the rules for participation and dissemination in "Horizon 2020 
-  the  Framework  Programme  for  Research  and  Innovation  (2014-2020)"  and  repealing 
Regulation (EC) No 1906/2006100  
Council  Decision  of  3  December  2013  establishing  the  specific  programme  implementing 
Horizon  2020  -  the  Framework  Programme  for  Research  and  Innovation  (2014-2020)  and 
repealing  Decisions  2006/971/EC,  2006/972/EC,  2006/973/EC,  2006/974/EC  and 
2006/975/EC101 

(b)  Description of  the  financial instrument,  implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
This  facility  succeeds  and  refines  the  GIF-1  scheme  under  CIP102,  and  is  part  of  a  single 
equity financial instrument supporting the growth of enterprises and their R&I activities. It is 
designed  to  improve  access  to  risk  finance  by  early-stage  R&I-driven  SMEs  and  small 
midcaps  through  supporting  early-stage  risk  capital  funds  that  invest,  on  a  predominantly 
cross-border  basis,  in  individual  enterprises.  SMEs  and  small  midcaps  located  in  Member 
States  or  in  Associated  Countries  will  be  eligible  as  final  recipients.  The  COSME 
programme's Equity Facility for Growth (EFG) complements this facility. 

Implementation arrangements 
The European Investment Fund (EIF)103 will make and manage equity investments into risk-
capital funds. EIF will be able to invest in a wide range of financial intermediaries, including 
those cooperating with business angels. The funds concerned will make VC and quasi-equity 
(including  mezzanine  capital)  early-stage  investments  in  enterprises,  which  are  likely  to  be 
mainly  SMEs.  In  the  case  of  multistage  funds  (i.e.,  covering  both  early-  and  growth-stage 
investments), funding can be provided pro rata from this facility and COSME's growth-stage 
equity facility, EFG. 
This  is  a  demand-driven  facility,  with  no  prior  allocations  between  sectors,  countries,  or 
regions. However, subject to the successful conclusion of negotiations, the Commission will 
incentivise EIF, via an appropriate performance indicator, to make a particular effort to ensure 
that a proportion of final recipients are eco-innovative SMEs and small midcaps. R&I-driven 
SMEs or small midcaps wishing to apply for an investment should contact one or more of the 
funds signing an agreement with EIF. 

Added value 
In terms of Union added value, the InnovFin SME Venture Capital will complement national 
and regional schemes that cannot cater for cross-border investments in R&I. The early-stage 
deals will also have a demonstration effect that can benefit public and private investors across 
Europe. For the growth phase, only at European level is it possible to achieve the necessary 
scale  and  the  strong  participation  of  private  investors  essential  to  the  functioning  of  a  self-
sustaining venture capital market. 

100 (OJ L 347/81, 20.12.2013) 
101 (OJ L 347/965, 20.12.2013) 
102 European Commission (2013c). 
103 Note: Subject to the successful conclusion of negotiations of the Delegation Agreement. 

61 

 
                                                 
(c)  The financial institutions involved in implementation; 

The implementation of the InnovFin SME Venture Capital will be made through an entrusted 
entity, EIF in Luxembourg,  subject to  the successful conclusion  of a Delegation  Agreement 
with the Commission. 
The Delegation Agreement to be signed with the entrusted entity will ensure that the InnovFin 
SME Venture Capital is accessible for a broad range of venture capital funds and public and 
private funds-of-funds which are experienced in financial transactions with early-stage R&I-
driven SMEs and small midcaps or which have the capacity to enter into financial transactions 
with early-stage R&I-driven SMEs and small midcaps. 
Financial  intermediaries,  selected  by  entrusted  entities  for  the  implementation  of  financial 
instruments pursuant to Article 139(4) of Regulation (EU, Euratom) No 966/2012 on the basis 
of open, transparent,  proportionate and non- discriminatory procedures,  may include  private 
financial  institutions  as  well  as  governmental  and  semi-governmental  financial  institutions, 
national and regional public banks as well as national and regional investment banks. 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

EUR 430 million indicatively foreseen for the period 2014-2020 

(e)  The performance of the financial instrument, including investments realised; 

Not applicable 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

(g)  The balance of the fiduciary account; 

Not applicable 

(h)  Revenues and repayments;  

Not applicable 

(i)  The value of equity investments, with respect to previous years; 

Not applicable 

(j)  The accumulated figures on impairments of assets of equity; 

Not applicable 

(k)  The target leverage effect, and the achieved leverage effect; 

The  leverage  of  the  Equity  facility  -  defined  as  the  total  funding  (i.e.  Union  funding  plus 
contribution from other financial institutions) divided by the Union financial contribution - 
is expected to be around 6, depending on market specificities. 

62 

 
D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  Innovation  Union  Europe  2020  Flagship  Initiative  of  2010  contains  the  following 
commitment104: 
On the basis of Commission proposals, the EU should put in place financial instruments to 
attract  a  major  increase  in  private  finance  and  close  the  market  gaps  in  investing  in 
research and innovation. Union contribution should create a major leverage effect and expand 
on the success of FP7 and CIP. 
The  Commission  will  work  with  the  European  Investment  Bank  Group,  national  financial 
intermediaries  and  private  investors  to  develop  proposals  addressing  the  following  critical 
gaps: (i) investment in knowledge transfer and start-ups; (ii) venture capital for fast growing 
firms expanding in EU and global markets; (iii) risk-sharing finance for investments in R&D 
and innovation projects; and (iv) loans for innovative fast growing SMEs and midcaps. The 
proposals  will  ensure  a  high  leverage  effect,  efficient  management  and  simple  access  for 
businesses. 
In  2011,  the  Commission  proposed105  that  Horizon  2020  and  COSME,  the  programmes 
succeeding  FP7  and  CIP,  should  jointly  support  an  equity  and  a  debt  financial  instrument 
designed to foster the growth of SMEs and small midcaps and their ability to undertake R&I, 
with Horizon 2020 also providing debt finance for larger entities. 
For  equity,  the  Commission  proposed  that  both  programmes  should  make  seed,  early-stage 
and  growth-stage  investments,  with  Horizon  2020  mainly  focusing  on  risk-capital  funds 
investing in seed, start-up and early-stage R&I-driven SMEs and small midcaps, and COSME 
mainly  focusing  on  venture  capital,  (VC),  and  mezzanine  funds  investing  in  SMEs  in  the 
expansion and growth phases. 
The  InnovFin  SME  Venture  Capital  ,  supported  by  a  set  of  accompanying  measures,  will 
support  the  achievement  of  Horizon  2020  policy  objectives.  To  this  end,  they  will  be 
dedicated  to  consolidating  and  raising  the  quality  of  Europe's  science  base;  promoting 
research  and  innovation  with  a  business-driven  agenda;  and  addressing  societal  challenges, 
with a focus on activities such as piloting, demonstration, test-beds and market uptake. The 
budget  envelope  of  EUR  430  million  is  targeted  to  mobilize  EUR  2,5  billion  of  new 
equity investments. 

E -  Other key points and issues 

 The Union-level InnovFin SME Venture Capital is needed to help improve the availability 
of  equity  finance  for  early  and  growth-stage  investments  and  to  boost  the  development  of 
the  Union  venture  capital  market.  During  the  technology  transfer  and  start-up  phase,  new 
companies face a 'valley of death' where public research grants stop and it is not possible to 
attract private finance. Public support aiming to leverage private seed and start-up funds to 
fill  this  gap  is  currently  too  fragmented  and  intermittent,  or  its  management  lacks  the 
necessary  expertise.  Furthermore,  most  venture  capital  funds  in  Europe  are  too  small  to 

104 European Commission (2010b). 
105 Note: For Horizon 2020, see  European Commission (2011a) and European Commission (2011b). For COSME, 
see European Commission (2011c). 

63 

 
                                                 
 
support the continued growth of innovative companies and do not have the critical mass to 
specialize and operate transnationally. 
Specific  support  actions  such  as  information  and  coaching  activities  for  SMEs  should  be 
provided.  Regional  authorities,  SMEs  associations,  chambers  of  commerce  and  relevant 
financial 
the 
programming and implementation of these activities. 

intermediaries  may  be  consulted,  where  appropriate, 

in  relation 

to 

Given the generally pro-cyclical nature of the activities of equity investors, the health of the 
economy  overall  is  very  likely  to  dominate  the  evolution  of  both  Europe's  VC  and  BA 
industries, though some analysts advocate and predict a considerable downsizing of the VC 
sector  in  both  Europe  and  the  USA  in  order  for  a  smaller  number  of  funds  to  enjoy  a 
reasonable level of return and profitability106. 

At EU level, EIF plays a crucial role: by end-2011, its total net equity commitments came to 
EUR 5,9 billion (with a record EUR 1,1 billion in 2011 alone), covering investments in over 
370 funds and over 300 fund manager teams107. 

In  the  Member  States,  the  lack  of  sufficient  capital  flows  from  private  VC  funds  into,  in 
particular, early-stage innovative firms has led to the creation of a large number of public-
sector  schemes,  taking  several  forms108,  at  the  regional  and  country  level.  In  France,  for 
example, CDC Enterprises manages the EUR 2,2 billion France-Investissement programme, 
while in Germany there is the EUR 500 million ERP-EIF Dachfonds managed by EIF plus 
the EUR 272  million High-Tech Gründerfonds. In  the UK,  a series of government-backed 
investment funds have provided over EUR 1 billion of public money in support of VC109.  

In  many  Member  States,  however,  with  pressure  mounting  to  reduce  budget  deficits,  the 
relatively  modest  returns  achieved  by  some  VC  operations  backed  with  public  funds, 
coupled with the significant management costs involved, may undermine support for future 
initiatives110. 

The  implementation  of  the  Horizon  2020  InnovFin  SME  Venture  Capital  should  start  
towards the end of 2014, after the EIF FAFA and the Delegation Agreement for the Horizon 
2020 Financial Instruments between the EU (represented by the Commissioner for Research 
and Innovation), EIB and EIF were signed. 

 Potential risks regarding the implementation of the Horizon 2020 Equity Facility for early-
stage investments  may  concern  publication obligations of financial intermediaries for final 
recipients and full compliance of combined eligibility criteria for final recipients by multi-
stage funds receiving funding from Horizon 2020 and COSME. 
However,  such  potential  risks  should  be  mitigated  through  contractual  arrangements 
between  the  Commission  and  the  EIF  and  subsequently,  through  contractual  agreements 
between  the  EIF  and  financial  intermediaries  (passing-on  of  eligibility,  reporting  and 
monitoring obligations throughout the delivery chain). 

106 See, for example, Mina with Lahr (2011), and Ernst & Young (2011). 
107 EIF (2012a). 
108 For more examples, see European Parliament (2012). 
109 Capital for Enterprise Ltd, (2012). 
110 For example, see National Audit Office (2009). 

64 

 
                                                 
2.  Guarantee Instruments 

2.1. The  SME  Guarantee  Facility  (SMEG07)  under  the  Competitiveness  and 

Innovation Framework Programme (CIP)  

A -  Summary 

Policy DG in charge: 

Implementing DG in charge:   

Implementing Body in charge: 

Initial Overall (2007-2013) Programme 
Budget: 

Current Overall (2007-2013) Programme 
Budget**: 

DG GROW, with participation of DG 
ECFIN for the design of the instruments 

DG ECFIN 

EIF 

EUR 506* million 

EUR 637,8 million 

Executed Budget since beginning until 
31/12/2014***: 

Commitments: EUR 649,9 million**** 
Payments::EUR 336,2 million 

*Initial voted commitments (SMEG07  506 million EUR). 
**Including increase in budget commitments from 2008 to 2013. 
***Including  EFTA  contributions  and  third  countries  contribution  paid  by  Participating  Countries  as  well  as 
regularised interest. 
****Including EFTA contributions and third countries contribution paid by Participating Countries as well as 
regularised  interest  generated  on  the  trust accounts  until 31/12/2012.  Relevant interest generated on  the  trust 
accounts during 2013 was not recovered to the EU budget due to shortages in the balance of the trust account. 
Relevant  interest  generated  on  the  trust  accounts  during  2014  was  not  yet  calculated  nor  recovered  on  the 
fiduciary account at writing date. 

The CIP market-oriented instruments under GIF and SMEG have shown high efficiency and 
relevance  to  the  current  market  conditions.  SMEG07  acts  as  counter-cyclical  measure, 
ensuring provision of finance to a vulnerable SME segment, which was one of the most hard 
hit  market  segments  in  the  wake  of  the  financial  crisis.  It  is  a  cost-effective  financial 
instrument  which  is  demonstrated  by  the  high  leverage  ratio.  Compared  to  grants,  where  1 
EUR of budgetary resources provide 1 EUR of financing, the SMEG is expected to support 
31,4 EUR of finance to SMEs for 1 EUR of the Union contribution. 
Moreover,  the  instrument  offers  tailor-made  solutions  that  are  based  on  the  common 
principles set out in the guarantee policy and operational guidelines of the programme. Due to 
the  embedded  flexibility  of  the  programme,  countries',  and  intermediaries'  specific  needs 
could be effectively addressed when considering an appropriate guarantee product. 
In  this  regard,  SMEG07  has  a  wide  geographical  coverage.  The  instrument  involves  57 
financial  intermediaries,  which  have  been  providing  finance  to  SMEs  in  24  participating 
countries (The loans associated with that guaranteed amount account for EUR 18,6 billion).. 
According  to  the  2011  ECA's  Performance  Audit,  the  Facility  should  be  able  to  reach  the 
number  of  315  000  supported  SME  recipients  as  foreseen  in  the  ex-ante  assessment  under 
CIP. This target has already been trespassed, as 356 589 SMEs were already supported by the 
end of September 2014. 

65 

 
 
B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Decision  No  1639/2006/EC  of 
the  Council  of 
24 October 2006  establishing  a  Competitiveness  and  Innovation  Framework  Programme 
(2007 to 2013)111 

the  European  Parliament  and  of 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
Financial instruments are part of the Entrepreneurship and Innovation Programme (EIP), one 
of  the  three  specific  programmes  under  the  Competitiveness  and  Innovation  Programme 
(CIP). 
The overall objective of the financial instruments under the CIP is the improvement of access 
to  finance  for  the  start-up  and  growth  of  SMEs  in  order  to  support  their  investment  in 
innovation  activities,  including  eco-innovation.  Under  the  SME  Guarantee  Facility,  this  is 
done by providing leverage to SME debt financing instruments to increase the supply of debt 
finance to SMEs. 

Implementation arrangements 
The SME Guarantee Facility (SMEG) is operated by the EIF on behalf of the Commission. It 
provides  counter-  or  co-guarantees  to  guarantee  schemes  and  direct  guarantees  to  Financial 
Intermediaries  operating  in  eligible  countries  with  the  aim  of  increasing  lending  volumes 
available to SMEs. The Facility is a demand-driven instrument, with only indicative country-
based allocations, in order to ensure wide geographical coverage. 
The  initial  Union  budget  for  the  CIP  financial  instruments  for  the  whole  period  of  2007-
2013 was foreseen at EUR 1,13 billion, with an original indicative split of EUR 506 million 
for the SME Guarantee Facility and EUR 623 million for the High Growth and Innovative 
SME Facility. 
Until the end of budgetary commitment period in 2013, the Designated Service was actively 
involved in financial intermediary approval process. Each deal was to be approved by the EIF 
Board  of  Directors  and  the  Commissions  Designated  Service.  The  Designated  Service  will 
continue its monitoring and reporting obligations until the wind-up of the facility (estimated 
2026). 
The  EIF  continues  to  implement  this  guarantee  instrument,  which  is  delivered  by  financial 
intermediaries  (private  banks,  promotional  banks,  private  and  public  guarantee  institutions). 
The EIF provides a capped guarantee that covers potential losses against a commitment of the 
financial intermediary to provide more debt financing (loans, leases or guarantees that support 
loans and leases) to target SMEs. Financial intermediaries commit to providing more finance 
to  SMEs  in  terms  of  increased  volumes,  providing  finance  to  riskier  SMEs  (start-ups  and 
young companies) or SMEs with less available collateral.  

Value added 
Thanks to the guarantee provided by the EIF, financial intermediaries provide more financing 
to SMEs or they are moving to more risky and previously not serviced segments of vulnerable 
SMEs, such as start-ups, young companies and companies lacking sufficient collateral. 

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

66 

 
                                                 
Regarding the sustainability and European value-added,112 the effectiveness of the instruments 
used has increased over time; notwithstanding the scope for further improvements, European 
value-added is evident in the development of facilities that are at the cutting-edge of provision 
for SMEs. 

(c)  The financial institutions involved in implementation; 

The  Commission  empowered  and  mandated  the  EIF  to  provide  EU  Guarantees  in  its  own 
name but on behalf of and at the risk of the Commission, under a Fiduciary and Management 
Agreement ('FMA', signed on 20/9/2007). 
The  EIF  was  responsible  for 
the  Financial 
Intermediaries ('FIs') according to the Guarantee Policy, which is part of the FMA. The EIF 
examined,  on  a  continuous  basis,  proposals  collected  based  on  a  call  for  expression  of 
interests. 

identifying,  evaluating,  and  selecting 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

             EUR 649 886 744 
             EUR 336 154 006 

(e)  The performance of the financial instrument, including investments realised; 

Amount of EU guarantee expected to be 
provided by the instrument (including EU 
contribution committed) to eligible final 
recipients, 

and the corresponding number of financial 
intermediaries; 

Amount of financing expected to be provided 
by financial intermediaries to eligible final 
recipients, 

and expected number of eligible final 
recipients  

EUR 587,6 million113 

57FIs 114 

EUR 25 445,4 million115 

315.000 FRs116 

112 CSES, EIP Final Evaluation, 2011. 
113 Correspond to the overall SMEG 07 portfolio's guarantee cap amount underlying loan  amount,  as per EIF's 
Quarterly Report dated 30/09/2014. 
114 Source: EIF's Quarterly Report dated 30/09/2014. 
115 Correspond to the SMEG 07 overall portfolio's "estimated SME financing guaranteed " ,as per the latest data 
available, i.e. EIF's Quarterly Report dated 30/09/2014. 
116  According  to CIP  performance  indicators  (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) and as confirmed by the 2011 ECA's Performance Audit, the SMEG07 facility should reach the 
number  of  315  000  supported  final  recipients.  Please  note  that  as  at  30/9/2014  (see  below)  the  number  of 
benefitting final recipients already trespasses this target/expected number.  

67 

 
  
 
 
                                                 
Amount of financing already provided by 
financial intermediaries to eligible final 
recipients, 
and the corresponding number of eligible final 
recipients;  

Amount of investments already made by 
eligible final recipients due to the received 
financing, if applicable. 

EUR 18 607,1 million117 

356 589 FRs118 

EUR 27 327,8 million119 

Additional operational information 
For  the  period  2007-2013,  EUR  1  275,1  million  of  commitment  appropriations  were  made 
available  for  the  CIP  financial  instruments,  of  which  EUR  649,9  million  for  SMEG.  The 
appropriations were fully committed. 
Regarding  the  payments  appropriations  for  the  period  2007-2014,  out  of  the  EUR  694,2 
million  made  available  for  the  CIP  financial  instruments,  EUR  336,15  million  were  paid  to 
the  SMEG  fiduciary  account,  managed  by  the  EIF  on  behalf  of  the  Commission.  Funds  are 
drawn down from the fiduciary account as and when defaults occur under SMEG. 
By  the  end  of  September  2014  (latest  available  figures  as  at  writing  date),  73  guarantee 
agreements  with  57  Financial  Intermediaries  from  24  countries  had  been  approved  by  the 
Commission,  with  a  total  of  EUR  587,6  million  guarantee  cap  from  the  Union  budget  for 
direct  and  counter-guarantees.  By  the  end  of  September  2014,  356  589  SMEs  had  received 
debt finance facilitated by financial support provided under SMEG120, through nearly 431 561 
loans. 
As  at  September  2014,  the  EIF  had  signed  agreements  for  a  cumulative  total  amount 
guaranteed  of  EUR  13  193,3  million121.  The  loans  associated  with  that  guaranteed  amount 
account for EUR 18,6 billion.  

SMEG impact on employment 
For  the  entire  period  as  of  31  September  2014  (latest  available  figures  as  at  writing  date), 
SMEG achievements under CIP were as follows: 

  number of employees at final recipients (supported SMEs) at inclusion date: 1 264 307; 
  number of jobs created or maintained: 356 589122. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

For the period 2007-2014, the amount of EUR 12,1 million returned to the instrument (point 
(h)) has been more than 60% used for further transactions in line with the policy objectives of 
the Programme. 

117 Correspond to the total loan volume received by the recipient SMEs as per the latest data available, i.e. EIF's 
Quarterly Report dated 30/09/2014. 
118 Source: 2014 3rd Quarterly report provided by the EIF. 
119 Source: 2014 3rd Quarterly report provided by the EIF. 
120  Source: 2014 3rd Quarterly report and Annual Report for SMEG07, both provided by the EIF, and internal information. 
121  Cumulated  'Actual  Utilisation'  of  all  agreements  under  the  Facility  (Source:  EIF  SMEG  2007  report  as  of 
30/09/2014).  
122  Note:  Estimate  based  on  the  methodology  outlined  in  the  Final  Evaluation  of  the  Entrepreneurship  and 
Innovation Programme, Final Report, April 2011. No other recent information is available as at writing date. 

68 

 
 
 
                                                 
(g)  The balance of the fiduciary account; 

Aggregate balance of the fiduciary account as at 31/12/2014 

EUR 150 799 792 

                                                                                                             In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

10 835 272 

139 964 520 

139 964 520 

N/A 

N/A 

N/A 

N/A 

326 531 

151 126 323 

(h)  Revenues and repayments (Art.140. 6); 

Aggregate additional resources as at 31/12/2014 

  EUR 12 089 883,9 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The accumulated figures on called guarantees for guarantee instruments; 

Called guarantees as at 31/12/2014 

      EUR 181 647 735  

(k)  The target leverage effect, and the achieved leverage effect; 

The  achieved  leverage  effect  for  CIP  SMEG  07  at  the  level  of  entrusted  entity  (total  loan 
volume received by the recipient SMEs / EU guarantee cap amount) is 31,6123.  
The  expected  CIP  SMEG07  leverage  effect  for  signed  operations  (calculated  as  maximum 
portfolio loan volume / EU guarantee cap amount) is estimated around 31,4124 for the entire 
duration of the programme. 

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

As at the end of 2014, the SMEG07 already contributed to provide nearly 18,6 billion EUR of 
financing to nearly 357 000 Final Recipients (SMEs) through more than 431 000 underlying 
loans,  accounting  for  an  estimated  27,3  billion  EUR  investment  amount,    and  had  thus  an 
important impact on the real economy of the EU as described below.   

123  Source: 2014 3rd Quarterly report provided by the EIF; total loan volume received by the recipient SMEs = 18 
607,1 m EUR / EU guarantee cap amount= 587,6 m EUR 
124 Source: 2014 3rd Quarterly report provided by the EIF;  maximum portfolio volume = 18 463 mio EUR / EU 
guarantee cap amount = 587,6 m EUR 

69 

 
             
 
 
                                                 
The  latest  evaluations  related  to  GIF  and  SMEG  financial  instruments  reiterated  that  the 
financial instruments appeared to be on track to achieve the targets set and confirmed that the 
effectiveness of the financial instruments has increased over time. In more detail, regarding: 

a) Effectiveness and efficiency 
The  financial  instruments  appear  to  be  on  track  to  achieve  the  targets  set  and  seem  to  be 
acquiring a certain momentum that may lead them to exceed expectations. 125 
In  addition,  there  have  been  improvements  in  monitoring  systems  at  the  level  of  both  EIF 
(entrusted entity) and financial intermediaries involved in implementation which contributed 
to  tracking  comprehensively  performance  of  the  instrument  and  thus  more  effectively 
pursuing the policy objectives of the instrument. 

b) Relevance 
The relevance of the instrument as assessed by the recipient SMEs is significant126:  

  46%  stated  that  the  EU  financing  scheme  was  the  only  option  available  for  them  to  get 

financing, 

  18% stated that without the EU support they would have received only part of the funding 

needed, 42% stated that the EU support helped them to get additional finance and 

  64% stated that EU support was crucial to find the finance needed. 

Moreover,  the  instrument  offers  tailor-made  solutions  that  are  based  on  the  common 
principles set out in the guarantee policy and operational guidelines of the programme. Due to 
the embedded flexibility of the programme, countries', and intermediary's specific needs could 
be effectively addressed when considering an appropriate guarantee product. 

In this regard, the SMEG Facility has a wide geographical coverage. The instrument involves 
57 financial intermediaries,  which have  been  providing  finance  to  SMEs in  24 participating 
countries. 

Based  on  the  financing  volumes  supported  so  far  (see  the  relevant  sections  above),  the  CIP 
market-oriented  instruments  under  both  GIF  and  SMEG  have  shown  high  efficiency  and 
relevance in addressing current market conditions, dominated in recent years by a tightening 
of credit conditions and more difficult access to finance for SMEs. The SMEG Facility is a 
counter-cyclical instrument and has helped final recipients to face difficulties arising from the 
economic  conditions  since  the  crisis,  namely  to  obtain  or  maintain  access  to  finance  and  to 
create or maintain jobs over the period. 

In  this  respect,  although  the  overall  effect  of  EU  programmes  on  SMEs'  financing  remains 
limited (by nature, EU intervention is limited to market gaps or sub-optimal market situations, 
meaning  by  far  the  largest  part  of  financing  is  provided  by  banking  and  finance  market 
players), the Facility did, however, make a very positive contribution to the development and 
sustainability of EU SMEs. 

125 CSES (2012). 
126 CSES (2011). 

70 

 
                                                 
Graph 3: Geographical distribution of SMEG Net Signatures, million EUR 

E -  Other key points and issues 

Source: ECFIN 

 During the SMEG implementation period, the following presumptions have been identified 

as necessary: 

o  a clear and complete target goal of the financial instrument so as there is no ambiguity 
as to what needs to be achieved in terms of SME access to finance (including keeping 
potential deadweight as small as possible); 

o  a first class delivery mechanism, such as the EIF, that has proven expertise in working 

with the SME loan and guarantee provision chain at European level; 

o  sufficient  flexibility  in  the  structure  of  the  programme  to  accommodate  and  sustain 

shifts in the SME credit market (including force majeure and crisis conditions); 

o  in  line  with  suggestions  from  the  European  Court  of  Auditors,  the  new  generation  of 
guarantee  financial  instruments  has  been  designed  by  considering,  inter  alia,  the 
following: 

 improved definition of the target group (final recipients) and reduced deadweight of 

the instrument; 

 selection of the Financial Intermediaries performed on the basis of open, 

transparent, objective and non-discriminatory procedures. 

The  monitoring visits carried out by both  the EIF and  the Commission  for SMEG during 
2014 allowed to confirm the eligibility of financial intermediaries (FI's) and final recipients, 
contractual  compliance  (transposal  of  the  Commission's  requirements  into  the  contractual 
documentation),  process  compliance  (observance  of  processes  prescribed  by 
the 
Commission)  and  performance  (achievement  of  predefined  targets/objectives).  The  EIF 
monitoring report 2014 did not indicate major deviations. 

 Audits and internal controls: 

o  As stated in ECFIN L2's 2014 Annual Activity Report, no issue is pending. 
o  A Declaration of Assurance letter was received by European Court of Auditors (ECA) 

as at 31/3/2015.  

71 

 
 
 
 
o  In  August  2012    DG  ECFIN  launched  an  ex-post  control  of  the  EIF  guarantee  calls 
paid  under  CIP.  The  provisional  scope  and  objective  of  this  ex-post  control  includes 
reviewing  of  the  sample  of  guarantee  calls  initiated  since  2007  to-date  with  the 
objective to examine their legality and regularity and to review related sound financial 
management aspects. CIP Financial Intermediaries (FI) have been sampled. The control 
report is still pending, but ECFIN has not been informed of any critical issues so far. 

o  DG ECFIN also accompanied the ECA to an audit visit to SEF (Slovenia), within the 
framework of the ECA's controls for the DAS 2014 (ECA's random selection process). 
The related report from ECA has not been communicated as at writing date. No finding 
has been communicated to DG ECFIN so far. 

o  Efficiency indicators regarding SMEG:  

 number  of  findings/minor  observations  (stemming  from  ECFIN's  monitoring 

activities) : 2 (of which, 100% closed); 

 number of OLAF inquiries: none;  

 number of IAC inquiries: none; 

 number of open recommendations in action plans established following ECA, IAS, 

IAC or ex-post control recommendations: none;  

 number of operations outside official 2014 procedures: none; 

 number of erroneous operations in 2014: none; 

 return to fiduciary account in 2014 linked to errors: none; 

 results on the checks on the balance of the TA in 2014: no errors/discrepancies.  

 Regarding the SMEG, which is a counter-cyclical instrument, there was a high demand for 
guarantees by financial intermediaries during the period 2007-2013; indeed, the share of the 
SMEG instrument in the total CIP budget (SMEG and GIF) was increased compared to the 
original split between the two Facilities, in line with the specific market needs. 

The commitment period for the SME Guarantee facility ended on 31 December 2013 but the 
instrument will exist until it is wound up after 2026. 

The successor of SMEG is the Loan Guarantee Facility (LGF) under COSME, further detailed 
in this document. 

72 

 
2.2. European Progress Microfinance Guarantee Facility (EPMF – G)  

A - Summary 

Policy DG in charge: 

Implementing DG in charge:   

Implementing Body in charge: 

DG EMPL, with participation of DG ECFIN 
for the design of the instruments 

DG ECFIN 

EIF 

Initial Overall (2007-2013) Programme 
Budget: 

EUR 25 million (appropriations as approved 
by the Budgetary Authority) 

Current Overall (2007-2013) Programme 
Budget: 

EUR 23,6 million (including any changes in 
the course of the programme) 

Executed Budget since beginning until 
31/12/2014: 

* including regularized interest of EUR 0,3 million. 

Commitments: EUR 23,9 million 

Payments:EUR 18,5 million* 

The  EPMF  Guarantee  Facility  has  been  implemented  by  the  European  Investment  Fund  in 
accordance  with  the  Fiduciary  and  Management  Agreement  entered  into  on  1  July  2010 
between the European Union, represented by the Commission and EIF. Under the Agreement, 
the Commission mandated EIF to provide direct guarantees and counter guarantees on micro 
credit loans in its own name, but on account and risk of the European Union. 

In accordance with the Agreement, the Project Signing Period runs from July 1, 2010 until 31 
December 2016, or any later date as notified in writing by the Commission to EIF. 

The  aim  of  the  instrument  is  to  increase  access  to  and  availability  of  microfinance.  The 
instrument covers part of the losses incurred under the guarantees up to a pre-determined cap 
amount by setting maximum Guarantee rate of 75% and maximum Guarantee cap rate at 20% 
- hence requiring a minimum leverage effect of 6,67. 

As of 30/09/2014, EIF has signed 35 guarantee agreements in 18 member states for a total cap 
amount of EUR 22,56 million, supporting EUR 279,03 million of aggregate volume of micro-
loans.  During  the  implementation  of  the  Facility,  14  448  micro-borrowers  and  vulnerable 
persons have been supported and 21 939 jobs have been created. 

As  of  31  December  2014,  the  European  Progress  Microfinance  Facility  including  both 
Guarantees  and  Funded  instruments  already  provided  31  371  micro-loans  to  final  recipients 
reaching the volume of EUR 291,7 million. 

Currently the market demand exceeds the original budgetary allocation of EUR 23,9 million. 
Further budget is envisaged for the EaSI microfinance guarantee, the successor of the EPMF-
G (section 2.3), will is also likely to be fully utilised. 

73 

 
 
B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Decision  No 283/2010/EU127  of 
the  European  Parliament  and  of  the  Council  of 
25 March 2010 establishing a European Progress Microfinance Facility for employment and 
social inclusion.128 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  aim  of  the  European  Progress  Microfinance  Guarantee  Facility  is  to  enhance  access  to 
microfinance by reducing microfinance providers' risk.  
The  EPMF  Facility  will  provide  Union  resources  to  increase  access  to,  and  availability  of, 
microfinance for: 
1.  persons who have lost or are at risk of losing their job, or who have difficulties entering or 
re-entering  the  labour  market,  as  well  as  persons  who  are  facing  the  threat  of  social 
exclusion or vulnerable persons who are in a disadvantaged position with regard to access 
to the conventional credit market and who want to start or further develop their own micro-
enterprise, including self-employment, 

2.  micro-enterprises,  especially  in  the  social  economy,  as  well  as  micro-enterprises  which 

employ persons referred to in point (a). 

Implementation arrangements 
The  EPMF  Guarantee  Facility  provides  capped  guarantees  up  to  20%  to  portfolios,  which 
include  micro-credit  loans  granted  by  intermediaries  to  micro–enterprises,  including  self-
employed  persons.  The  micro-credit  guarantee  covers  up  to  75%  of  the  individual  micro-
credit loans included in the respective portfolio. 
Guarantees  provided  by  the  EIF  in  accordance  with  the  Agreement  shall  be  open  to  any 
intermediaries  being  public  or  private  bodies  established  on  national,  regional  and  local 
levels in the Member States, which provide microfinance to persons and micro-enterprises in 
the  Member  States,  such  as  financial  institutions,  microfinance  institutions,  guarantee 
institutions or any other institution authorised to provide microfinance instruments. 
The EPMF  Guarantee  Facility is  implemented via direct guarantees and counter-guarantees. 
The  implementation  foresees  also  support  measures,  such  as  communication  activities, 
monitoring,  control,  audit  and  evaluation  which  are  directly  necessary  for  the  effective  and 
efficient  implementation  of  the  Decision  No  283/2010/EU  and  for  the  achievement  of  its 
objectives. 
EPMF Guarantee Facility is subject to the following requirements and restrictions that have to 
be respected by the participating Microfinance providers: 

  Additionality 
  Promotion and visibility 
  Monitoring, control and audit 
  Compliance with State aid rules 
  Reporting 

127 European Progress Microfinance Facility includes both Guarantees (EPMF-G) and Funded instruments (FCP-
FIS). 
128 (OJ L 87/1, 7.4.2010) 

74 

 
                                                 
The Facility also seeks to promote a balanced geographic distribution and the set target is to 
cover  at  least  12  Member  States  until  31  December  2016.  As  of  30/09/2014,  the  Facility 
covers 18 Member States. The EPMF Guarantee Facility shall remain in full force and effect 
until  31 December 2020.  However,  as  the  budget  of  the  EPMF  Guarantee  Facility  has  been 
fully utilised by Q2 2014, no new transactions with financial intermediaries are expected to 
take place. 

Added value 
This Facility allows microfinance providers to reach out to target groups, who could normally 
not  be  served;  for  instance,  because  persons  from  these  groups  could  not  provide  sufficient 
collateral or because the interest rates, which they would have to pay in accordance to their 
actual risk, profile are too high. 

(c)  The financial institutions involved in implementation;  

The  Commission  empowers  and  mandates  the  EIF  to  provide  EU  Guarantees  in  its  own 
name  but  on  behalf  of  and  at  the  risk  of  the  Commission,  under  a  Financial  management 
Agreement ('FMA', signed 01/07/2010).  
The EIF is responsible for identifying, investigating, evaluating and selecting the Financial 
Intermediaries  ('FI')  by  applying  selection criteria  and  processes  set  out  in  Annex  1  of  the 
FMA:  Operational  Guidelines.  Under  the  FMA,  the  EIF  examines,  on  a  continuous  basis, 
proposals collected based on a call for expression of interest. 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

                    EUR 23 873 348 
                    EUR 18 473 348  

(e)  The performance of the financial instrument, including investments realised (as 
of 30/09/2014129); 

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 
and corresponding number of eligible final 
recipients; 

EUR 279,03 million  

25 156  eligible FRs 

Amount committed to financial intermediaries  

EUR 22,56 million (total guarantee cap 
amount) 

Amount of investments expected to be made 
by eligible final recipients due to the financing, 
if applicable 

N/A 

129 EPMF FMA - 2014 Annual Implementation Report 

75 

 
 
 
 
                                                 
Amount of financing already provided by the 
instrument to eligible final recipients, 

and the corresponding number of recipients;  

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if applicable. 

EUR 160,26 million  

14 448 eligible FRs 

N/A 

Impact on employment 
For the entire period as of 30 September 2014, EPMF achievements for the Guarantee Facility 
component of the programme were as follows:  

 Number of micro-loans: 14 973 
 Total amount of micro-loans: EUR  160,26 million 
 Total number of employees (in the supported micro-enterprises): 21 939 

Additional operational information 

 As of 30/09/2014, 35 Guarantee Agreements have been signed in 18 Member States for 
a total guarantee cap amount of EUR 22,56 million, with a clear geographical balance 
between Eastern and Western Europe. 

 Based  on  forecasts  subject  to  variations  a  further  EUR  137  million  in  microloans  is 

expected to benefit from the Guarantee facility until September 2015. 

 In 2015, the demand from microfinance providers will remain significant and the new 
EaSI Microfinance Guarantee should be ready to cover fast and effective the needs of 
the  microfinance  market.  The  envisaged  EPMF-G  successor  is  EaSI  Microfinance 
Guarantee. 

Additional information at the aggregate EPMF level, including both Guarantee facility and 
Funded instruments  

 As of 31 December 2014, the European Progress Microfinance Facility including both 
Guarantees  and  Funded  instruments  already  provided  31  371  micro-loans  to  final 
recipients  reaching  the  volume  of  EUR  291,7  million,  compared  to  the  initial 
programme  target  of  46,000  micro-loans  with  the  volume  of  EUR  500  million.  The 
Facility is on track to reach the initial programme target, as new loan inclusions will 
take place until 2018. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Given  the  high  demand  for  additional  commitments  due  to  the  success  of  the  EPMF 
Guarantee  facility  all  the  proceeds  (see  point  (h))  received  of  the  fiduciary  account  were 
used for the purposes of the Facility (as foreseen in the FMA). 

76 

 
 
 
(g)  The balance of the fiduciary account; 

At the end of the financial year 31/12/2014                                             EUR 4 419 882 

                                                                                                     In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

4 419 882 

9 000 409 

9 000 409 

1 805 

13 422 096 

(h)  Revenues and repayments;  

Aggregate additional resources as at 31/12/2014 

                               EUR    273 348 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  on  called  guarantees  for  guarantee 
instruments; 

Called130 guarantees as at 31/12/2014 

                                            EUR 2 468 093 

(k)  The target leverage effect, and the achieved leverage effect; 

As of 30/09/2014, based on the signed Guarantee agreements, the total guarantee cap amounts 
to  EUR  22,56  million  and  the  expected  volumes  of  micro-loans  to  final  recipients  are 
estimated  to  EUR 279,03  million  that  brings  the  expected  leverage  effect  to  12,37  which  is 
much higher than the minimum target leverage estimated at 6,67. 

As  for  achieved  leverage  until  30/09/2014,  the  total  guarantee  cap  amount  of  EUR  22,56 
million has supported so far EUR 160,26 million of new micro-loans, implying a leverage of 
7,1. 

130 Note: no available figures of recoveries. 

77 

 
 
 
 
 
 
 
                                                 
D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme  concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

See  below  some  information  on  the  impact  of  the  EU's  Financial  Instruments  for  micro-
entrepreneurs SMEs (The economic environment for micro-finance131). 
At the aggregate EPMF Facility level (including both Guarantee and Funded Instruments132), 
the gender breakdown for the 30 473 natural persons benefitting from loans under the Facility 
show  that  considerable  outreach  to  females  was  achieved  (36,5%  of  the  micro-borrowers 
guaranteed were women). 
In  addition,  the  majority  of  individual  micro-borrowers  who  received  support  under  the 
Facility  so  far,  were  either  unemployed  or  inactive  at  the  time  they  received  their  loan 
(61,2%).  Further,  a  clear  majority  (75,4%)  of  micro-enterprises,  which  received  financing 
under the Facility, were established no earlier than three years since the micro-loan inclusion 
date. 
At Facility level, individuals which were final recipients of micro-loans were, by and large, 
educated at the secondary level (38,7%). Nevertheless, EPMF continues to be of importance 
in  serving  the  financing  needs  of  individuals  with  more  substantial  education  beyond  the 
secondary level (41,0%). 
Regarding the age group, with respect to final recipients who are natural persons the outreach 
to individuals in disadvantaged age groups (younger and older people combined) remains at 
noteworthy  levels  (16,3%).  As  of  31  December  2014,  the  European  Progress  Microfinance 
Facility  including  both  Guarantees  and  Funded  instruments  already  provided  31  371  micro-
loans to final recipients reaching the volume of EUR 291,7 million. 

E - Key points and issues 

 Main issues for the implementation & general outlook: 

o in terms of the number of micro-loans disbursed, the European microfinance sector 
as  a  whole  continued  to  grow  in  2014,  which  is  also  reflected  by  the  guarantee 
activity under EPMF. The continuously decreasing bank lending, the limited capacity 
of national governments to support microfinance and the strong market demand for 
microfinance still suggest that there is a clear rationale for intervention at EU-level 
by providing risk-sharing solutions to Microfinance providers. 

o Room for improvement has been identified for accompanying mentoring and training 
for  micro-entrepreneurs  since  it  is  considered  as  important  factor  for  the 
sustainability  of  the  micro-enterprises.  The  issue  of  Microfinance  providers’ 
institutional capacity concerning mainly small non-bank microfinance institutions is 
a  bottleneck  which  hurdles  the  disbursement  of  the  agreed  micro-loans  and  affects 
negatively their prospects in the microfinance market. 

o The provision of regulatory capital relief under the Guarantee Agreements has been 
identified  as  important  issue  in  attracting  qualified  microfinance  providers.  During 
the  negotiations  with  EIF  many  Intermediaries,  mainly  banks,  raised  this  issue 

131  Bendig,  Unterberg  and  Sarpong  (2012);  Convergences  (2013):  Evers&Jung  (2014);  EMN  (2012);    Kraemer-
Eis, Lang and Gvetadze (2013); UEAPME (2013).  
132 EPMF – Annual Implementation Report 2014  – Social Reporting Analysis 

78 

 
                                                 
especially  when  EIF  asked  Intermediaries  to  pass  the  EPMF  benefit  to  the  final 
recipients through price reduction. 

o Finally,  critical  is  further  budgetary  allocation  in  the  new  EaSI  Microfinance 
Guarantee Facility – the budgetary commitment of EUR 23,9 million for the current 
EPMF Facility was fully allocated to guarantee agreements by 2014 Q2 almost two 
years  before  the  end  of  the  Facility's  signing  period.  For  the  programming  period 
2014-2020  on  the  basis  of  the  current  Facility's  utilisation  the  market  need  for 
Guarantees is estimated approximately to EUR 56 million. 

 Main risks and solutions in place to mitigate these:  

o contractual and process compliance of the microfinance providers is ensured through 
contractual reporting and monitoring after the signature of the guarantee agreements 
in accordance with the EIF internal procedures.  

o In  addition,  Commission  as  Designated  Service  safeguards  that  the  requirements 
included in the Facility's Fiduciary and Management Agreement are fully respected 
by both EIF and the microfinance providers.  

o In order to encourage utilisation by the microfinance provider, a commitment fee is 
charged if not at least specific percentage of the Agreed Portfolio is reached during a 
contractually defined Availability Period. 

o  Furthermore,  the  observance  of  specific  requirements  set  out  in  the  Facility's 
Fiduciary  and  Management  Agreement  with  regard  to  reporting,  monitoring  and 
auditing, data protection, promotion and visibility, protects the interests of the Union 
against any risks of contractual, processes and performance non-compliance. 

2.3. EaSI Microfinance and Social Entrepreneurship  

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

Implementing Body in charge: 

Initial Overall Budget Envelope: 

Expected Overall Budget: 

DG EMPL 

DG EMPL 

EIF 

EUR 190 million 133 

EUR 190 million 

As has been shown by ex-ante evaluations134, it is essential to provide financial instruments 
for microfinance and social enterprises in order to successfully achieve the objectives of the 
EaSI programme. In line with the outcome of ex ante evaluations, debt finance, risk-sharing 
instruments, and equity investments are likely to be used. 

133 EUR 96 million are planned for the Guarantees part in the 2014-2020 period, and consist of: EUR 56 million 
for  Microfinance,  EUR  40  million  for  Social  Entrepreneurship.  The  remaining  amount  will  be  used  for  funded 
instruments and capacity building instrument. 
134 See above 'Study on imperfections in the area of microfinance and options how to address them through an EU 
financial instrument' and Spiess-Knafl, Wolfgang and Jansen, Stephan A.,’Imperfections in the social investment 
market  and  options  on  how  to  address  them’,  on  behalf  of  the  European  Commission,  November  2013,  as 
published  on  http://bookshop.europa.eu/en/imperfections-in-the-social-investment-market-and-options-on-how-
toaddress-them-pbKE0214002/ 

79 

 
 
                                                 
B - Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EU)  No  1296/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  on  a  European  Union  Programme  for  Employment  and  Social  Innovation 
("EaSI")  and  amending  Decision  No  283/2010/EU  establishing  a  European  Progress 
Microfinance Facility for employment and social inclusion135 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
EaSI Microfinance and Social Entrepreneurship aims at fulfilling the following objectives:  

  to  increase  access  to,  and  the  availability  of,  microfinance  for  vulnerable  groups  who 

want to set up or develop their business as well as for existing micro-enterprises, 

  to build up the institutional capacity of microcredit providers, 
  to  support  the  development  of  social  enterprises,  in  particular  by  facilitating  access  to 

finance. 

The instruments will do so by providing support not directly to final recipients, but rather to 
relevant intermediaries, i.e. microfinance providers and social enterprise investors. 
"Microfinance Instrument" will target: 

 Vulnerable  people,  i.e.  persons  who  are  in  a  disadvantaged  position  with  regard  to 
access to the conventional credit market and who want to start or further develop their 
own micro-enterprise, including self-employment; (the Regulation gives special focus to 
young people as vulnerable group). 

 Micro-enterprises,  meaning  an  enterprise,  including  a  self-  employed  person,  that 
employs fewer than 10 people and whose annual turnover or annual balance sheet total 
does  not  exceed  EUR  2  million,  in  accordance  with  Commission  Recommendation 
2003/361/EC (OJ L124/36, 20.05.2003). 

"Social Entrepreneurship financial Instrument" will target:  
 social enterprises, regardless of their legal form136. 

Implementation arrangements  
The  negotiation  of  the  Delegation  Agreement  with  the  EIF  started  in  2014  in  view  to  be 
operational from 2015 onwards.  

Added value  
The  Delegation  Agreement  signed  with  the  EIF  will  ensure  that  EaSI  Microfinance  and 
Social  Entrepreneurship  is  accessible  for  a  broad  range  of  financial  intermediaries 

135 (OJ L 347/238, 20.12.2013) 
136 Note: Social enterprise means an undertaking, which: 

(a)  in  accordance  with  its  Articles  of  Association,  Statutes  or  with  any  other  legal  document  by  which  it  is 
established,  has  as  its  primary  objective  the  achievement  of  measurable,  positive  social  impacts  rather  than 
generating profit for its owners, members and shareholders, and which: 
(i) provides services or goods which generate a social return and/or 
(ii) employs a method of production of goods or services that embodies its social objective; 

(b) uses its profits first and foremost to achieve its primary objective and has predefined procedures and rules 
covering  any  distribution  of  profits  to  shareholders  and  owners  that  ensure  that  such  distribution  does  not 
undermine the primary objective; and 
(c)  is  managed  in  an  entrepreneurial,  accountable  and  transparent  way,  in  particular  by  involving  workers, 
customers and stakeholders affected by its business activities. 

80 

 
                                                 
 
(microcredit providers, both banks and non-banks, and social enterprise investors) which are 
experienced in financial transactions with self-employed and micro-entreprises. 
From  a  technical  point  of  view,  the  EIF  will  be  instructed  to  provide  guarantees  to  the 
financial  intermediaries  to  cover  a  portion  of  expected  losses  of  a  portfolio  of  newly 
generated self-employed and micro-entreprises transactions with a higher risk profile. 

(c)  The financial institutions involved in implementation; 

The EIF, microcredit providers (both banks and non-banks) and social enterprise investors. 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014                         EUR  28 400 200 137  

(e)  The performance of the financial instrument, including investments realised; 

Not yet applicable 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not  applicable  for  2014  as  no  transactions  were  signed  during  this  year.  The  financial 
instrument is not fully operational yet.  

(g)  The balance of the fiduciary account; 

Not yet applicable 

(h)  Revenues and repayments;  

Not yet applicable 

(i)  The value of equity investments, with respect to previous years; 

Not yet applicable 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

 Not yet applicable 

(k)  The target leverage effect, and the achieved leverage effect; 

The  leverage  effect,  agreed  with  the  EIF  in  the  Delegation  agreement,  is  5,5  over  the 
lifetime  of  the  financial  instrument  for  the  guarantees  part  (which  with  the  Union 
contribution of EUR 96 million is intended to support about EUR 528 million of financing 
volumes) and not yet available for the funded instruments funds. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The ex-ante evaluation 'Study on imperfections in the area of microfinance and options how 
to  address  them  through  an  EU  financial  instrument'  138  has  indicated  that  "The  crisis  in 

137  The  Global  Commitment  No  SI2.  697353  of  EUR    28  400  200  was  created    for  Microfinance  and  Social 
Entrepreneurship on 11/12/2014. Individual commitments are expected in 2015. 

81 

 
                                                 
several EU Member States with high levels of youth unemployment calls for ongoing support 
of  inclusive  entrepreneurship  as  an  option  to  (re-)  enter  the  labour  market.  Microloan 
provision is an important tool for this." 
In most European countries, a significant market gap in the provision of microloans to persons 
using self-employment as a way out of social and financial exclusion can be identified. Based 
on estimations the total gap in EU-28 member states and selected EFTA countries amounts to 
2,7 billion EUR. Microfinance providers in Europe need additional external funding to be able 
to close this gap via an extension of their loan providing activity." In line with these findings, 
EaSI  Microfinance  should  provide  debt  finance,  risk-sharing  instruments,  and  equity 
investments.  The  EaSI  guarantee  should  contribute  to  supporting  about  528  million  of 
financing  volumes.  The  EaSI  financial  instruments  are  intended  to  reach  a  target  of  1  350 
eligible FRs for Social Entrepreneurship and 41 000 for Microfinance. 
The ex-ante evaluation 'Imperfections in the social investment market and options on how to 
address them' identified guarantees, direct investments and grants as necessary instruments in 
order  to  "Increase  the  capital  base,  through  a  signalling  effect  for  other  investors;  facilitate 
lending for social enterprises; and reduce the risk for capital providers and provide capacity 
building in the social investment market". 
Both studies have provided analysis of the geographical element within the EU. 

E - Other key points and issues 

 Main issues for the implementation: 

o at  this  stage  of  preparation,  the  main  issues  are  related  to  the  design  of  the 

instruments and the selection of entrusted entity/DIV manager. 

o In order to successfully face these challenges the EC commissioned two studies (as 

indicated above) which have served as ex ante evaluations. 

 Main risks: 

o in comparison to the existing Progress Microfinance (EPMF-G), EaSI may provide a 

strengthened capacity-building element to help mitigate this risk. 

o The risks related to social enterprises are linked to the fact that that market has not 
yet developed and the EU financial instrument has to help building it. Given the level 
of its development and the changes in the socio-economic environment, the market 
also tends to change very rapidly. This might cause a situation where the instrument 
in question may not be fit anymore for future situations. 

 General outlook: 

o based  on  the  experience  with  the  Progress  Microfinance  and  its  current  levels  of 
implementation,  we  expect  an  initial  slower  take  up  in  the  area  of  social 
entrepreneurship  followed  by  significantly  higher  levels  of  implementation  in  the 
next years. 

138 Unterberg, Michael, Bendig, Mirko, and Sarpong, Benjamin, on behalf of the European Commission, 'Study on 
imperfections in the area of microfinance and options how to address them through an EU financial instrument’, 
January 2014, as published on http://ec.europa.eu/social/BlobServlet?docId=12485&langId=en  

82 

 
                                                                                                                                             
 
2.4. Loan Guarantee Facility under COSME  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG GROW 

DG GROW 

EIF 

EUR 717 million139 

EUR 686 million140 

The  capped  portfolio  guarantees  offered  under  the  LGF  and  implemented  by  the  EIF  under 
the COSME Delegation Agreement signed in July 2014 have created strong market demand 
from financial intermediaries.  
The first guarantee agreements which have been signed in late 2014 will make a significant 
contribution to providing financing for riskier SME transactions. It is expected that especially 
start-ups and smaller SMEs, which find it hardest to access finance, will benefit from the LGF 
and that about 13 000 SMEs will receive financing for a total financing value of almost EUR 
851 million over the next two years. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Loan Guarantee Facility (LGF) under the Programme for the Competitiveness of Enterprises 
and  small  and  medium-sized  enterprises  (COSME)  –  2014  to  2020  -Regulation  (EU)  No 
1287/2013 of the European Parliament and of the Council of 11 December 2013 establishing 
a Programme for the Competitiveness of Enterprises and small and medium-sized enterprises 
(COSME)  (2014  –  2020)  and  repealing  Decision  No  1639/2006/EC  (O.J.  L347  of  20 
December 2013) 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The specific objective of COSME Financial Instruments is  to improve access to  finance for 
SMEs in the form of equity and debt. Actions shall aim to stimulate the take-up and supply of 
both equity and debt finance, which may include seed funding, angel funding and quasi-equity 
financing subject to market demand but excluding asset stripping.  

139  The  Basic  Act  provides  that  no  less  than  60%  of  the  total  financial  envelope  for  the  implementation  of  the 
COSME programme shall be allocated to the financial instruments. The split of the total amount allocated to the 
financial  instrument  is 52%  for  the Loan Guarantee  Facility  (LGF)  and 48%  for  the Equity Facility  for  Growth 
(EFG),  based  on  the  distribution  between  the  loan  guaranteed  and  equity  facility  in  the  legislative  financial 
statement. 
140  This amount, based on the assumptions that the distribution between the COSME financial instruments is 52% 
for  LGF  and  48%  for  EFG,  is  indicative  and  subject  to  change,  in  line  with  Article  17  of  the  Basic  Act  which 
stipulates that the allocation of funds to the loan guarantee and equity facilities shall take into account the demand 
from financial intermediaries. It includes the contribution to the SME Initiative where applicable. 

83 

 
                                                 
In line with the above, the Loan Guarantee Facility (LGF) provides: 

o counter-guarantees and other risk sharing arrangements for guarantee schemes; 
o direct  guarantees  and  other  risk  sharing  arrangements  for  any  other  financial 

intermediaries meeting the eligibility criteria. 

The LGF consists of: 

o guarantees  for  debt  financing  via  loans,  including  subordinated  and  participating 
loans, or leasing, which shall reduce the particular difficulties that viable SMEs face 
in accessing finance either due to their perceived high risk or their lack of sufficient 
available collateral; 

o securitisation  of  SME  debt  finance  portfolios,  which  shall  mobilise  additional  debt 
financing  for  SMEs  under  appropriate  risk-sharing  arrangements  with  the  targeted 
institutions. Support for those transactions is conditional upon an undertaking by the 
originating  institutions  to  use  a  significant  part  of  the  resulting  liquidity  or  the 
mobilised  capital  for  new  SME  lending  within  a  reasonable  period  of  time.  The 
amount of this new debt financing will be calculated in relation to the amount of the 
guaranteed  portfolio  risk  and  will  be  negotiated,  together  with  the  period  of  time, 
individually with each originating institution. 

The LGF covers, except for loans in the securitised portfolio, loans up to EUR 150 000 and 
with a minimum maturity of 12 months. The LGF may also cover loans above EUR 150 000 
in cases where SMEs who meet the criteria to be eligible under the COSME programme do 
not meet the criteria to be eligible under the SME window in the Debt Facility of the Horizon 
2020 programme (the InnovFin SME Guarantee Facility), and with a minimum maturity of 12 
months.  The  LGF  is  designed  in  such  a  way  that  it  will  be  possible  to  report  on  SMEs 
supported, both in terms of number and volume of loans. 

Implementation arrangements 
The Delegation Agreement signed with the EIF ensures that the LGF is accessible for a broad 
range  of  financial  intermediaries  (guarantee  societies,  national  promotional  institutes, 
commercial  banks,  cooperatives,  etc.)  which  are  experienced  in  financial  transactions  with 
SMEs or which have the capacity to enter into financial transactions with SMEs. 
From  a  technical  point  of  view,  the  EIF  is  instructed  to  provide  to  financial  intermediaries 
capped  portfolio  guarantees  which  will  cover  a  portion  of  expected  losses  of  a  portfolio  of 
newly generated SME transactions which have a higher risk profile. 
In  as  far  as  securitisation  transactions  are  concerned,  the  EIF  is  instructed  to  provide 
guarantee coverage on a part of the mezzanine tranche of a securitised SME lending portfolio 
coupled  with  an  undertaking  by  the  financial  intermediary  to  build  up  a  new  SME  loan 
portfolio.  
Target  final  recipients  under  the  capped  portfolio  guarantees  and  the  securitisation 
transactions  are  SMEs  of  all  sizes  without  a  specific  sector  focus.  The  range  of  financial 
products  which  can  be  supported  through  the  capped  guarantees  is  very  broad  so  as  to  not 
discriminate  amongst  the  SME  population  which  has  very  differing  financing  needs 
depending on a company’s stage of development and the sector/industry in which it operates. 
The guarantee instrument is planned to last until 31 December 2034 (until last operations are 
wound down). Individual guarantee agreements to be signed by the entrusted entity will have 
a maximum duration of 10 years. 
The  LGF  may  also  contribute  to  the  financial  instruments  to  be  deployed  under  the  SME 
initiative,  a  joint  instrument  combining  EU  funds  available  under  COSME  and/or  Horizon 
2020  and  ESIF  resources  in  cooperation  with  EIB/EIF  with  a  view  to  generate  additional 

84 

 
lending to SMEs in specific Member States. This contribution may take the form of uncapped 
portfolio  guarantees  or  securitisation  operations  and  cover  the  mezzanine  tranche  of  the 
portfolio. 

Added value 
The added  value  for the Union of the Financial Instruments lies,  inter  alia, in  strengthening 
the internal market for venture capital and in developing a pan-European SME finance market 
as well as in addressing market failures that cannot be addressed by Member States. 
More  specifically,  the  EIF  provides  under  the  LGF  (counter-)guarantees  for  a  portfolio  of 
newly generated SMEs transactions which have a higher risk profile than transactions offered 
by the financial intermediary under its normal business practice, thereby providing financing 
to SMEs who might otherwise not be able to obtain financing. 

(c)  The financial institutions involved in implementation; 

The implementation of the LGF has been entrusted to the EIF and the Delegation Agreement 
has been signed on 22 July 2014. The related open call for expression of interest for financial 
intermediaries published by the EIF is available at 
http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/cosme-loan-facility-
growth/index.htm 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014 
Aggregate budgetary payments as at       31/12/2014 

EUR 89 129 526 
EUR 41 744 830 

(e)  The performance of the financial instrument, including investments realised; 

Amount of EU Contribution committed to financial 
intermediaries, 

and the corresponding number of financial 
intermediaries; 

Amount of financing expected to be provided by 
financial intermediaries to eligible final recipients , 

EUR 42,4 million  

3 FIs 

EUR 850,9 million  

and expected number of eligible final recipients; 

13 000 Eligible FRs 

Amount of financing already provided by financial 
intermediaries to eligible final recipients, 

and the corresponding number of eligible final 
recipients;  

Amount of investments already made by eligible 
final recipients due to the received financing, if 
applicable. 

EUR 0 million  

0 Eligible FRs 

N/A 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

85 

 
 
 
 
(g)  The balance of the fiduciary account; 

For Risk-sharing and Guarantee Instruments                (in EUR) 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

EUR 0 

  9 497 324 

  29 824 496 

29 824 496 

  1 083 

39 322 903 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

EUR 0 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect indicated in the COSME legal base is in the 1 to 20 – 1 to 30 range 
for the debt instrument over the lifetime of the programme, with an overall value of financing 
mobilised by the EU contribution ranging from EUR 14,3 billion to EUR 21,5 billion.  
These  amounts  have  been  computed  on  the  basis  of  the  initially  allocated  budget  for  the 
COSME  financial  instruments,  which  is  60%  of  the  total  amount  allocated  to  the  COSME 
programme as set out in the basic act (EUR 2 298 243 000). 
It has been assumed (as documented in the legislative financial statement accompanying the 
basic  act)  that  the  split  between  the  two  financial  instruments  would  be  52%  for  the  Loan 
Guarantee Facility (LGF) and 48% for the Equity Facility for Growth (EFG).  

The achieved leverage effect  
As the first operations with financial intermediaries under the LGF have only been signed in 
December 2014, and financial intermediaries have not yet disbursed loans to SMEs under the 
COSME guarantees, no achieved leverage effect can be computed for 2014.  

The "Expected Leverage for Signed Operations"  
For the three operations signed with financial intermediaries in 2014, the maximum financing 
available to SMEs amounts to almost EUR 851 million. Based on the overall 2014 budgetary 
commitments  for  the  LGF  (i.e.  EUR  89  million),  the  expected  leverage  for  the  operations 
signed  in  2014  is  1  to  10.  This  leverage  is  expected  to  increase  significantly  in  2015  as 
additional  operations  related  to  the  2014  LGF  budgetary  commitments  will  be  signed 
throughout the year. 

86 

 
 
 
 
 
D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

In  line  with  the  Europe  2020  strategy,  the  COSME  financial  instruments  are  designed  to 
address the market gaps in access to finance for SMEs in their start-up, growth and transfer 
phase and to support the creation of a pan-European finance market.  
Under  the  LGF,  this  will  be  achieved  by  incentivising  financial  intermediaries  to  provide 
financing  predominantly  to  those  SMEs  which  the  financial  intermediary  would  under  its 
normal business practices not finance due to the higher risks involved. 
The  market  response  for  this  facility,  which  was  launched  at  the  beginning  of  August  2014 
through an open call for expression of interest, has been very positive. By the end of 2014, the 
EIF  had  concluded  due-diligence  and  signed  guarantee  agreements  with  three  financial 
intermediaries from three different participating countries for a total guarantee cap amount of 
EUR 42,4 million (which is the amount of EU budget allocated to the guarantee agreements 
signed).  
In addition, the EIF had received a significant number of additional applications which were 
at  different  stages  of  the  screening/due  diligence  process  and  which  are  expected  to  lead  to 
signature of guarantee agreements in the course of 2015. 
Under  the  three  agreements  signed,  it  is  expected  that  about  13  000  SMEs  will  receive 
financing  for  a  total  financing  value  of  almost  EUR  851  million  over  the  next  two  years 
thereby contributing to the achievement of the overall LGF target to finance between 220 000 
and 330 000 SMEs with a total volume of financing ranging from EUR 14,3 to 21,5 billion 
over the lifetime of the COSME programme. 

E - Other key points and issues 

 Main issues for the implementation: 

o  as  the  EIF  has  only  started  at  the  end  of  2014  signing  guarantee  agreements  with 
financial intermediaries it is too early to judge whether technical issues will arise during 
the implementation phase of the programme. It appears that requirements for financial 
instruments  stemming  from  the  Financial  Regulation  have  been  accepted  by  the 
financial intermediaries (e.g. in relation to ex-post publication requirements), but these 
points will be carefully monitored. 

o  The  financial  intermediaries  have  responded  positively  to  the  fact  that  under  the 
COSME LGF they have the possibility to offer higher risk SME products which can be 
tailored towards the needs of the SMEs serviced by such intermediary.  

 Main risks: 

o  in  the  course  of  2014  no  risks  were  identified  with  regard  to  eligibility  of  financial 
intermediaries and final recipients, contractual compliance process and performance. 

 General outlook: 

o  despite  the  fact  that  leverage  targets  have  not  been  met  in  2014,  the  guarantee 
agreements concluded by the EIF with financial intermediaries have paved the way for 
the  achievement  of  the  leverage  targets  as  well  as  other  targets  set  (in  terms  of 
financing volume and number of SMEs financed). 

o  After the launch of the call for expression of interest in August 2014, which spells out 
the  detailed technical  requirements of  the  Loan  Guarantee Facility, the  EIF  as  well  as 
the  Commission  received  positive  feed-back  from  relevant  stakeholders  on  the 
usefulness  of  the  instrument.  This  has  been  further  confirmed  by  the  strong  pipeline 

87 

 
presented by the EIF to the Commission. As of March 2015, the EIF had received 20 
applications and expected another 20 to 25 applications to come through until summer 
2015. If all of these applications were to materialise, the budget made available for the 
LGF in 2014 and 2015 would be insufficient to cover market demand. 

2.5. RSI (Pilot guarantee facility for R&I-driven SMEs and Small Midcaps) under FP7  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG RTD 

DG RTD 

EIF 

EUR 270 million 

EUR 270 million 

RSI (Risk-Sharing Instrument for SMEs and small midcaps, with maximum 499 employees) 
was launched to improve access loan finance for RDI investments. The RSI guarantee facility 
is part of the RSFF implementation and is carried out by the European Investment Fund (EIF). 
The EU budget coming from FP7 (plus additional EFTA and Third Country appropriations to 
FP7) for the period 2012/2013 amounted to EUR 270 million. 
The  Risk-Sharing  Instrument  has  so  far  provided  over  EUR  1,59  billion  in  guarantees  and 
counter-guarantees to 37 banks and guarantee societies: this has enabled them to support up to 
an estimated 3 000 innovative SMEs and small midcaps with the loan volume of EUR 3 301 
million. In only two years' time, these financial intermediaries now cover 18 countries in the 
European Union and Associated Countries.  

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 
2006  concerning  the  Seventh  Framework  Programme  of  the  European  Community  for 
research,  technological  development  and  demonstration  activities  (2007-2013)  (OJ  L  412, 
30.12.2006, p. 1). 
Council  Decision  2006/971/EC  of  19  December  2006  concerning  the  specific  programme 
‘Cooperation’  implementing  the  Seventh  Framework  Programme  of  the  European 
Community  for  research,  technological  development  and  demonstration  activities  (2007  to 
2013) (OJ L 400, 30.12.2006, p. 86). 
Council  Decision  2006/974/EC  of  19  December  2006  on  the  Specific  Programme: 
‘Capacities’ implementing the Seventh Framework Programme of the European Community 
for research, technological development and demonstration activities (2007 to 2013) (OJ L 
400, 30.12.2006, p. 299). 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The RSFF, co-developed by the European Commission and the EIB, was established in June 
2007.  In  early  2012,  within  this  programme  a  new  pilot  guarantee  facility,  RSI  (Risk-

88 

 
Sharing  Instrument  for  SMEs  and  small  midcaps,  with  maximum  499  employees)  was 
launched to improve access loan finance for RDI investments.  

Implementation arrangements 
The RSI guarantee facility is part of the RSFF implementation (see the relevant section in 
this report) and is carried out by the European Investment Fund (EIF). 
For  this  RSI  pilot  guarantee  facility,  the  Union  budget  coming  from  FP7  for  the  period 
2012/2013  amounted  to  EUR  270  million  (plus  additional  EFTA  and  Third  Country 
appropriations to FP7). 

Added value 
RSI is a dedicated guarantee facility for loan and lease finance addressing the finance gap 
for innovative SMEs and Small Midcaps (with up to 499 employees). Through risk-sharing 
via  guarantees  provided  by  the  EIF  to  financial  intermediaries,  it  made  a  significant 
contribution  to  support  innovative  smaller  companies  by  improving  their  access  to  loan 
finance. 

(c)  The financial institutions involved in implementation; 

European Investment Fund (EIF) 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014 
Aggregate budgetary payments as at 31/12/2014 

         EUR 270 000 000   
                    EUR 270 000 000  

(e)  The performance of the financial instrument, including investments realised; 

The  instrument  has  so  far  provided  over  EUR  1,59  billion  in  guarantees  and  counter-
guarantees  to  37  banks  and  guarantee  societies:  this  will  enable  them  to  support  up  to  an 
estimated  3000  innovative  SMEs  and  small  midcaps  via  loans,  financial  leases,  and  loan 
guarantees. 
The  aggregate  number  of  applications  from  financial  intermediaries  is  47,  including  four 
guarantee increases.  

Amount of financing expected to be 
provided by the instrument (including EU 
contribution committed) to eligible final 
recipients, 

and corresponding number of eligible final 
recipients; 

EUR 3 301 million 

3 000 eligible FRs 

Amount of investments expected to be 
made by eligible final recipients due to the 
financing, if applicable 

EUR 6 000 million 

89 

 
 
 
 
 
 
 
Amount of financing already provided by 
the instrument to eligible final recipients, 

and the corresponding number of 
recipients;  

Amount of investments already made by 
eligible final recipients due to the 
financing provided through the instrument, 
if applicable. 

EUR 831 million 

1 376 eligible FRs 

EUR 1 600 million 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

                                                                                                      In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

167 309 

269 534 215 

80 972 650 

116 196 432 

72 365 133 

12 638 

269 714 162 

For the period 2012-2014, the following revenues and repayments were received by the EU 
on the EU RSI Account: 
Total operating revenues:                                                                                  EUR 1 323 335 
Repayments:                                                                                                none 

(i)  The value of equity investments, with respect to previous years; 

NA  

(j)  The accumulated figures on impairments of assets of equity; 

Called guarantees as at 31/12/2014 

                                                   EUR 1 646 715 

(k)  The target leverage effect, and the achieved leverage effect; 

The achieved leverage effect is above 12 with an amount of financing expected to be provided 
by financial intermediaries of EUR 3 301 million and an EU contribution of EUR 270 million. 

90 

 
 
 
 
 
 
 
D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  Risk  Sharing  Instrument  (RSI)  under  the  7th  Framework  Programme  is  a  guarantee 
facility dedicated for loan and lease finance addressing the finance gap for innovative SMEs 
and  Small  Midcaps  (enterprises  with  up  to  499  employees).  The  Risk-Sharing  Instrument 
has so far provided over EUR 1,59 billion in guarantees and counter-guarantees to 37 banks 
and  guarantee  societies:  this  has  enabled  them  to  support  up  to  an  estimated  3  000 
innovative SMEs  and  small  midcaps  with  the loan  volume  of  EUR  3  301  million.  In  only 
two  years'  time,  these  financial  intermediaries  now  cover  18  countries  in  the  European 
Union and Associated Countries. 

E - Other key points and issues 

The Risk Sharing Instrument (RSI) has paved the way to the financial instrument SMEs & 
Small  Midcaps  R&I  Loans  Service under Horizon 2020 which is implemented on a larger 
scale as well in term of budget than geographical coverage or specific target groups. 

2.6. SMEs & Small Midcaps R&I Loans Service under Horizon 2020  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG RTD 

DG RTD 

EIF 

EUR 1 060 million 

EUR 1 060 million * 

*Please note that the total indicative budget for SME/ small midcap guarantee instruments is EUR 1,060 million 
that also includes the Horizon 2020 contribution to the SME Initiative. The minimum Horizon 2020 contribution 
to the SMEs and Small Midcaps Loan Service for R&I is EUR 880 million but might be increased depending on 
the actual size of the contribution from Horizon 2020 to the SME Initiative. 

This instrument addresses the financing gap for innovative SMEs and Small Midcaps (with up 
to  499  employees)  for  their  investments  in  innovative  products  and  processes  containing 
significant technology or application risks 
The  EU  and  the  EIF,  as  risk-sharing  partners  at  EU  level,  support  loan  finance  to  such 
innovative SMEs and Small Midcaps through direct or indirect guarantees which the EIF will 
provide to financial intermediaries. 
Due to the advantages the InnovFin SME Guarantee offers, notably in the form of risk-sharing 
and  capital  relief  for  banks,  guarantee  institutions  and  other  financial  intermediaries,  this 
instrument is able to successfully address the financing gap for innovative small companies. 
Based  on  the  foreseen  Union  budget  coming  from  Horizon  2020,  the  risk-sharing 
arrangements  between  the  EU  and  EIF  as  well  as  between  the  EIF  and  its  financial 
intermediaries, a significant loan and lease volume in support of innovative small companies 
and their investment can be expected. For the period 2014-2020, it is expected to mobilize a 
loan  and  lease  volume  of  approximately  EUR  9,5  billion  in  support  of  3  000  innovative 
companies and their investments in RDI. 

91 

 
B - Description 

(a) Identification of the financial instrument and the basic act; 

Regulation  (EU)No  1291/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  establishing  Horizon  2020  -  the  Framework  Programme  for  Research  and 
Innovation (2014-2020)  (OJ L 347/104, 20.12.2013) 
Regulation(EU)  No  1290/2013  of  the  European  Parliament  and  of  the  Council    of  11 
December 2013 laying down the rules for participation and dissemination in "Horizon 2020 
-  the  Framework  Programme  for  Research  and  Innovation  (2014-2020)"    (OJ  L  347/81, 
20.12.2013) 
Council  Decision  2013/743/EU  of  3  December  2013  establishing  the  specific  programme 
implementing Horizon 2020 - the Framework Programme for Research and Innovation (2014-
2020)  (OJ L 347/965, 20.12.2013).  

(b)  Description  of  the  financial  instrument,  implementation  arrangements  and  the 
added value of the Union contribution; 

Policy objectives and scope 
This guarantee facility succeeds and refines the RSI pilot under the RSFF in FP7, and is part 
of  a  single  debt  financial  instrument  supporting  the  growth  of  enterprises  and  their  R&I 
activities. It targets R&I-driven SMEs and small midcaps (up to 499 employees) requiring 
loans of between EUR 25 000 and EUR 7,5 million. A loan of more than EUR 7,5 million 
will be considered on a case-by-case basis.  

Implementation arrangements 
The European Investment Fund (EIF) implements this facility by providing direct guarantees 
to financial intermediaries such as banks, who will extend the actual loans to final recipients. 
The guarantee covers up to 50% of intermediaries' potential losses. EIF also offers counter-
guarantees  to  financial  intermediaries  (such  as  guarantee  institutions)  providing  risk 
protection to banks extending loans to R&I-driven SMEs and small midcaps. This facility is 
available since 10 June 2014. 
R&I-driven SMEs or  small  midcaps  wishing to  apply for a loan should contact one of the 
financial intermediaries signing an agreement (see Selection procedure) with EIF. This is a 
demand-driven  facility,  with  no  prior  allocations  between  sectors,  countries  or  regions. 
However,  the  Commission  incentivises  EIF  to  make  a  particular  effort  to  ensure  that  a 
significant proportion of final recipients are eco-innovative SMEs and small midcaps. 
Selection procedure: 
a)  For  financial  intermediaries:  EIF  issues  calls  for  expression  of  interest,  with  eligibility 
and  selection  criteria  defined  as  part  of  each  call  after  consultation  with  DG  Research  & 
Innovation.  
b) For loans: according to the internal processes of the intermediary bank or other financial 
institution that the SME or small midcap applies to, using normal commercial criteria.  

Added value 
Expected impact: R&I-driven SMEs and small midcaps able to carry out a greater amount of 
R&I. The indicators are the number of agreements signed with financial intermediaries and 
the number and volume of loans made. 

(c) The financial institutions involved in implementation; 

European Investment Fund (EIF) 
The  EIF  implements  this  guarantee  instrument,  which  will  be  delivered  by  financial 
intermediaries  (such  as  banks).  Financial  intermediaries  will  be  guaranteed  against  a 

92 

 
proportion  of  their  potential  losses  by  EIF,  which  will  also  offer  counter-guarantees  to 
guarantee institutions. 
This is a demand-driven instrument, with no prior allocations between sectors, countries or 
regions, or types or sizes of firms or other entities. 
Financial  intermediaries  selected  by  entrusted  entities  for  the  implementation  of  financial 
instruments pursuant to Article 139(4) of Regulation (EU, Euratom) No 966/2012 on the basis 
of open, transparent,  proportionate and non- discriminatory procedures,  may include private 
financial  institutions  as  well  as  governmental  and  semi-governmental  financial  institutions, 
national and regional public banks as well as national and regional investment banks 

C - Implementation 

(d) The aggregate budgetary commitments and payments from the budget;  

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments       as at 31/12/2014  

                 EUR 168,6 million 
                 EUR 168,6 million  

(e) The performance of the financial instrument, including investments realised; 

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 

and corresponding number of eligible final 
recipients; 

Amount of investments expected to be made 
by eligible final recipients due to the financing, 
if applicable 

Amount of financing already provided by the 
instrument to eligible final recipients, 

and the corresponding number of recipients;  

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if applicable. 

EUR 475 million 

900 eligible FRs 

EUR 900 million 

EUR 11 million 

21 eligible FRs 

EUR 22 million 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

(Note: the requirement applies only as from 2015 for 2014-2020 financial instruments)  

93 

 
 
 
 
(g)  The balance of the fiduciary account; 

                                                                                                   In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

41 625 725 

123 286 083 

25 773 159 

918 334 

96 594 590 

924 

164 912 732 

Revenues:                                                                                                 EUR 61 000 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

 None 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect equals 9 with an amount of financing expected to be provided by 
financial intermediaries of EUR 9 500 million and an EU contribution of EUR 1060 million. 
The  expected  leverage  effect  as  at  31/12/2014  equals  2,82  with  an  amount  of  financing 
expected to be provided of EUR 475 million and an EU contribution of EUR 168,6 million. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The dedicated InnovFin SME Guarantee makes the following contribution to the objectives of 
Horizon 2020: 

 increase in private finance and address the financing gap for innovative SMEs and Small 

Midcaps seeking loan finance for their riskier investments in RDI; 

 support,  via  risk-sharing  (guarantees  and  counter-guarantees),  for  innovative  SMEs  and 
Small Midcaps investing across Horizon 2020 Societal Challenges through better access 
to  longer-term  loan  and  lease  finance,  for  loan  amounts  between  EUR  25,000  and  7.5 
million; 

94 

 
 
 
 allow,  in  combination  with  the  COSME  Loan  Guarantee  Facility  which  focuses  on 
increasing the competitiveness of SMEs in general, improved access to finance for SMEs 
(and Small Midcaps) as part of a single EU debt financial instrument for SMEs. 

In  terms  of  incentivizing  the  implementation  of  the  InnovFin  SME  Guarantee  and  its 
geographical coverage (EU Member States and Associated Countries), similar milestones and 
indicators are in place, as part of the Delegation Agreement with the EIF, to make sure that 
within the period 2014-2020, the instrument will be rolled out successfully and in an efficient 
manner. 

The  InnovFin  SME  Guarantee  is  a  dedicated  guarantee  facility  for  loan  and  lease  finance 
addressing  the  finance  gap  for  innovative  SMEs  and  Small  Midcaps  (with  up  to  499 
employees).  Through  risk-sharing  via  guarantees  provided  by  the  EIF  to  financial 
intermediaries,  it  makes  a  significant  contribution  to  the  Horizon  2020  policy  objective  to 
support innovative smaller companies by improving their access to loan finance.  

The  InnovFin  SME  Guarantee  focuses  on  the  important  target  group  of  innovative  smaller 
companies and complements the Loan Service for R&I instrument under Horizon 2020. With 
the EU contribution of EUR 1 060 million, the instrument is targeted to support the amount of 
financing of EUR 9 500 million, implying 3 000 final recipients. 

E - Other key points and issues 

 Main issues for the implementation: 

o  it will be crucial for the implementation of the InnovFin SME Guarantee to attract a 
sufficient  number  of  financial  intermediaries  (banks  and  guarantee  institutions)  as 
risk-sharing partners of the EIF and loan providers to final recipients. 

o  In  this  context,  the  fees  charged  to  financial  intermediaries  need  to  reflect  the  risk 
taken at EU level while, at the same time, offering risk-sharing and capital relief for 
financial intermediaries. 

o  The  contractual  arrangements  between  the  European  Commission  (represented  by 
DG RTD) and EIF allow for flexibility as regards product development for the period 
2014-2020. 

 Main risks :  

o  no particular risks 

 General outlook:  

o  based  on  the  very  successful  implementation  of  the  Pilot  guarantee  facility  (RSI) 
during the period 2012-2013, it can be reasonably expected that the InnovFin SME 
Guarantee will successfully be taken up by the market. 

o  Demand for longer-term (up to 10 years) loan finance in the range of EUR 25,000 to 
7,5 million for the target group innovative SMEs/ Small Midcaps should remain high 
across EU Member States and Associated countries, due to the incentives built into 
the instrument (regulatory capital relief of the 50% uncapped guarantee per loan for 
financial intermediaries). 

o  Provided  that  the  InnovFin  SME  Guarantee  instrument  can  be  implemented  as 
foreseen, it would be able to make a significant contribution to addressing the loan 
finance gap for innovative smaller companies. 

95 

 
2.7. The Cultural and Creative Sectors Guarantee Facility   

A - Summary 

Policy DG in charge:   

DG CNECT  and DG EAC 

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG CNECT 

EIF 

EUR 121 million141 

EUR 121 million 142 

The Cultural and Creative Sectors Guarantee Facility is a facility under which the European 
Commission  through  the  European  Investment  Fund  (EIF)  will  provide  guarantees  and 
counter-guarantees on debt financing to Financial Intermediaries in order to improve access to 
finance  to  SMEs  from  cultural  and  creative  sectors.  Thanks  to  the  CCS  GF,  Financial 
intermediaries selected by the EIF will be able to provide additional debt financing to SMEs 
in Participating Countries. In addition, the action will provide expertise/capacity building to 
the financial institutions wishing to build dedicated portfolios of loans targeting cultural and 
creative  SMEs.  This  may  result in  an  increase  in  the  number  of  financial  institutions  which 
are  willing  to  work  with  cultural  and  creative  SMEs  as  well  as  maximising  the  European 
geographical  diversification  of  targeted  financial  products  for  the  sector.With  a  total 
budgetary  appropriation  for  CCS  GF  of  EUR  121million  in  the  2016-2020  period  and  a 
targeted leverage effect of 5,7 the financial instrument may leverage around EUR 690 million 
of additional funding or the cultural and creative industries. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

REGULATION (EU) No 1295/2013 OF THE EUROPEAN PARLIAMENT AND OF THE 
COUNCIL  of  11  December  2013  establishing  the  Creative  Europe  Programme  (2014  to 
repealing  Decisions  No  1718/2006/EC,  No  1855/2006/EC  and  No 
2020)  and 
1041/2009/EC.143  
Thereof: Art 14 and Annex 1 on the Cultural and Creative Sectors Guarantee Facility specific 
political and operational objectives. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  Cultural  and  Creative  Sectors  Guarantee  Facility  (CCS  GF)  is  part  of  the  Creative 
Europe  programme.  The  general  objective  of  the  Cultural  and  Creative  Sectors  Guarantee 
Facility  is  in  line  with  those  of  the  Creative  Europe  Programme  which  is  to  foster  the 

141  Note:  this  figure  does  not  include  circa  EUR  2million  in  expected  recoveries  from  the  MEDIA  Production 
Guarantee Fund 
142 Idem 
143 OJ L 347, 20.12.2013, p. 221–237 

96 

 
                                                 
safeguarding and promotion of European cultural and linguistic diversity, and strengthen the 
competitiveness  of  the  cultural  and  creative  sectors,  with  a  view  to  promoting  smart, 
sustainable and inclusive growth, in line with the Europe 2020 strategy. 
The  Cultural  and  Creative  Sectors  (CCS)  count  for  more  than  1  million  enterprises  and 
represent nearly 4,5% of the total business economy in Europe. The sector employs over 3,2 
million  people,  predominantly  in  very  small  enterprises,  and  provides  work  to  many  self-
employed people.  CCS grow quickly yet suffer from negative stereotypes when it comes to 
assessing their economic performance. Hence the operational objectives are: 

 to  provide  guarantees  to  banks  dealing  with  cultural  and  creative  SMEs  resulting  in 

easier access to bank credits; 

 to provide expertise/capacity building to the financial institutions;  
 to increase the number of financial institutions which are willing to work with cultural 

and creative SMEs; 

 to maximise the European geographical diversification of financial institutions willing 

to work with cultural and creative SMEs. 

Implementation arrangements 
The European Commission retains an overall responsibility for managing the CCS GF but 
day-to-day  management  will  be  entrusted  to  the  European  Investment  Fund  (EIF)  under  a 
Delegation Agreement. 

Added value 
The  Guarantee  Facility  has  been  the  subject  of  an  impact  assessment,  in-depth  analysis  of 
the  pre-existing  market  gap,  market  testing  with  a  sample  of  financial  institutions  and  a 
dedicated study on  'Access to finance for cultural and creative sectors'.144  
CCS  GF    aims  at  strengthening  the competitiveness  of  the cultural  and  creative  sector,  by 
providing  guarantees  or  counter  guarantees  to  financial  institutions  lending  to  cultural  and 
creative  SMEs  in  Participating  Countries  (i.e.  EU  28  +  Norway  and  Iceland).  A  capacity 
building scheme (technical assistance) will be an integral component of the CCS GF. 
Hence the implementation of a Cultural and Creative Sector Guarantee Facility will improve 
access  to  finance  for  companies  and  organisations  in  the  cultural  and  creative  sectors, 
leading to the strengthening of their financial capacity and competitiveness. 

(c)  The financial institutions involved in implementation; 

European Investment Fund 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Commitments: 

 none for 2014. 
 EUR 1 000 000 for year 2015 (indicative: this amount will come from recoveries from 
the preceding financial instrument, the MEDIA Production Guarantee Fund (MPGF). 

 EUR 14 828 833 for year 2016. 
 EUR121 million for 2016-20 (indicative)145. 

144 http://ec.europa.eu/culture/library/studies/access-finance_en.pdf 
145 Note: this amount does not include a further EUR 1million expected recoveries from  the preceding financial 
instrument the MPGF. 

97 

 
                                                 
Payments: 

 no payments made in 2014; 
 EUR 1 000 000 for year 2015 (to be sourced from expected recovery from MPGF).  
 EUR 14 077 550,58 for year 2016.  

(e)  The performance of the financial instrument, including investments realised; 

NA 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

NA 

(h)  Revenues and repayments; 

NA 

(i)  The value of equity investments, with respect to previous years; 

NA (guarantee fund) 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

 NA 

(k)  The target leverage effect, and the achieved leverage effect; 

The targeted leverage is 5,7. With a total budgetary appropriation of EUR 121 million in the 
2016-2020  period  the  financial  instrument  may  leverage  around  EUR  690  million  of 
additional funding for the cultural and creative industries. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The use of a financial instrument may have a strong structuring effect on the CCS, thanks to 
the  leverage  effect  on  EU  funds  and  to  the  expected  progressive  transition  from  grants  to 
loan support for some types of supports and beneficiaries, such as: micro-loans for all types 
of  individual  cultural  project  development;  funding  for  independent  game  developers; 
funding for publishers of books or sound recordings; loans to exhibitors for the digitisation 
of  cinema  theatres;  working  capital  loans  to  distributors  to  cover  distribution  costs  (print, 
marketing, advertising, dubbing and subtitling) etc.  
Additionally, companies will be able to build closer relationships with the financial sector, 
both  thanks  to  the  capacity-building  arm  of  the  scheme  addressed  to  the  financial 
intermediaries and the training programmes for operators of the sector that will be provided 
under the Creative Europe Programme.  
The contribution of the CCS GF to the achievement of the objectives of the Creative Europe 
programme will be measured by the indicators established in the legal basis: 

i)  the  volume  of  loans  guaranteed  in  the  framework  of  the  Guarantee  Facility, 
categorised  by  national  origin,  size  and  sectors  of  SMEs  and  micro,  small  and 
medium- sized organisations; 

98 

 
ii) the  volume  of  loans  granted  by  participating  financial  intermediaries,  categorised  by 

national origin; 

iii) the number and geographical spread of participating financial intermediaries; 
iv) the  number  of  SMEs  and  micro,  small  and  medium-  sized  organisations  benefiting 

from the Guarantee Facility, categorised by national origin, size and sectors; 

v) the average default rate of loans; 
vi) the  achieved  leverage  effect  of  guaranteed  loans  in  relation  to  the  indicative  leverage 

effect (1 to 5,7).  

E - Other key points and issues 

 Main issues for the implementation: 

o timely agreement and adoption of Delegation Agreement with the EIF. 
o A sufficient critical mass of Financial Intermediaries to ensure a successful start to the 

programme. 

 Main risks:  

o no specific risk identified. 

 General outlook: 

o based on market testing carried out by the EIF and direct contacts and an info session 
with  potential  Financial  Intermediaries,  there  is  a  positive  forecast  demand  for  the 
guarantees.  

o The  scheme  itself  will  start  in  earnest  after  a  signature  of  Delegation  Agreement 

between the European Commission and the EIF, expected in Q4 of year 2015.  

2.8. Student Loan Guarantee Facility - ERASMUS+  

A - Summary 

Policy DG in charge: 

Implementing DG in charge: 

DG EAC 

DG EAC 

Operating Body in charge: 

EIF 

Initial Overall Budget Envelope: 

EUR 517 million 

Current Overall Budget: 

EUR 517 million 

The Erasmus+ Master Student Loan seeks to make  EUR 0,5 billion (EUR 33 million in 2015) 
of  guarantees  to  support  mobility,  equity  and  study  excellence  via  guarantees  to  financial 
institutions  which  agree  to  offer  loans  for  Master's  studies  in  other  Erasmus+  Programme 
countries on favorable terms for mobile students, (regardless of their social background) with 
an expected leverage of 5,7, unlocking EUR 3 billion in student loans. The main priority in 
2015  is  to  ensure  a  rapid  implementation  so  that  students  will  be  able  to  access  loans 
supported through the facility in 2015. 

99 

 
 
 
B - Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EU)  No  1288/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  establishing  'Erasmus+':  the  Union  programme  for  education,  training, 
youth  and  sport  and  repealing  Decisions  No  1719/2006/EC,  No  1720/2006/EC  and  No 
1298/2008/EC. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The objective of Erasmus + Master Student Loan (a guarantee facility under the Erasmus+ 
programme),  is  to  incentivise  commercial/retail  banks,  promotional  banks,  student  loan 
bodies  and  other  financial  intermediaries  (“Intermediaries”)  to  extend  loans  (up  to  a 
maximum  of  EUR  12 000  for  one-year,  up  to  EUR  18  000  for  a  two-year  programme)  to 
mobile students pursuing a full higher education degree (Masters’ programme) in a country 
which  is  neither  their  country  of  residence  nor  the  country  in  which  they  obtained  their 
qualification giving them access to Master's studies. 

Implementation arrangements 
The  Facility  aims  at  granting  students  access  to  Master’s  programmes  through  loans 
provided  by  financial  institutions,  at  favourable  conditions  because  of  effective  portfolio 
credit  risk  transfer  (via  a  guarantee  or  a  counter-guarantee)  by  the  EIF  on  behalf  of  the 
Commission. 

Added value 
The  Facility  was  created  to  support  Master  students,  who  will  make  an  increasingly 
important  contribution  to  innovation  and  entrepreneurship  in  Europe  but  who  also  face 
difficulties in accessing finance, especially for transnational student mobility where a market 
gap has been identified. 

(c)   The financial institutions involved in implementation; 

European Investment Fund 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Commitments: 

 EUR 28,35 million made in 2014 
 EUR 33 million foreseen in 2015 
 EUR 456 million for 2015-20 (indicative) 

Payments: 

 No payments made in 2014 
 EUR 25,6 million foreseen for 2015 
 EUR 31,1 million for 2016-17 (indicative) 

(e)  The performance of the financial instrument, including investments realised; 

As  the  Delegation  Agreement  was  signed  in  December  2014,  no  investments  were  made 
during 2014. 

100 

 
(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

As at 31/12/2014, no transfer  to  the fiduciary account had yet been  made  made  (10  million 
foreseen). 

(h)  Revenues and repayments; 

NA 

(i)  The value of equity investments, with respect to previous years; 

NA (guarantee fund) 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

NA 

(k)  The target leverage effect, and the achieved leverage effect; 

The targeted leverage is 5,7.  
EU contribution of 517 million € is targeted to unlock about EUR 3 billion in student loans. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

To  support  mobility,  equity  and  study  excellence,  the  Student  Loan  Guarantee  Facility  (EU 
contribution of EUR 517 million unlocking EUR 3 billion in student loans) will enable up to 
200 000 students, regardless of their social background; to take their Master degree in another 
Erasmus+ Programme country. 
The Student Loan Guarantee Facility will be available to financial institutions, which agree to 
offer loans on favourable terms to such mobile students. This additional and innovative tool 
for  learning  mobility  will  neither  replace  any  current,  nor  impede  the  development  of  any 
future grant or loan system supporting student mobility at local, national, or Union level. 

E - Other key points and issues 

 Three main issues for the implementation: 

o a sufficient critical mass of Financial Intermediaries to ensure a successful start to the 

programme. 

o The build-up towards an adequate geographical spread of Financial Intermediaries, so 
as to ensure wide availability of the student loans across the 33 Erasmus+ Programme 
Countries. 

o The  number  of  loans  supported  through  the  instrument  are  sufficient  to  meet  student 

demand. 

 Main risks: 

o   no specific risk identified. 

101 

 
 General outlook:  

o based on market testing carried out by the EIF and direct contacts at information events 
for  potential  Financial  Intermediaries,  there  is  a  positive  forecast  demand  for  the 
guarantees.  

o However,  a  rapid  turnaround  of  the  contracting  process  will  be  necessary  to  ensure 

loans can be made available for the academic year 2015-16. 

2.9. Private Finance for Energy Efficiency Instruments (PF4EE)  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

DG CLIMA 

DG CLIMA 

EIB 

Initial Overall Budget Envelope: 

Current Overall Budget: 

EUR 80 million146 
EUR 80 million (2014-2017)147 

The PF4EE is a guarantee instrument providing access to finance for energy efficiency (EE) 
investments  which  implement  National  Energy  Efficiency  Action  Plans  (NEEAP)  of 
Participating Countries, or other programmes in line with EU Directives relating to Energy 
Efficiency. The final recipients include private individuals, home-owner associations, SMEs, 
corporates and/or public institutions/bodies. 
It  is  implemented  under  indirect  management  by  the  European  Investment  Bank.  The 
delegation agreement (DA) was signed on 8 December 2014.  
The instrument aims to increase lending activity and to improve financing conditions for final 
recipients  through,  among  others,  lower  pricing,  longer  maturities  and  lighter  securities 
requirements.  
The  target  leverage  effect  as  indicated  in  the  Delegation  Agreement  is  8.  The  EU  budget 
allocation  foreseen  for  the  programming  period  (2014-2017)  amounts  to  EUR  80  million 
(including  EUR  3,2  million  for  the  Expert  Support  Facility).  It  is  estimated  that  the  total 
amount of investments/loans supported would be EUR 540 million, at least EUR 430 million 
made by the EIB, to which the possible investments of about 110 million made by financial 
intermediaries have to be added. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EU)  N°  1293/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  on  the  establishment  of  a  Programme  for  the  Environment  and  Climate 
Action (LIFE) Article 17148. 

146 The overall budget envelope of the PF4EE is defined in the Commission Implementing Decision C(2014)1709 
of 19 March 2014 on the adoption of the LIFE multiannual work programme for 2014-2017 and it is referred to 
the period 2014-2017.  
147    Including EUR 3,2 million for the Expert Support Facility. 
148 OJ L 116/1, 17.04.2014 

102 

 
                                                 
(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The PF4EE is a guarantee instrument which is implemented under indirect management by 
the European Investment Bank. The delegation agreement (DA) was signed on 8 December 
2014.  
The  PF4EE  is  conceived  as  a  pilot  initiative  in  the  years  2014-2017  to  provide  access  to 
adequate and affordable commercial financing for eligible energy efficiency (EE) investments 
targeted by schemes developed by Participating Countries to implement their National Energy 
Efficiency Action Plans (NEEAP) or other programmes in line with EU Directives relating to 
Energy Efficiency. 

Implementation arrangements 
The PF4EE instrument provides to financial intermediaries (FIs):  

  a portfolio-based credit risk protection (Risk Sharing Facility or RSF), combined with  
  expert  support  services  for  the  FIs  in  order  to  support  the  implementation  of  the 

PF4EE instrument and 
long-term financing. 

 

The RSF is designed to mitigate the credit risk faced by FIs when lending to final recipients 
undertaking  eligible  EE  investments.  By  means  of  collateral  deposited  on  the  collateral 
account, the RSF will cover losses at the collateral rate incurred under EE loans included in 
the portfolio to be built by the FIs for the financing of EE investments.  
The  size  of  the  EE  loans  provided  to  beneficiaries  range  from  EUR  40  000,  which  can  be 
reduced  to  accommodate  small  investments  within  the  residential  sector,  to  EUR  5  million 
and in exceptional cases up to EUR 15 million.  

EU added value 
The  RSF  aims  to  increase  lending  activity  and  to  improve  financing  conditions  for  final 
recipients  through,  among  others,  lower  pricing,  longer  maturities  and  lighter  securities 
requirements. The EIB loan for EE to the FIs may complement the RSF. Such EIB loans for 
EE will be provided by the EIB at competitive rates and with long-maturities.  
The final recipients include private individuals, home-owner associations, SMEs, corporates 
and/or public institutions/bodies, undertaking EE investments in line with the NEEAP of each 
Member States. 

(c)  The financial institutions involved in implementation; 

 European Investment Bank (EIB) 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

EUR 30 000 000  
EUR 6 000 000  

(e)  The performance of the financial instrument, including investments realised; 

The PF4EE delegation agreement was signed on 8 December 2014. No operations started by 
31/12/2014 

103 

 
 
(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

EUR 6 000 000 

                                                                                               In EUR 

Balance on the fiduciary account (current account) 

6 000 000  

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

EUR 0 

0 

 6 000 000  

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

EUR 0 

(k)  The target leverage effect, and the achieved leverage effect; 

  The target leverage effect 

The EU budget allocation foreseen in the LIFE regulation for the programming period 2014-
2017 amounts to EUR 80 million (4% of which will finance the Expert Support Facility and 
are not considered in the calculation of the leverage).  
The total amount of loan financing by the EIB is expected to reach up to approximately EUR 
430  million.  Additional  debt  financing  is  expected  from  other  financial  intermediaries.  The 
total investment in EE over this period could be at around EUR 540 million.  
Hence the target leverage effect (defined also as Target Investment Leverage) as indicated in 
the  Delegation  Agreement  is  8  (EUR  540  million  divided  by  EUR  76,8  million  of  Union 
contribution).  

 The achieved leverage effect  

The  Delegation  Agreement  (DA)  having  been  signed  in  December  2014,  no  operation 
started  in  2014.  The  calculation  will  follow  the  same  rationale  as  outlined  for  the  target 
leverage factor. 

104 

 
 
 
 
 
 
 
 
 The "Expected Leverage for Signed Operations"   

The Delegation Agreement (DA) having been signed in December 2014, no operation started 
in 2014. 

D -  Strategic importance/relevance 

(l)  The contribution of the financial instrument to the achievement of the objectives 
of the programme concerned as measured by the established indicators, including, 
where applicable, the geographical diversification; 

The Delegation Agreement having been signed on December 2014, no operation started in 
2014.  

E - Other key points and issues 

 Three main issues for the implementation: 

o the  PF4EE  instrument  will  provide  valuable  piloting  experience  for  possible  up 
scaling. This piloting phase will allow in particular to test the most appropriate level 
of  protection  (i.e.  minimise)  to  be  provided  to  financial  intermediaries  in  about  10 
banks in different Member States for different categories of beneficiaries. 

o Since  its  structure  is  fully  decentralized  (i.e.  the  risk  protection  is  provided  by  the 
Commission  by  means  of  collateral  deposited  on  collateral  accounts,  set  for  each 
financial intermediaries and managed by the EIB) the PF4EE is designed to allow for 
scalable  levels  of  finance  using  structural  funds.    In  this  respect  Managing 
Authorities of Member States can replicate (or provide financial contributions to) this 
instrument which ensures that the impact of the contribution provided remain within 
the  relevant  geographical  area,  building  on  the  existing  ex-ante  assessment149  and 
benefiting from the basic legal structure of the PF4EE instrument as described in the 
Delegation Agreement. 

o The EIB is committed under the Delegation Agreement art. 17 to carry out by 2017 a 
specific evaluation of the cash collateral approach to assess the effectiveness of the 
cash collateral approach, including through a comparison with alternative unfunded 
approaches,  such  as  financial  guarantees  provided  by  the  Union  through  entrusted 
entities or directly to Financial Intermediaries. 

 Main risks identified: 

o considering  that  lending  is  implemented  through  financial  intermediaries,  the 
assessment  of  compliance  of  final  recipient  and  eligible  investments  and  impact 
indicators with the provisions set in the Delegation Agreement is challenging. EIB's 
monitoring and reporting on these critical aspects will need to be scrutinized by the 
PF4EE Board. 

o Accordingly  with  the  provision  of  the  Delegation  Agreement  Annex  1,  section  7.2 
the  assessment  of  eligibility  of  Final  Recipient  will  need  to  be  performed  against 
specific requirements and financing should only support Eligible Energy Efficiency 
Investment. 

o As mentioned in the Delegation Agreement Annex 5a, Section III, operations will be 
chosen  having  regard  to  the  fields  of  intervention  of  the  PF4EE  and  carefully 

149 "Ex-ante evaluation of a new Financial Instrument to foster investment in EE by private financial institutions 
(PF4EE)",  Annex  2  to  the  LIFE  multiannual  work  programme  2014-2020  -  Commission  Implementing  Decision 
C(2014)1709.  

105 

 
                                                 
monitored and evaluated to assess the impact on energy efficiency and GHG saving 
and other impact indicators.  

 General outlook:  

o after  the  publication  of  the  "Request  for  proposals  in  order  to  become  a  financial 
intermediary  under  the  PF4EE"  in  January  2015,  the  EIB  reported  that  so  far  10 
banks  has  manifested  an  interest  to  implement  the  PF4EE.  The  EIB  is  currently 
exploring  an  agreement  with  3  banks  in  different  Member  States  which  expects  to 
sign by Q3 2015. To be fully on track with the target set to obtain the performance 
fees the EIB would need to sign a fourth extra agreement by year end. 

3.  Risk Sharing Instruments 

3.1. Risk-Sharing Finance Facility under the FP7 (RSFF)  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

DG RTD 

DG RTD 

EIB 

Initial Overall Budget Envelope: 

EUR 960,73 million 

Current Overall Budget: 

EUR 960,73 million 

The  RSFF,  officially  launched  in  July  2007,  was  one  of  the  new,  innovative  funding 
mechanisms of FP7. It is a debt finance instrument, jointly developed by the Commission and 
the  European  Investment  Bank  (EIB).  The  RSFF  facilitated  access  to  finance  by  providing 
loans  and  guarantees  to  a  wide  range  of  beneficiaries  —  including  SMEs,  mid-sized 
enterprises,  larger  companies,  research  institutions,  universities  and  research  infrastructures 
—investing in RDI. 
The  RSFF  has  reached  and  easily  exceeded  almost  all  its  operational  and  intermediate 
objectives. Three evaluative assessments clearly demonstrate that RSFF is well on its way to 
realising longer-term objectives and wider achievements. 
Loan agreements have been signed with 114 R&I promoters, with a total loan volume (active 
loans) of EUR 11,31 billion and the instrument had been implemented in 25 countries. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 
2006  concerning  the  Seventh  Framework  Programme  of  the  European  Community  for 
research,  technological  development  and  demonstration  activities  (2007-2013)  (OJ  L  412, 
30.12.2006, p. 1). 
Council  Decision  2006/971/EC  of  19  December  2006  concerning  the  specific  programme 
‘Cooperation’  implementing 
the  Seventh  Framework  Programme  of  the  European 
Community  for  research,  technological  development  and  demonstration  activities  (2007  to 
2013) (OJ L 400, 30.12.2006, p. 86). 

106 

 
Council  Decision  2006/974/EC  of  19  December  2006  on  the  Specific  Programme: 
‘Capacities’ implementing the Seventh Framework Programme of the European Community 
for research, technological development and demonstration activities (2007 to 2013) (OJ L 
400, 30.12.2006, p. 299). 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The RSFF, co-developed by the European Commission and the EIB, was established in June 
2007.  The  RSFF  facilitates  access  to  finance  by  providing  loans  and  guarantees  to  a  wide 
range of beneficiaries — including SMEs, mid-sized enterprises, larger companies, research 
institutions, universities and research infrastructures —investing in RDI. 

Implementation arrangements 
The  EU  and  the  EIB  are  risk-sharing  partners  for  loans  provided  by  the  EIB  directly  or 
indirectly to beneficiaries. The European Union, through FP7 budget resources, and the EIB 
have  set  aside  a  total  amount  of  up  to  EUR  2  billion  (up  to  EUR  1  billion  each)  for  the 
period 2007-2013 to cover losses if RSFF loans are not repaid.  

Added value 
Through these EU/EIB contributions for risk-sharing and loss coverage, the EIB is able to 
extend a loan volume of EUR 10 billion to companies and the research community for their 
investments in R&D and Innovation. 

(c)  The financial institutions involved in implementation; 

European Investment Bank (EIB) 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014 
Aggregate budgetary payments as at 31/12/2014 

   EUR 960,73 million 
              EUR 960,73 million  

(e)  The performance of the financial instrument, including investments realised; 

The results of the RSFF under FP7 covering from 2007 until 2013 showed a total number of 
114  RDI  operations,  which  were  signed,  and  loan  volume  of  EUR  11  313  million,  and  98 
disbursed operations (EUR 9 556 million).150 

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 

and corresponding number of eligible final 
recipients; 

Amount of investments expected to be made 
by eligible final recipients due to the 
financing, if applicable 

150 European Investment Bank (2014). 

107 

EUR 11 313 million  

114 eligible FRs 

EUR 22 000 million  

 
 
 
 
 
                                                 
Amount of financing already provided by the 
instrument to eligible final recipients, 
and the corresponding number of recipients;  

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if 
applicable. 

EUR disbursed 9 556 million  

98 eligible FRs 

EUR 19 000 million  

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA for 2014. 

(g)  The balance of the fiduciary account; 

                                                                                                   In EUR 

Balance on the fiduciary account (current account) 

267 000 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

61 867 000 

46 499 000 

330 806 000 

510 839 000 

950 278 000 

Please  note  that  the  figures  provided  includes  RSI  figures  whose  asset  management  is  carried  out  in 
RSFF by the EIB. 

(h)  Revenues and repayments; 

For the period 2007-2014, the following revenues and repayments were received by the EU 

on the EU RSFF Account: 

Total operating revenues:  
Of which expected loss recovery: 

                                        EUR 136,11 million 
                                        EUR  12,11 million 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The accumulated figures on impairments of assets of equity; 

By  31/12/2014,  an  "Available  for  sale"  reserve  of  EUR  5,02  million  was  included  in  the 
Balance Sheet. 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage of the Debt facility - defined as the total funding (i.e. Union funding plus 
contribution from other financial institutions) divided by the Union financial contribution - 

108 

 
 
 
 
 
 
 
 
 
 
is  expected  to  range  from  an  average  of  5  to  6,5,  depending  on  the  type  of  operations 
involved (level of risk, target recipients, and the particular debt financial instrument facility 
concerned).  

Together with the EIB window of the Facility, the achieved leverage effect is close to 12 with 
an amount of financing  expected to be provided to final beneficiaries of EUR 11 313 million 
(the reached loan volume)  and an EU contribution of EUR 960,73 million. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  RSFF,  officially  launched  in  July  2007,  was  one  of  the  new,  innovative  funding 
mechanisms of FP7. It is a debt finance instrument, jointly developed by the Commission and 
the European Investment Bank (EIB).  

Demand for RSFF loan finance has been high since the launch of the facility in mid-2007: in 
its  first  phase  (2007-2010),  its  take-up  exceeded  initial  expectations  by  more  than  50  %  in 
terms of active loan approvals (EUR 7,6 billion versus a forecast EUR 5 billion). 

The  RSFF  has  reached  and  easily  exceeded  almost  all  its  operational  and  intermediate 
objectives. Three evaluative assessments clearly demonstrate that RSFF is well on its way to 
realising longer-term objectives and wider achievements. 
The first interim evaluation151 concluded that the RSFF had been successfully introduced into 
the  EU’s  research  funding  scheme  within  FP7,  was  a  model  example  of  an  EU  financial 
instrument,  and  should  be  further  developed  and  strengthened.  Recommendations  included 
the need to better target SMEs and research infrastructures. The second interim evaluation152 
concluded  that  the  RSFF  had  proved  to  be  attractive  to  RDI  companies  and  had  met  or 
exceeded  its  loan  volume  targets  and  enabled  EIB  to  increase  the  bank's  capacity  to  make 
riskier loans.  

By  the  end  of  2013,  127  RSFF  operations  had been  approved  by  the  EIB,  with  a  total  loan 
volume  of  EUR  16,2  billion,  and  the  Bank  had  signed  loan  agreements  with  114  R&I 
promoters,  with  a  total  loan  volume  (active  loans)  of  EUR  11,31  billion.  The  sector 
diversification was broad, and the instrument had been implemented in 25 countries. 

E -  Other key points and issues 

At the end of 2014, reflows of EUR 375 million had been reallocated to the 'Loans Service 
for R&I' successor debt instrument in Horizon 2020. 

151 For the report by a group of independent experts on the first interim evaluation of the RSFF, see   Mann et 
al.(2010). 
152 For the report by a group of independent experts on the second interim evaluation of the RSFF, see 
http://ec.europa.eu/research/evaluations/pdf/archive/other_reports_studies_and_documents/interim_evaluation_rep
ort_rsff.pdf  

109 

 
                                                 
 
3.2. Horizon 2020 Loan Services for R&I Facility   

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

DG RTD 

DG RTD 

EIB 

Initial Overall Budget Envelope: 

Current Overall Budget: 

EUR 1 060 million 

EUR 1 060 million 

The  InnovFin  Large  Projects,  InnovFin  MidCap  Growth  Finance  and  InnovFin  MidCap 
Guarantee aim is to improve access to risk finance for R&I projects carried out by a variety of 
promoters  notably  including  medium  and  large  midcaps,  larger  companies,  universities  and 
research institutes, R&I infrastructures and special-purpose vehicles located in Member States 
or in Associated Countries. 
This instrument helps addressing riskier projects or sub-investment grade promoters carrying 
out RDI investments across all Horizon 2020's Societal Challenges. A particular approach is 
foreseen to address the financing needs of midcap companies (with employees between 500 
and 3 000 employees). 
The  InnovFin  Large  Projects,  InnovFin  MidCap  Growth  Finance  and  InnovFin  MidCap 
Guarantee    instruments  offers  better  access  to  risk  finance  in  an  open,  demand-driven  way 
through direct loans  or hybrid/mezzanine investments  made available by the EIB as well as 
through risk-sharing (guarantees) involving other banks and financial intermediaries. 
The  InnovFin  Large  Projects,  InnovFin  MidCap  Growth  Finance  and  InnovFin  MidCap 
Guarantee cover a broad spectrum of final recipients with a flexible loan financing approach, 
and  are  complemented  by  a  dedicated  guarantee  facility  for  loans  and  leases  for  innovative 
SMEs  and  Small  Midcaps.  For  2014-2020,  the  EU  contribution  of  EUR  1  060  million  is 
targeted  to  mobilise  an  amount  of  financing  of  EUR  13  250  million  for  the  target  final 
recipients.  

B - Description 

(a)   Identification of the financial instrument and the basic act; 

Regulation  (EU)  No  1291/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  establishing  Horizon  2020  -  the  Framework  Programme  for  Research  and 
Innovation (2014-2020)  (OJ L 347/104, 20.12.2013) 
Regulation  (EU)  No  1290/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December 2013 laying down the rules for participation and dissemination in "Horizon 2020 
-  the  Framework  Programme  for  Research  and  Innovation  (2014-2020)"    (OJ  L  347/81, 
20.12.2013) 
Council  Decision  2013/743/EU  of  3  December  2013  establishing  the  specific  programme 
implementing  Horizon  2020  -  the  Framework  Programme  for  Research  and  Innovation 
(2014-2020)  (OJ L 347/965, 20.12.2013). 

110 

 
(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The goal is to improve access to debt financing — loans, guarantees, counter-guarantees and 
other  forms  of  debt  and  risk  finance  —  for  public  and  private  entities  and  public-private 
partnerships  engaged  in  research  and  innovation  activities  requiring  risky  investments  in 
order  to  come  to  fruition.  The  focus  is  on  supporting  research  and  innovation  with  a  high 
potential for excellence. 
The target final recipients are potentially legal entities of all sizes that can borrow and repay 
money and, in particular, SMEs with the potential to carry out innovation and grow rapidly; 
mid-caps  and  large  firms;  universities  and  research  institutes;  research  infrastructures  and 
innovation  infrastructures;  public-private  partnerships;  and  special-purpose  vehicles  or 
projects. 

Implementation arrangements 
The  Loan  and  Guarantee  Service  for  Research  and  Innovation  is  implemented  towards  a 
platform  approach  offering  several  products  specifically  designed  to  address  particular 
needs. The key partner as entrusted entity for the implementation of the Loan and Guarantee 
Service for Research and Innovation will be the European Investment Bank (EIB). 
The funding of the Loan and Guarantee Service for Research and Innovation has two main 
components: 
 demand-driven,  providing  loans  and  guarantees  on  a  first-come,  first-served  basis,  with 
specific  support  for  beneficiaries  such  as  SMEs  and  mid-caps.  This  component  shall 
respond to the steady and continuing growth seen in the volume of RSFF lending, which is 
demand-led.  This  demand-driven  component  will  be  supported  by  the  budget  of  the 
Horizon 2020 Access to Risk Finance programme. 

 Targeted,  focusing  on  policies  and  key  sectors  crucial  for  tackling  societal  challenges, 
enhancing  competitiveness,  supporting  sustainable,  low-carbon,  inclusive  growth,  and 
providing environmental and other public goods. This component helps the Union address 
research  and  innovation  aspects  of  sectorial  policy  objectives  and  will  be  supported  by 
other parts of Horizon 2020, other frameworks, programmes and budget lines in the Union 
budget,  particular  regions  and  Member  States  that  wish  to  contribute  with  their  own 
resources  (including  through  Structural  Funds)  and/or  specific  entities  (such  as  Joint 
Technology Initiatives) or initiatives. 

The expiry date of the instrument is expected to be in 2027-2030. 

Added value 
This financial instrument aims to improve access to risk finance for R&I projects emanating 
from  large  firms  and  medium  and  large  midcaps,  universities  and  research  institutes,  R&I 
infrastructures  (including  innovation-enabling  infrastructures),  public-private  partnerships, 
and  special-purpose  vehicles  or  projects  (including  those  promoting  first-of-a-kind, 
commercial-scale  industrial  demonstration  projects).  Firms  and  other  entities  located  in 
Member States or in Associated Countries are eligible as final recipients.  
This  instrument  will  help  address  sub-optimal  investment  situations  stemming  from  poor 
prospects  within  firms  or  other  entities  for  the  creation  or  commercialisation  of  products  or 
services  of  societal  importance  (in  the  sense  of  Horizon  2020's  Societal  Challenges)  or  that 
constitute a public good. Overall, it will improve access to risk finance. 

111 

 
(c)  The financial institutions involved in implementation; 

European Investment Bank (EIB) 
The EIB implements this instrument, which will be delivered both directly by EIB and also by 
financial intermediaries (such as banks). Financial intermediaries will be guaranteed against a 
proportion of potential losses  by EIB, which will also offer counter-guarantees to guarantee 
institutions.  This  is  a  demand-driven  instrument,  with  no  prior  allocations  between  sectors, 
countries or regions, or types or sizes of firm or other entities. 
The Delegation Agreement signed with the entrusted entity ensures that the InnovFin Large 
Projects, InnovFin MidCap Growth Finance and InnovFin MidCap Guarantee are accessible 
for  large  firms  and  medium  and  large  midcaps,  universities  and  research  institutes,  R&I 
infrastructures, public-private partnerships, and special-purpose vehicles or projects. 
Regarding the indirect delivery, financial intermediaries selected by entrusted entities for the 
implementation  of  financial  instruments  pursuant  to  Article  139(4)  of  Regulation  (EU, 
Euratom)  No  966/2012  on  the  basis  of  open,  transparent,  proportionate  and  non- 
discriminatory procedures may include private financial institutions as well as governmental 
and  semi-governmental  financial  institutions,  national  and  regional  public  banks  as  well  as 
national and regional investment banks. 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget;  

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

                     EUR 483 million153 
                    EUR 483 million  

(e)  The performance of the financial instrument, including investments realised; 

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 
and corresponding number of eligible final 
recipients; 

Amount of investments expected to be made 
by eligible final recipients due to the financing, 
if applicable 

Amount of financing already provided by the 
instrument to eligible final recipients, 
and the corresponding number of recipients;  

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if applicable. 

EUR 2 446,4 million  

30 eligible FRs 

EUR 6 627 million  

EUR 1 157,2 million  
15 eligible FRs 

EUR 3 150 million  

153including the transfer from RSFF to H2020 as indicated under 'additional information' of point h) 

112 

 
 
 
 
 
 
 
 
 
 
                                                 
(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

 (Note: the requirement applies only from 2015 and  for 2014-2020 financial instruments)  

None 

(g)  The balance of the fiduciary account; 

                                                                                              In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

266 000 

478 402 000 

38 301 000 

22 999 000 

4 139 000 

412 697 000 

478 402 000 

Aggregate additional resources as at 31/12/2014                                                      EUR   0 

Additional information 
It  should  be  noted  that  EUR  375  million  have  been  paid  back  by  the  EIB  further  to  the 
signature  of  the  8th  amendment  to  the  RSFF  cooperation  agreement.  In  accordance  with 
Article 52.3 of the Horizon 2020 Rules for Participation, this amount has been transferred 
to its successor debt instrument under Horizon 2020 (Horizon 2020 Loan Services for R&I 
Facility) 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

No impairment of assets as at 31/12/14 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect equals 12,5 with an amount of financing expected to be provided by 
financial intermediaries of EUR 13 250 million and an EU contribution of EUR 1 060 million. 
The  achieved  leverage  effect  as  at  31/12/2014  is  close  to  2,4  with  an  amount  of  financing 
provided of EUR 1 157,2 million and an EU contribution of EUR 483 million. 
The expected leverage effect as at 31/12/2014 is above 5 with an amount of financing signed 
provided of EUR 2 446,4 million and an EU contribution of EUR 483 million.  

113 

 
 
 
 
                                   
D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme  concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  successor  financial  instrument  (2014-2020)  continues  and  refines  the  Risk-Sharing 
Finance Facility (RSFF) under FP7, and offers loans and hybrid or mezzanine finance. 
It  aims  to  improve  access  to  risk  finance  for  R&I  projects  emanating  from  a  variety  of 
different  recipients  such  as  large  firms  and  medium  and  large  midcaps,  universities  and 
research  institutes,  R&I  infrastructures  (including  innovation-enabling  infrastructures), 
public-private  partnerships,  and  special-purpose  vehicles  or  projects  (including  those 
promoting  first-of-a-kind,  commercial-scale  industrial  demonstration  projects).  Firms  and 
other  entities  located  in  Member  States  or  in  Associated  Countries  will  be  eligible  as  final 
recipients. 
For  medium  and  large  midcaps,  the  EIB  offers  loans  and  hybrid  or  mezzanine  finance 
between EUR 7,5 million and EUR 25 million. Loans to a medium or large midcaps of more 
than  EUR  25  million  will  be  considered  on  a  case-by-case  basis.  For  large  firms,  loans  of 
between EUR 25 million and EUR 300 million are available. Any loan to a large firm of less 
than  EUR  25  million  will  be  considered  on  a  case-by-case  basis.  For  the  other  entities 
mentioned above, loans from EUR 7,5 million up to EUR 300 million are available. 
The  EIB  implements  this  instrument,  which  is  delivered  both  directly  by  EIB  and  by 
financial intermediaries (such as banks). Financial intermediaries may obtain, on a portfolio 
basis,  a  guarantee  from  the  EIB  for  loans  provided  to  final  recipients,  for  a  proportion  of 
their potential losses. 
InnovFin  Large  Projects,  InnovFin  MidCap  Growth  Finance  and  InnovFin  MidCap 
Guarantee,  like  their  predecessor  scheme  (RSFF),  are  demand-driven  instruments,  with  no 
prior  allocations  between  sectors,  countries  or  regions,  or  types  or  sizes  of  firm  or  other 
entities. 
As  regards  expected  impact,  this  instrument  helps  addressing  sub-optimal  investment 
situations  stemming  from  poor  prospects  within  firms  or  other  entities  for  the  creation  or 
commercialisation  of  products  or  services  of  societal  importance  (in  the  sense  of  Horizon 
2020's  Societal  Challenges)  or  that  constitute  a  public  good.  Overall,  it  improves  access  to 
risk finance. For direct loans or hybrid/mezzanine investments, the indicators are the number 
and  volume  of  loans  or  investments  made.  For  intermediated  loans,  the  indicators  are  the 
number  of  agreements  signed  with  financial  intermediaries  and  the  number  and  volume  of 
loans  made.  Targets  and  milestones  (performance  indicators)  are  set  for  EIB  to  incentivize 
implementation  and  to  reach  envisaged  volumes  of  lending,  target  groups  as  well  as 
satisfactory geographical coverage. 
InnovFin Large Projects, InnovFin MidCap Growth Finance and InnovFin MidCap Guarantee 
contribute  to  achieving  the  policy  objectives  of  Horizon  2020  by  improving  access  to  loan 
finance  for  a  range  of  target  groups  such  as  innovative  companies,  research  institutions, 
public-private-partnerships  and  research  infrastructures  investing  in  research  and  innovation 
across the societal challenges of Horizon 2020. 
This  debt  financial  instrument  building  on  its  successful  FP7  predecessor  helps  addressing 
financing gaps in the market through risk sharing and mobilize additional financing, notably 
from private sources.  
For 2014-2020, the EU contribution of EUR 1 060 million is targeted to mobilise an amount 
of financing of EUR 13 250 million for the target final recipients. 

114 

 
E - Other key point and issues 

 Main issues for implementation: 

o critical  for  the  implementation  of  the  InnovFin  Large  Projects,  InnovFin  MidCap 
Growth  Finance  and  InnovFin  MidCap  Guarantee  will  be  attractiveness  of  the 
instrument,  its  stronger  focus  on  midcap  companies  (with  up  to  3  000  employees) 
and the possibility to develop new financing approaches, if necessary, to respond to 
financing needs coming from the various Societal Challenges of Horizon 2020. 

o However,  the  contractual  arrangements  between  the  EU  and  the  EIB  foresee 
sufficient  flexibility  to  develop  such  new  financing  approaches  and  also  to  create 
policy-driven  sub-facilities  which  could  address  specific  needs  (provided  that 
additional budget resources become available). 

 Main risks:  

o no risks identified. 

 General outlook: 

o based  on  the  very  satisfactory  implementation  of  the  preceding  loan  instrument 
supported  by  FP7,  (the  RSFF),  on-going  demand  for  loans  to  finance  riskier  RDI 
investments, first indications for a robust project pipeline for the next 12 months, and 
a  stronger  focus  on  the  midcap  target  group,  the  outlook  for  the  InnovFin  Large 
Projects,  InnovFin  MidCap  Growth  Finance  and  InnovFin  MidCap  Guarantee  is 
generally positive. 

o It  can  be  reasonably  expected  that  across  Horizon  2020  Societal  Challenges  (i.e. 
Energy, Bio-economy, Transport, Health), companies will seek EIB loan finance or 
risk  sharing  (via  guarantees)  to  support  medium  and  longer-term  RDI  investments. 
Target volumes for the Loan Service for R&I instrument with Horizon 2020 budget 
envisage lending of at least EUR 5 to 6,5 billion for the entire period 2014-2020.  

o In  addition,  under  EIB's  own  complementary  window  for  RDI  investments,  which 
will  be  part  of  the  overall  loan  finance  approach  for  RDI  investments,  a  similar 
lending volume, i.e. a further EUR 5 to 6,5 billion (EUR 13 billion in total) can be 
expected. 

3.3. Loan Guarantee Instrument (LGTT)  

A - Summary 

Policy DG in charge: 

DG Mobility and Transport 

Implementing DG in charge: 

DG Mobility and Transport 

Implementing Body in charge: 

European Investment Bank 

Initial Overall Budget Envelope: 

Current Overall Budget 

EUR 500 million 

EUR 250 million 

Note:*As  at  31-12-2014,  EUR  250  million  was  committed  via  annual  budgets  adopted  by  the  budget 
authority, further EUR 6,8 million were committed from generated revenues.  An additional amount of 
EUR  0,66  million  resulting  from  net  LGTT  income  generated  in  2013  will  be  made  available  for  the 
current overall budget of the LGTT instruments in the coming months. 

LGTT  is  a  guarantee  scheme  set  up  in  2007/2008  and  is  a  risk  sharing  facility  for  revenue 
based projects. As of 31-12-2014, 7 projects have been signed using over EUR 500 million of 
guarantees and attracting EUR 12 billion of public and private financing. 

115 

 
Due  to  changing  market  conditions  and  the  financial  crisis,  demand-based  revenue  projects 
have declined in Europe since 2009. Based on the forecast of projects provided by the Bank 
and  the  discussions  with  the  Member  States,  the  LGTT  can  be  still  adapted  to  some  traffic 
based projects in Europe. 
The  recommendation  of  the  ex-post  evaluation  points  to  more  proactive  dissemination  and 
awareness raising on the applicability of LGTT amongst the procuring authorities and project 
promoters, as well as on more transparent presentation of the pricing by the EIB. 
The Commission is expecting to merge the portfolio of LGTT with the CEF Debt Instrument 
in  2015,  which  would  maximize  the  number  of  projects  that  can  be  supported  by  the  EU 
funds. 

B - Description 

(a)   Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  680/2007  of  the  European  Parliament  and  of  the  Council  of  20  June 
2007 laying down general rules for the granting of Community financial aid in the field of 
the  trans-European  transport  and  energy  networks,154  as  amended  by  Regulation  (EU)  No 
670/2012 of the European Parliament and of the Council of 11 July 2012:155 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution;  

Policy objectives and scope 
The  LGTT  is  a  loan  guarantee  instrument  for  facilitate  finance  for  transport  infrastructure 
projects.  The  legal  basis  establishes  that  the  EU  contribution  is  to  be  used  for  the 
provisioning and capital allocation for guarantees to be issued by the European Investment 
Bank  (EIB)  on  its  own  resources  under  the  loan  guarantee  instrument  Risk-sharing  in  this 
context means that both partners, the EU represented by the Commission and the EIB, share 
financial risk, to accelerate and implement TEN-T infrastructure projects. 
The  main  terms,  conditions  and  procedures  of  the  LGTT  are  laid  down  in  the  annex  of 
Regulation  (EC)  680/2007  as  amended  by  Regulation  (EU)  No  670/2012.  The  practical 
implementation  is  done  on  the  basis  of  a  cooperation  agreement  between  the  Commission 
and  the  EIB  that  was  originally  signed  on  11  January  2008  and  subsequently  amended  in 
2013 following the adoption of Regulation (EU) 670/2012. 

Implementation arrangements 
Technically, the guarantee facilities provided by the EIB under LGTT to the private sector 
(project sponsors/ promoters) serve to enhance the credit rating of the senior debt issued to 
finance the project by reducing traffic risk. The EIB provides a guarantee in the form of a 
contingent credit line, which may be drawn upon by the project promoter during the first 5 
to  7  years  of  operation,  if  the  revenues  generated  by  a  project  are  not  sufficient  to  ensure 
repayment  of  the  senior  debt,  in  case  the  actual  revenues  from  the  project  fall  below  the 
forecasted level; 
The  initial  overall  budget  foreseen  in  Regulation  (EC)  680/2007  for  the  LGTT  instrument 
was EUR 500 million. The EIB was required to provide an equal amount.  

Regulation  (EU)  No  670/2012  reduced  the  overall  budget  re-deploying  EUR  200  million 
from  the  funds  dedicated  to  the  LGTT  to  the  pilot  phase  of  the  Project  Bonds  Instrument. 

154 (OJ L 162/1, 22.6.2007) 
155 (OJ L 204/1, 31.7.2012) 

116 

 
                                                 
Subsequently, after agreement with the EIB, EUR 50 million was re-deployed into the TEN-
T Programme for grant funding. Therefore, the total amount of the EU contribution currently 
available to support LGTT projects is EUR 250 million. 
LGTT was available for transactions approved by the EIB of Directors by the end of 2014 
with the financial close until end of 2016. Guarantees can be called for the first 5 to 7 years 
operation, the latest draw down date of a project in the current portfolio is end of 2021. 

Added value 
LGTT brought value added to the projects by covering traffic risk during ramp-up and thus 
improving  the  ability  of  borrowers  to  service  senior  debt.  LGTT  has  clearly  facilitated 
financial close in a difficult market situation of the financial crisis in all transactions which 
used it.  

(c)   The financial institutions involved in implementation; 

The European Investment Bank (EIB) 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31-12-2014 
(voted appropriations by the budget authority) 

EUR 250 000 000 

Additional budgetary commitments as at 31-12-2014 
(generated revenues) 

EUR 6 881 251* 

Aggregate budgetary payments as at 31-12-2014 

EUR 211 881 251 

Note: * an additional amount of EUR 0,61 million resulting from net LGTT interest revenues generated in 
2013will be made available for the current overall budget of the LGTT instruments  in coming months. 

(e)  The performance of the financial instrument, including investments realised;  

During  the  period  2008-2014,  the  LGTT  has  supported  five  motorway  projects  (of  which 
one  was  cancelled  meaning  that  only  four  are  currently  in  the  LGTT  portfolio),  one  port 
infrastructure project and one high speed rail project. The total amount of LGTT guarantees 
signed  as  of  31-12-2014  is  EUR  517  million.  The  outstanding  total  amount156  of  signed 
LGTT  guarantees  towards  the  six  transactions  in  the  portfolio  as  of  31-12-2014  (i.e. 
excluding  the  cancelled  transaction)  is  EUR  497  million.  This  is  illustrated  in  the  table 
below: 

156  As  at  31-12-2014  the  LGTT  instrument  provides  a  guarantee  to  six  projects.  The  total  amount  of  guarantee 
provided to the projects is EUR 497 million. In other terms the outstanding total exposure as at 31-12-2014 is EUR 
497 million. Going forward, as the guarantee period of the underlying transactions will come to an end and as the 
transaction come to their term, the outstanding amount of exposure of the instrument will decrease. 

117 

 
                                                 
In million EUR 

Project cost                         

Financial 
close 

Type 

Project 

LGTT guarantee 

(sum of equity, debt, 
grants) 
543 
633 
815 
562 
7 846 
1 698 
12 097 
Source: LGTT Operating report to the Commission prepared by the EIB as at 31-12-2014 

Jan 2009 
Mar 2009 
Jul 2010 
May 2011 
Jun 2011 
Dec 2011 

Baxio Alentejo PPP 
A5 
Eix Transversal C25 
A8 
LGV SEA 
London Gateway 
 TOTAL 

25 
25 
70 
60 
200 
117 
497 

road 
road 
road 
road 
rail 
port 

Overall,  the  instrument  is  expected to  provide  at  least  the  EUR  497  million  of  guarantee  to 
projects as at 31-12-2014. In addition, one further project could potentially receive the LGTT 
guarantee assuming it reaches financial close by December 2016. 

Amount of EU Contribution committed to 
financial intermediaries, 
and the corresponding number of financial 
intermediaries;  

Total amount of the risk-sharing, including 
the EU Contribution, committed to financial 
intermediaries, 
and the corresponding number of financial 
intermediaries; 

Amount of financing expected to be 
provided by the instrument (including EU 
contribution committed) to eligible final 
recipients, 
and corresponding number of eligible final 
recipients; 

the  LGTT 

As  at  31-12-2014  the  EU  committed  EUR  250  million 
instrument  (annual  budgetary 
towards 
procedure)  and  committed  EUR  7  million  from 
generated revenues, i.e. a total of EUR 257 million. 
There is a single financial intermediary – the EIB. 

As at 31-12-2014 the EU has paid in EUR 212 million 
to  the  EIB  for  the  purpose  of  the  portfolio  first-loss 
piece  risk-sharing  arrangement  supporting  the  LGTT 
portfolio. 
There is a single financial intermediary – the EIB. 

As  at  31-12-2014,  the  outstanding  guarantee  provided 
to the current portfolio of six projects (final recipients) 
is for a total of EUR  497 million157. 
One further project could potentially receive the LGTT 
guarantee  assuming  it  reaches  financial  close  by 
December  2016.  Overall  the  instrument  is  expected  to 
provide  at  least  the  EUR  497  million  of  guarantee  to 
projects as at 31-12-2014. 

157 As at 31-12-2014, the LGTT instrument provided an aggregate guarantee of EUR 517 million to seven signed 
projects (final recipients) (one of the signed projects was cancelled and is no longer covered by LGTT and is no 
longer part of the guarantee portfolio).  

118 

 
 
 
 
 
 
 
 
 
 
                                                 
Amount of investments expected to be 
made by eligible final recipients due to the 
financing, if applicable 

Amount of financing already provided by 
the instrument to eligible final recipients, 
and the corresponding number of recipients; 

The amount of investments expected to be made by the 
six projects (final recipients) under the current portfolio 
guarantee  is  EUR  12  097  million  (equity,  debt  and 
grants).158  This  amount  would  increase  if  one  further 
potential  project is covered by the LGTT guarantee  by 
reaching financial close before December 2016. 

As  at  31-12-2014,  the  outstanding  guarantee  provided 
to the current portfolio of six projects (final recipients) 
is for a total of EUR 497million.159 

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if 
applicable. 

The amount of investments expected to be made by the 
six projects (final recipients) under the current portfolio 
guarantee  is  EUR  12  097  million    (equity,  debt  and 
grants).160 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

In 2013 the net interest income (net revenues less costs) covering the years 2008-2012 stood 
at  EUR  6,88  million.  The  amount  was  returned  to  the  Commission  and  recommitted  and 
paid  back  into  the  instrument  and  included  in  the  First  Loss  Piece,  in  line  with  the  legal 
basis. 

(g)  The balance of the fiduciary account;  

                                                                                                      In EUR 

Balance on the fiduciary account (current account) – 
cash and cash equivalents 

28 437 208 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current (AFS current) 

Bonds non-current (AFS non-current) 

Other  assets (if applicable) (LT receivables) 

= Total assets 

67 398 609 

118 557 438 

20 605 845 

234 999 100 

158 The figure reflects the amount of finance mobilized based on signed commitments relative to the six projects in 
the portfolio (for the projects under construction, not all of the finance mobilized was invested as of 31-12-2014) 
159 As at 31-12-2014, the LGTT instrument provided an aggregate guarantee of EUR 517 million to seven signed 
projects (final recipients). (one of the signed projects was cancelled and is no longer covered by LGTT and is no 
longer part of the guarantee portfolio) 
160 The figure reflects the amount of finance mobilized based on signed commitments relative to the six projects in 
the portfolio (for the projects under construction, not all of the finance mobilized was invested as of 31-12-2014) 

119 

 
 
 
 
 
 
 
 
                                                 
(h)  Revenues and repayments (Art.140. 6);   

In cumulative terms from the launch of the instrument until 31-12-2014 the total revenues 
amount  to  EUR  35,4  million.  The  revenues  fall  under  two  categories:  first  loss  piece 
remuneration and financial revenues. 

(i)  The value of equity investments, with respect to previous years;  

Not applicable 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments;  

No impairments registered at 31.12.2014 

(k)  The target leverage effect, and the achieved leverage effect;  

The specific basic act, as amended, does not define the target leverage effect. 
The achieved leverage effect. 
The current LGTT portfolio is composed of 6 TEN-T projects, representing a total amount of  
finance (investment)  attracted of EUR 12,1 billion (debt, equity and grants). The EU budget 
contribution paid into the instrument is EUR 212 million as at 31-12-2014 (EUR 205 million 
of  payments  from  annual  budgetary  procedure  plus  EUR  7  million  of  recommitted  net 
revenues). This leads to a leverage of 57,1. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

In 2014, the Commission conducted an ex-post evaluation of the LGTT instrument.161 The 
overarching conclusion of that evaluation is that the LGTT has had a positive impact where 
it  has  been  applied,  but  not  sufficient  effect  to  achieve  its  broader  objectives.  A  key 
circumstance  has  been  that  LGTT  instrument  was  designed  in  2008,  prior  to  the  global 
financial  and  public  debt  crisis.  In  the  period  of  application  of  the  LGTT,  both  public 
authorities  (project  promoters)  and  private  investors  postponed  or  abandoned  investment 
decisions  and  fewer  (especially  PPP)  projects  were  developed.  Since  then,  revenue  based 
projects  have  become  less  common  due  to  the  reluctance  of  the  private  sector  to  take  on 
traffic demand risk, making the market for the LGTT even smaller. 

E - Other key points and issues 

The critical issues for the implementation of the LGTT instrument, including aspects relevant 
for  future  design  and  development  of  new  instruments  have  been  examined  in  the  ex-post 
Evaluation carried out by the Commission in 2014.162  

161 http://ec.europa.eu/transport/themes/infrastructure/studies/doc/2014_ex-
post_evaluation_of_the_loan_guarantee_instrument_for_ten-t_projects.pdf 
162 http://ec.europa.eu/transport/themes/infrastructure/studies/doc/2014_ex-
post_evaluation_of_the_loan_guarantee_instrument_for_ten-t_projects.pdf 

120 

 
                                                 
 
The ex-post evaluation and pointed out the following issues: 

 the LGTT instrument had a fairly narrow scope of application limited to projects on the 
TEN-T  network  whose  revenues  were  generated  from  the  traffic  (this  excluded  all 
availability-payment based PPPs). 

 The  instrument  was  not  flexible  enough  to  be  successfully  adapted  to  a  drastically 
changed  market  environment  (near-disappearance  of  revenue-risk  PPPs  in  TEN-T 
transport). 

 A  pilot  phase  for  LGTT  could  have  helped  to  trial  the  product  before  rolling-out  the 

mature product at a later stage. 

 More  proactive  dissemination  and  awareness  raising  on  the  applicability  of  LGTT 
amongst the procuring authorities and project promoters was needed, as well as on more 
transparent presentation of the pricing by the EIB. 

 Overall,  before  adapting  the  LGTT  further  or  designing  new  financial  instruments  in 
this  area,  the  obstacles  to  realizing  transport  infrastructure  projects  as  a  result  of 
affordability problems should be further investigated and better understood. The initial 
focus should be to stimulate the pipeline of projects. 

These  lessons  learned  were  reflected  in  the  design  of  the  Connecting  Europe  Facility  Debt 
Instrument (CEF DI): the instrument was devised in a flexible way so as to allow for changes 
in market gaps and needs. Also, the instrument will not focus on a single type of transactions 
linked to a unique risk category (i.e. focus on only revenue-risk PPPs). 

The Pilot Phase of the Project Bond Initiative that started in 2012 is the trial for the full roll-
out of the Project Bond Credit Enhancement product under the CEF DI. 

Technical Assistance focused on transport projects financed with private sector participation 
will be delivered both under the CEF DI, as well as under the Investment Plan (the European 
Investment Advisory Hub – EIAH). 

As of 1 January 2015, the LGTT Portfolio shall be merged with the new Financial Instrument 
under  the  Connecting  Europe  Facility,  as  foreseen  in  article  14.3  of  Regulation  (EU) 
1316/2013. 

The book value of the LGTT, as presented in the LGTT audited Financial Statements as of 31 
December 2014 (prepared under the LGTT Agreement) shall be the starting book value of the 
CEF assets, liabilities and contributors resources as at 1 January 2015.  

Assets,  liabilities  and  contributors'  resources  allocated  to  the  LGTT  Fiduciary  Account 
established under the LGTT Agreement as shown in the LGTT audited Financial Statements 
as of 31 December 2014 shall be transferred to the account corresponding to CEF projects in 
the sector of transport. 

121 

 
3.4. Project Bond Initiative 

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

DG Mobility and Transport, DG Energy, 
DG Communications Networks, Content 
and Technology 

DG Mobility and Transport, DG Energy, 
DG Communications Networks, Content 
and Technology 

Operating Body in charge: 

European Investment Bank 

Initial Overall Budget Envelope: 

Current Overall Budget: 

TEN-T sub-account 
TEN-E sub-account 
ICT sub-account 

EUR 230 million 

EUR 230 million 

EUR 200 million 
EUR 10 million 
EUR 20 million 

The Project Bond Initiative is a financial instrument developed, set up, and supported jointly 
by the Commission and the EIB. It was launched in 2012 with the aim of stimulating capital 
market  financing  for  infrastructure  projects  in  the  areas  of  Trans-European  networks  in 
transport  and  energy  as  well  as  broadband  networks.  The  Project  Bond  Initiative  provides 
credit enhancement to bond issues which is attractive inter alia to institutional investors such 
as insurance companies and pension funds. 
As  at  31-12-2014  the  Project  Bond  Initiative  supported  five  transactions  in  all  three  sectors 
and five Member States. These five projects represent a capital cost of EUR 3,9 billion a total 
bond issuance of EUR 3,0 billion supported by credit enhancement of EUR 493 million. Four 
projects  were  supported  by  the  EU  budget  representing  a  capital  cost  of  EUR  2,1  billion, 
bonds of EUR 1,5 billion and credit enhancement of EUR 293 million. 
 The  PBI  has  served  as  a  catalyst  to  attract  debt  capital  market  investment  to  targeted 
infrastructure  projects  and  opening  up  new  financing  sources  for  infrastructure  projects  as 
alternatives to bank financing.  
The  Project  Bond  Initiative  will  be  continued  under  the  Connecting  Europe  Facility,  with 
some  adjustments  necessary  for  the  implementation  of  the  instrument,  in  particular  for  the 
maximization  of  the  portfolio  effect  among  the  three  sectors.  The  possibility  of  extending 
project  bond  solutions  to  the  financing  of  other  infrastructure  sectors,  including  sustainable 
transport, renewable generation and smart grid assets, as well as possible contributions under 
ESIF, will be examined by the Commission in 2015. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation (EU) No 670/2012 of the European Parliament and of the Council of 11 July 2012 
amending  Decision  No  1639/2006/EC,  establishing  a  Competitiveness  and  Innovation 
Framework  Programme  (2007-2013)163,  and  Regulation  (EC)  No  680/2007  laying  down 

163 (OJ L 204/1, 31.7.2012) 

122 

 
                                                 
general  rules  for the  granting of Community financial  aid in the field of the trans-European 
transport and energy networks164 
Regulation (EU) No 1316/2013 of the European Parliament and the Council of 11 December 
2013 establishing the Connecting Europe Facility165 

(b)   Description of the financial instrument, implementation arrangements and the 
added value of the Union contribution;  

Policy objectives and scope: Pilot phase of the Project Bonds Initiative 
The Project Bond Initiative is a financial instrument developed, set up, and supported jointly 
by the Commission and the EIB. 
It aims at stimulating capital market financing for infrastructure projects in the areas of Trans-
European networks in transport and energy as well as broadband networks by improving the 
credit quality of the senior debt such that it can be financed by a bond issue which is attractive 
inter alia to institutional investors such as insurance companies and pension funds. 
In addition to financing provided for the benefit of individual projects, the objective is to pave 
the  way  for  the  creation  of  a  new  asset  class  for  EU  infrastructure,  in  which  institutional 
investors could invest. This way, the Project Bond Initiative intends to open up new sources 
for  infrastructure  financing  in  the  context  of  constrained  public  budgets  and  restricted  bank 
lending to infrastructure projects with long-term maturities. 

Implementation arrangements 
The instrument can finance projects or part of projects eligible under the guidelines for TEN-
T,  TEN-E,  and  the  criteria  for  broadband  projects  defined  in  the  amended  Competitiveness 
and Innovation Framework Programme. Projects are usually structured as a Special Purpose 
Vehicle  (SPV)  established  to  build,  finance,  and  operate  an  infrastructure  project.  The  PBI 
facility provides a subordinated debt tranche to the financial structure of the project company. 
This  facility  may  take  the  form  of  a  contingent  credit  line  ("unfunded  facility")  or  a 
subordinated loan ("funded facility") and is capped at a maximum of 20% of the total amount 
of senior debt. In case the unfunded facility is called upon, the EIB becomes a creditor to the 
project company and  amounts due under the PBI would rank junior to the service of senior 
debt  and senior to equity. The maximum available amount for credit enhancement under PBI 
is 20% of the nominal of the senior debt.  
The risk-sharing mechanism between the Commission and EIB operates on the basis of a First 
Loss Piece principle: the risk for the Union budget and the EIB is divided into two tranches, a 
Portfolio First Loss Piece (PFLP), which is called upon first in the event of impairments on 
PBI  operations,  and  a  Residual  Risk  Tranche  (RRT),  which  is  only  used  if  PFLP  has  been 
exhausted.  
The EU and EIB contribute 95% and 5% to PFLP, respectively. The residual risk tranche is 
covered entirely by the EIB. 
Individual PBI Operations can be approved by the EIB Board of Directors no later than end of 
2014 and their financial close must take place no later than end of 2016. The instrument will 
wind up when there is no more contingent exposure under any PBI operations (or where such 
exposure has been declared by the EIB as unrecoverable). 

164 (OJ L 162/1, 22.5.2007) 
165 (OJ L 348, 20.12.2013) 

123 

 
                                                 
The pilot phase has a total financial envelope of EUR 230 million: EUR 200 million from the 
TEN-T budget line, EUR 10 million from the TEN-E budget line and EUR 20 million from 
the CIP ICT line. 
The financial instrument is carried out in indirect management mode. The entrusted entity is 
the  EIB.  The  governance  structure  is  established  in  the  cooperation  agreement  and  includes 
the establishment of a Steering Committee to supervise the implementation of the instrument. 
Three  trust  accounts  have  been  set  up  to  hold  the  Union  contribution  under  the  three 
respective budget lines (TEN-T, ICT and TEN-E). 
Debt instrument under CEF, including successor to the pilot phase of the PBI 
In  2015,  the  PBI  will  be  merged  with  the  debt  instrument  under  the  CEF,  as  foreseen  in 
Article 14(3) of Regulation (EU) No 1316/2013 of the European Parliament and the Council 
of 11 December 2013 establishing the Connecting Europe Facility. 

Added value 
This new merged portfolio will be supported by a portfolio first loss piece of which the EU 
will hold 95% of the risk. This merged portfolio and portfolio first loss piece will allow for an 
improved  risk  diversification  allowing  for  a  better  use  of  the  EU  funds  committed  to  the 
merged  instrument.  This  will  in  return  increase  the  leverage  and  allow  for  a  more  wide 
deployment of the instrument. 

(c)   The financial institutions involved in implementation; 

European Investment Bank (EIB) 

C - Implementation of the financial instrument 

(d)  The aggregate budgetary commitments and payments from the budget; 

In million EUR 

TEN-T sub-account 
Commitment  
Payments  

TEN-E sub-account 
Commitment  
Payments 
ICT sub-account 
Commitment 
Payments 
Aggregate PBI 

Commitment  
Payments  

2012 

2013 

2014 

Total  (2014) 

100 
50 

- 
- 

- 
- 
2012 
100 
50 

100 
- 

10 
10 

20 
7 
2013 
130 
17 

- 
66 

- 
- 

- 
13 
2014 
- 
79 

200 
116* 

10 
10 

20 
20 
Total (2014) 
230 
146* 

*Note: a payment of EUR 84 million was made in early 2015 in connection with the A7 PBI transaction 
signed in the transport sector in 2014 (the payment was normally due to be made in 2014). 

(e)  The performance of the financial instrument, including investments realised;  

The EIB has been working on transactions in the three sectors. Five projects have been signed 
in  5  Member  States  as  of  31.12.2014,  out  of  which  one  (Castor  project)  has  been  entirely 
signed on the EIB own resources: 

124 

 
 
 
 
 
 
 
 
  Two energy projects, i.e.: 

i)  the  Castor  project  for  the  construction  and  the  operation  of  an  underground  gas 
storage in Spain, which was credit enhanced only by the EIB in July 2013 without 
Union contribution166.  

ii) The  Greater  Gabbard  offshore  transmission  project  (OFTO)  was  signed  in 
November 2013. The size of the project bond-credit enhancement (PBCE) for this 
transaction  is  EUR  54,9  million  for  a  project  size  of  EUR  421  million  (including 
debt and equity). The Union contribution under TEN-E is EUR 10 million. 

  Two transports projects signed in 2014:  

o  the  construction  of  A11  Motorway  in  Belgium.  Total  project  cost  of  EUR  657,5 
million was financed by a EUR 577,9 million project bond and EUR 79,6 million of 
equity;  the total PBCE provided amounts to EUR 115 580 000; 

o  the  construction  of  the  A7  Motorway  in  Germany.  The  total  project  cost  of  EUR 
772,6 million was partly financed by a EUR 429,1 million Project Bond; the total 
amount of PBCE amounts to EUR 85 827 400; 

o  the EU contribution of EUR 200 million to transport projects covers the above two 
projects and will also cover additional projects to be concluded at the latest by the 
end of 2016; 

o  one  broadband  project  signed  in  2014,  Axione  Infrastructures,  where  credit 
enhancement  of  ca.  EUR  38  million  under  the  PBI  supported  a  EUR  189  million 
bond  issue  by  a  French  provider  of  wholesale  ,broadband  network  services.  The 
total  project  cost  is  circa  EUR  257  million.  The  amount  of  Union  contribution  to 
this project is EUR 20 million. 

the 

investors 

institutional 

The Project Bond Initiative was subject to an interim independent evaluation commissioned 
by the Commission and finalised in June 2014167. The evaluation has outlined that, despite the 
small  number  of  projects  signed  to  end  2013,  the  initiative  had  a  positive  impact  on 
infrastructure  financing,  raising 
in  European 
interest  of 
infrastructure investment. Initial investor feedback suggests that the project bond solution is a 
valuable  complement  to  bank  lending  solutions  and  may  help  to  narrow  the  infrastructure-
financing gap. 
The Project Bond facility is particularly suitable for projects that struggle to reach investment 
grade  because  of  sovereign  ratings  constraints  or  specific  project  features  (innovative 
construction technique or high demand risk for instance). The evaluation underlined the need 
to  maintain  the  interest  of  investors  by  building  a  pipeline  of  mature  projects  over  the  long 
term. 
The  pilot  phase  of  the  initiative  has  demonstrated  early  success  when  measured  against  the 
objectives  set  initially  and  an  expectation  of  5-10  transactions  to  be  closed.  The  EIB  has 
identified a strong pipeline of projects for 2015 and beyond. The project pipeline includes in 
particular motorways eligible under the TEN-transport Regulation and a total EIB financing 
of  EUR  270  million  is  estimated  to  be  provided  in  support  of  a  total  bond  issue  of  approx. 

166 As a result of seismic activity in the area the Spanish Authorities decided to halt the project and relinquish the 
concession. 
167 Dhondt, Tristan, Anton Krawchenko, and Franz Traxler(2014), "Ad-hoc audit of the pilot phase of the Europe 
2020 Project Bond Initiative".Reliance (2014). 

125 

 
                                                 
 
EUR  1,1  billion  for  the  financing  of  these  projects.    The  next  signature  is  expected  to  take 
place in H1 2015. 

Amount  of  financing  expected  to  be 
provided by the instrument (including EU 
contribution  committed)  to  eligible  final 
recipients, 
and  corresponding  number  of  eligible 
final recipients; 

Amount  of  investments  expected  to  be 
made  by  eligible  final  recipients  due  to 
the financing, if applicable 

Amount of financing already provided by 
the instrument to eligible final recipients, 
the  corresponding  number  of 
and 
recipients;  

Amount  of  investments  already  made  by 
the 
eligible 
the 
financing 
instrument, if applicable. 

recipients  due 

provided 

through 

final 

to 

Overall,  the  pilot  phase  is  expected  to  cover  up  to  10 
transactions  (eligible  final  recipients)  with  circa  EUR 
840  million  of  credit  enhancement  provided  by  the 
EIB (up to c.EUR 570 million backed by EU funds and 
up to c.EUR 270 million on own EIB risk). 
From  these  10  transactions,  up  to  7  will  be  covered 
using the EUR 230 million contribution to the First Loss 
Piece, while the rest will be covered fully by the EIB.  

The  10  transactions  (eligible  final  recipients)  are 
expected to mobilize circa EUR 6,6 billion of debt and 
equity  (of  which  circa  EUR  4,3  billion  by  the  up  to  7 
projects backed by the EU budget). 

As of 31-12-2014, the Pilot Phase of the Project Bond 
Initiative has provided a credit enhancement of EUR 
493 million to five projects: EUR 293 million of credit 
enhancement  to  the  four  projects  supported  by  the  EU 
budget  and  EUR  200  million  to  the  single  project 
carried out by the EIB on its own risk. 

As  of  31-12-2014  the  Pilot  Phase  has  mobilised  circa 
EUR  3,9  billion  of  capital  cost  for  the  five  projects 
supported.  The  four  projects  with  EU  budget  support 
mobilised EUR 2,1 billion of capital cost. 

(f)   An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

Pilot phase of the Project Bonds Initiative 
As of 31-12-2014 no revenues were recovered to the EU budget, committed and reused by the 
instrument. 
However, in 2014, financial revenues earned on PBI sub-accounts amounted to EUR 323 000, 
as per the PBI audited financial statements at 31 December 2014. Such amount is used by EIB 
to cover various fees related to PBI.  

(g)  The balance of the fiduciary account;   

The  balance  on  the  fiduciary  accounts  amount  overall  to  EUR  453  000  as  per  the  audited 
financial  statements  of  the  Project  Bond  Initiative  at  31.12.2014.  However,  this  figure  does 
not include a late payment of EUR 192 745.93 which was made on 31 December 2014 under 
the PBI TEN-T account in connection with a PBI TEN-T project closed in 2014, and which 
the  EIB  recorded  on  2  January  2015.  Consequently,  the  balance  on  the  fiduciary  accounts 
amounts to a total of EUR 646 thousand. The total assets (adjusted to account for the above 
mentioned payment made in December) are broken down as follows: 

126 

 
 
 
 
For Risk-sharing and Guarantee Instruments                      in thousand EUR('000) 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current (AFS current) 

Bonds non-current (AFS non-current) 

Other assets (if applicable) (other receivables) 

= Total assets 

(h)  Revenues and repayments (Art.140. 6);   

646 

14 505 

15 882 

109 767 

8 514 

149 314 

Pilot phase of the Project Bonds Initiative 
Article 1.8 of the Cooperation Agreement with the EIB states that the risk related revenues for 
each  Portfolio  will  be  shared  between  the  Commission  and  the  EIB  at  the  end  of  the 
investment period. 

  Revenues 

Total operating revenues as of 31.12.2014:  EUR 6 715 000 
Total financial operations revenues:  EUR 323 000168 

  Repayments 

No repayments took place so far. 

(i)  The value of equity investments, with respect to previous years;  

Not applicable 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments;  

No impairments registered at 31.12.2014 

(k)   The target leverage effect, and the achieved leverage effect;  

For 2007-2013 instruments: Pilot phase of the PBI 
As at the end of 2014, the PBI has supported financing for five projects for a total amount of 
EUR 3,9 billion project capital costs (out of which EUR 2,1 billion capital costs of projects 
which received Union budget support).  A total PBCE of EUR 494 million (out of which EUR 
293 million provided with Union support) was provided to support the issue of EUR 3 billion 
senior bonds by these five projects (out of which EUR 1,5 billion bonds supported by PBCE 
provided  with  Union  budget  support).  The  EU  contribution  to  the  instrument  is  EUR  230 
million. Hence, the overall leverage effect of the Union contribution to the financing of EUR 

168 The PBI audited Financial Statements as at December 2014 show Financial Revenues amounting to EUR 323 
thousand. However, following the sale of the EIB Unitary Fund, in 2014 the Commission recorded realised gains 
amounting  to  EUR  6  119.13,  i.e.  an  amount  which  the  EIB  had  classified  as  Net  Gain  on  EIB  Unitary  Fund 
Investments in 2013. Consequently, total Financial Revenues as recorded by the Commission in 2014 amount to 
EUR 329 thousand, i.e. the cumulative figure of EUR 323 thousand and EUR 6.1 thousand. 

127 

 
 
 
 
                                                 
2,1 billion of project capital cost of PBI projects across the three sectors is approximately 9 
(2,1 billion of capital cost / 0,23 billion of EU contribution). 

D - Strategic importance/relevance of the financial instrument 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification;  

Pilot phase of the Project Bonds Initiative 
The objective of the pilot phase of the PBI was two-fold: to mobilize investment in priority 
projects  with  a  EU  added  value  in  the  transport,  ICT  and  energy  sectors,  and  to  increase 
private sector involvement in the capital market financing of projects in the afore-mentioned 
sectors. 
The pilot phase of the PBI aimed at creating state-of-the-art interconnected networks across 
Europe. Such investments in infrastructure are also instrumental in enabling the EU to meet 
its sustainable growth objectives outlined in the Europe 2020 Strategy and the EU's "20-20-
20" objectives in the area of energy policy and climate action. 
The  aim  of  the  pilot  phase  is  to  test  the  instrument  to  prepare  its  full  rollout  under  the 
Connecting  Europe  Facility  and  to  increase  debt  capital  market  financing  of  eligible 
infrastructure projects. The following indicators have to be applied as per the legal base: 

o The  number  of  TEN-T,  TEN-E  and  broadband  projects  having  received  EIB  financing 
under  the  initiative:  5  projects  have  benefited  of  the  instrument  at  the  end  of  2014,  2 
energy projects (of which 1 project without Union budget support), 2 transport projects and 
1 telecom project. 

o The achieved multiplier effect, cumulative and per sector:  

As at end 2014, the cumulative multiplier effect of the Union contribution to the financing of 
PBI projects across the three sectors (measured as total capital cost of PBI projects per total 
EU  contribution  to  the  instrument)  is  approximately  9.  A  more  robust  indication  of  the 
achieved leverage can only be reported after the conclusion of other operations, in particular 
after the PBCE projects approved by the EIB Board of Directors at end 2014 reach financial 
close. 
The  five  PBI  operations  concluded  until  end  2014  show  that  the  instrument  is  raising  the 
interest  of  institutional  investors  in  infrastructure  projects  and  is  seen  as  a  valuable 
complement  to  bank  lending  solutions.  The  Commission's  Interim  Report  as  at  December 
2013169  and  the  external  evaluation  of  the  PBI  concluded  in  June  2014  confirmed  that  the 
Initiative is viewed positively by a majority of stakeholders. In particular, stakeholders hinted 
at the increasing importance of bonds as opposed to bank financing for infrastructure projects, 
which is also supported by the significant increase in bond-financed infrastructure deals that 
occurred in 2013 and 2014. According to stakeholders, the instrument is well-structured, suits 
the market needs and has been well-executed in transactions. Furthermore, EIB participation 
brings additional credibility and reassurance to investors. The Union contribution is important 
to  cover  the  EIB’s  risk  from  engaging  in  riskier-than-normal  transactions  and  stakeholders 
view the instrument as an excellent use of EU funds. 
As demonstrated by the five bond issuances supported by Project Bond Credit Enhancement 
(PBCE)  to  end  2014,  the  instrument  has  been  successful  in  both  bringing  debt  investors  to 
perceived risky projects and expanding the pool of capital to more solid projects. Overall, as 

169 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1431074029283&uri=CELEX:52013DC0929 

128 

 
                                                 
at  31-12-2014  the  EU  budget  supported  four  transactions  worth  EUR  2,1  billion  of  capital 
cost.  These  transactions  issued  EUR  1,5  billion  of  project  bonds  supported  by  EUR  293 
million  of  credit  enhancement  provided  by  the  EIB  with  EU  budgetary  support.  For  these 
transactions  the  obtained  pricing  and  the  other  terms  of  the  debt  financing  compared 
favourably with the alternative financing options.  

Debt instrument under CEF, including successor to the pilot phase of the PBI 
The  Regulation  (EU)  No  1316/2013  of  the  European  Parliament  and  the  Council  of  11 
December  2013  provides  a  detailed  description  of  the  debt  instrument  under  the  CEF  in 
Annex  1,  Part  III.  The  overall  objective  of  the  financial  instruments  under  the  CEF  is  to 
facilitate  infrastructure  projects'  access  to  project  and  corporate  financing  by  using  Union 
funding as leverage. 
The  financial  instruments  shall  help  finance  projects  of  common  interest  with  a  clear 
European  added  value,  and  facilitate  greater  private  sector  involvement  in  the  long-term 
financing of such projects in the transport, telecommunications and energy sectors, including 
broadband.  In  particular,  the  CEF  Regulation  envisages  a  debt  instrument  involving  loans, 
guarantees  and  credit  enhancement  mechanisms  to  project  bonds,  underpinned  by  a  risk 
sharing mechanism with the relevant entrusted entity. 
In 2014, the Commission carried out the ex-ante assessment required by the CEF Regulation 
for  setting  up  the  CEF  financial  instruments.  The  conclusions  of  the  ex-ante  assessment 
recommended the merger of the PBI with the new CEF Debt Instrument.  
The modalities of implementation of the CEF Debt instrument and the practical arrangements 
for merger of the PBI with the new instrument are detailed in the delegation agreement to be 
signed with the EIB. 
The  Project  Bond  Initiative  has  been  subject  to  an  interim  independent  evaluation 
commissioned  by  the  European  Commission.  The  evaluation  has  outlined  that,  despite  the 
small number of projects signed to the evaluation date (i.e. December 2013), the instrument 
had a positive impact on infrastructure financing, raising the interest of institutional investors 
in  European  infrastructure  investment.  The  five  projects  supported  covered  these  three 
eligible  sectors  and  were  carried  out  in  five  different  countries.  Initial  investor  feedback 
suggests  that  the  project  bond  solution  is  a  valuable  complement  to  bank  lending  solutions 
and may help to narrow the infrastructure financing gap.  
As  indicated  by  various  stakeholders,  the  Project  Bond  credit  enhancement  is  particularly 
suitable  for  projects  that  struggle  to  reach  investment  grade  because  of  sovereign  ratings 
constraints or specific project features (innovative construction technique or high demand risk 
for  instance).  The  evaluation  underlined  the  need  to  maintain  the  interest  of  investors  by 
building a pipeline of mature projects over the long term. 
The  EIB  and  the  European  Commission  have  made  considerable  efforts  to  promote  the 
initiative  and  to  outreach  towards  wider  public  via  various  bilateral  meetings  with  the 
Member  States,  international  events,  conferences  and  workshops.  However,  as  the  market 
showed  clear  signs  of  evolution  towards  more  competitive  processes  and  pricing  since  the 
launch of the Pilot Phase, it became evident that the instrument design needs to be refined. To 
increase  the  uptake  of  the  initiative  and  building  on  the  recommendation  highlighted  in  the 
external evaluation report, a step change would be necessary to expand the application of PBI 
to new countries and sectors and to increase its focus on greenfield and brownfield operations 
away from refinancing.  In areas where procurement by the public sector plays a crucial role, 
further awareness raising and practical guidance to the public sector will be a necessary step 
in the success of the Project Bonds. 

129 

 
The  full  stage  of  the  initiative,  which  will  be  deployed  under  the  CEF  and  EFSI,  will  take 
account of these market evolutions and deploy a product with improved design characteristics 
in order to maximize its scope and applicability. 

E - Key points and issues 

Implementation of the pilot phase of the Project Bond Initiative started at the end of 2012. It 
should  come  to  an  end  in  2015,  with  the  merger  of  the  existing  transactions  under  the  new 
CEF Debt Instrument established by Regulation (EU) No 1316/2013. The PBI pilot phase had 
several  constraints  limiting  its  potential,  notably  the  limited  budget  available,  the  clear 
separation  between  the  portfolios  of  the  three  sectors  and  the  limitation  of  the  size  of  the 
subordinated tranche. 
Despite  these  constraints,  the  PBCE  was  used  in  five  projects  in  this limited  time-frame,  in 
line with the targeted number of projects to be supported by the instrument. In addition, the 
PBI has served as a catalyst to attract debt capital market investment to targeted infrastructure 
projects and open up new financing sources for infrastructure projects as alternatives to bank 
financing.  Overall,  as  at  31-12-2014  the  EU  budget  supported  four  transactions  worth  EUR 
2,1 billion of capital cost. 
The  Project  Bond  Initiative  will  be  continued  under  the  Connecting  Europe  Facility,  with 
some  adjustments  necessary  for  the  implementation  of  the  instrument,  in  particular  for  the 
maximization of the portfolio effect among the three sectors. The deployment of project bond 
solutions  to  less  mature  markets  (i.e.  southern  Europe,  new  Member  States  of  Central  and 
Eastern Europe) or sectors (innovative transport solutions, energy interconnectors developed 
on  a  project  finance  basis,  etc.)  will  be  examined  by  the  Commission  in  2015.  Practical 
arrangements  for  possible  contributions  under  the  new  European  Fund  for  Strategic 
Investments (EFSI, expected to come into operation in 2015) will also be examined. 

3.5. Risk sharing debt instrument under the Connecting Europe Facility (CEF DI) 

A - Summary 

Policy DG in charge:   

DG Mobility and Transport 
DG Energy 
DG CNECT 

Implementing DG in charge:   

DGs ECFIN, MOVE, ENER and CNECT  

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

European Investment Bank 
Other possible entrusted entities 

Up  to  10%  of  the  funds  from  the  CEF 
Regulation (EU) 1316/2013  

N.A.:  the  legal  agreement  between  the 
Commission  and  the  EIB  is  expected  to  be 
signed in the first half of 2015 

The Debt Financial instrument under the CEF will tackle one of the key failures identified in 
the  market,  i.e.  the  insufficient  involvement  of  private  investors  in  infrastructure  financing 
throughout the Union, particularly on cross-border and riskier projects. The objective of the 
Debt  Instrument  under  the  CEF  is  to  facilitate  infrastructure  projects'  access  to  project  and 
corporate financing by using Union funding as leverage. The financial instrument shall help 

130 

 
finance projects of common interest with a clear European added value, and facilitate greater 
private sector involvement in the long-term financing of such projects in the transport, energy 
and broadband sectors. At the same time, the design of the instruments should also support the 
development  of  a  sustainable  financial  environment  –  both  capital  markets  and  banks  - 
enabling in the longer term an enhanced private financing of infrastructure projects. 
The instrument will build on the existing Project Bond Initiative and the Loan Guarantee for 
TEN-Transport. However, given that not all CEF eligible projects where market failures have 
been identified can be financed by capital markets or on a project financing basis and to face 
efficiently  a  changing  market  environment,  the  intention  is  to  make  use  of  all  the  toolbox 
available  of  debt  instruments  available  under  the  CEF  Regulation,  including  senior  and 
subordinated funded and unfunded instruments. 
All operations under the Debt Instrument will be supported by a risk sharing mechanism with 
the EIB where the EU budget takes the first loss piece of the portfolio of such operations. The 
first  loss  provisioning  provided  by  the  EU  budget  will  be  shared  among  all  projects  in  the 
three  sectors  covered  by  the  CEF.  This  will  allow  for  higher  diversification  and  hence 
maximise the number of projects that can be supported by the CEF Debt Instrument. Also, the 
portfolios  and  first-loss  pieces  of  the  existing  Project  Bond  Initiative  and  of  the  Loan 
Guarantee for TEN-T transport will be merged together with the CEF Debt Instrument. 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EU)  No  1316/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 
913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/210170. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  goal  of  the  CEF  Debt  Instrument  is  to  contribute  to  overcoming  deficiencies  of  the 
European  debt  capital  markets  by  offering  risk-sharing  for  debt  financing.  Debt  financing 
shall be provided by entrusted entities or dedicated investment vehicles in the form of senior 
and subordinated debt or guarantees. 
The  Debt  Instrument  will  consist  of  a  risk-sharing  instrument  for  loans  and  guarantees  as 
well  as  for  Project  Bonds.  The  project  promoters  may,  in  addition,  seek  equity  financing 
under the Equity Instrument (not yet developed).171 

Implementation arrangements 
Risk-sharing instrument for loans and guarantees 
The  risk-sharing  instrument  for  loans  and  guarantees  is  designed  to  create  additional  risk 
capacity  in  the  entrusted  entities.  This  shall  allow  the  entrusted  entities  to  provide  funded 
and unfunded subordinated and senior debt to projects and corporates in order to facilitate 
promoters'  access  to  bank  financing.  If  the  debt  financing  is  subordinated,  it  shall  rank 
behind the senior debt but ahead of equity and related financing related to equity. 

170 (OJ L 348, 20.12.2013) 
171 European Commission (2014b), Ex-Ante Assessment on the Potential Use of Financial Instruments within the 
Connecting Europe Facility, March 2014. 

131 

 
                                                 
 
The unfunded subordinated debt financing will not exceed 30 % of the total amount of the 
senior debt issued. 
The senior debt financing provided under the Debt Instrument will not exceed 50 % of the 
total  amount  of  the  overall  senior  debt  financing  provided  by  the  entrusted  entity  or  the 
dedicated investment vehicle. 

Project Bonds 
The risk-sharing instrument for project bonds is designed as a subordinated debt financing in 
order to facilitate financing for project companies raising senior debt in the form of bonds. 
This  credit  enhancement  instrument  shall  aim  at  helping  the  senior  debt  to  achieve  an 
investment grade credit rating. It shall rank behind the senior debt but ahead of equity and 
financing related to equity. 
The subordinated debt financing will not exceed 30 % of the total amount of the senior debt 
issued. 

Combination with other sources of funding 
Funding  from  the  Debt  Instrument  may  be  combined  with  other  budgetary  contributions 
listed below, subject to the rules laid down in Regulation (EU, Euratom) No 966/2012 and 
the relevant legal base: 

  other parts of the CEF; 
  other instruments, programmes and budget lines in the Union budget; 
  Member  States,  including  regional  and  local  authorities,  that  wish  to  contribute  own 
resources  or  resources  available  from  the  funds  under  the  cohesion  policy  without 
changing the nature of the instrument. 

Duration of the Debt Instrument 
The last tranche of the Union contribution to the Debt Instrument shall be committed by the 
Commission by 31 December 2020. The actual approval of debt financing by the entrusted 
entities or the dedicated investment vehicles shall be finalized by 31 December 2022. 

Expiry 
The Union contribution allocated to the Debt Instrument shall be reimbursed to the relevant 
fiduciary account as debt financing expires or is repaid. The fiduciary account shall maintain 
sufficient funding to cover fees or risks related to the Debt Instrument until its expiry. 

EU added value 
This CEF Debt Instrument merged portfolio will be supported by a portfolio first loss piece 
of  which  the  EU  will  hold  95%  of  the  risk.  This  merged  portfolio  and  portfolio  first  loss 
piece  will  allow  for  an  improved  risk  diversification  allowing  for  a  better  use  of  the  EU 
funds  committed  to  the  merged  instrument.  This  will  in  return  increase  the  leverage  and 
allow for a more wide deployment of the instrument bringing affordable financial support to 
projects targeted under CEF. 

(c)  The financial institutions involved in implementation; 

The European Investment Bank (EIB) 
Other Entrusted entities (not yet designated at this stage; entities to be selected in accordance 
with Regulation (EU, Euratom) No 966/2012  

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

 Not  applicable:  the  legal  agreement  between  the  EC  and  the  EIB  is  expected  to  be 
concluded in the first half of 2015 

132 

 
(e)   An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(f)  The balance of the fiduciary account; 

NA 

(g)  Revenues and repayments; 

NA 

(h)  The value of equity investments, with respect to previous years; 

NA 

(i)  The  accumulated  figures  on  impairments172  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

NA 

(j)  The target leverage effect, and the achieved leverage effect; 

The  target  (expected)  leverage  of the  Debt Instrument  —  defined  as  the  total  funding  (i.e. 
Union  contribution  plus  contributions  from  other  financial  sources)  divided  by  the  Union 
contribution  —  is  expected  to  range  from  6  to  15,  depending  on  the  type  of  operations 
involved (level of risk, target beneficiaries, and the debt financing concerned). Assuming the 
full possible budgetary allocation of EUR 3 billion is made available to the instrument, total 
funding  of  EUR  18  billion  to  EUR  45  billion  could  be  attracted  thanks  to  the  Union 
contribution. 

D -  Strategic importance/relevance 

(k)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  financial  instruments  to  be  deployed  under  the  CEF  (Debt  Instrument  and  possibly 
Equity  Instrument)  will  tackle  one  of  the  key  failures  identified  in  the  market,  i.e.  the 
insufficient  involvement  of  private  investors  in  infrastructure  financing  throughout  the 
Union,  particularly  on  cross-border  and  riskier  projects.  The  objective  of  the  financial 
instruments  under  the  CEF  is  to  facilitate  infrastructure  projects'  access  to  project  and 
corporate  financing  by  using  Union  funding  as  leverage.  The  CEF  financial  instruments 
shall  support  the  financing  of  projects  of  common  interest  with  a  clear  European  added 
value,  and  facilitate  greater  private  sector  involvement  in  the  long-term  financing  of  such 
projects  in  the  transport,  energy  and  broadband  sectors.  At  the  same  time,  CEF  financial 
instruments shall be designed such as to enhance the development of a sustainable financial 
environment – both capital markets and banks. 

CEF Debt Instrument 2015-2020 
Given the market failures currently identified and the need to start operations in 2015, it is 
proposed  to  initially  set  up  and  launch  the  Debt  Instrument  in  cooperation  with  the  EIB. 

172 Note: 'Impairment of Assets' seeks to ensure that an entity's assets are not carried at more than their recoverable 
amount (IAS36). 

133 

 
                                                 
 
Other entrusted entities may be considered for the implementation of the instrument in the 
future.  The  instrument  will  build  on  the  existing  Project  Bond  Initiative  and  the  Loan 
Guarantee  for  TEN-Transport.  However,  given  that  not  all  CEF  eligible  projects  where 
market  failures  have  been  identified  can  be  financed  by  capital  markets  or  on  a  project 
financing  basis  and  to  face  efficiently  a  changing  market  environment,  the  intention  is  to 
make  use  of  all  the  toolbox  available  of  debt  instruments  available  under  the  CEF 
Regulation, 
instruments. 
including  senior  and  subordinated  funded  and  unfunded 
All  operations  under  the  Debt  Instrument  will  be  supported  by  a  risk  sharing  mechanism 
with  the  EIB  where  the  EU  budget  takes  the  first  loss  piece  of  the  portfolio  of  such 
operations. The first loss provisioning provided by the EU budget will be shared among all 
projects in the three sectors covered by the CEF. This will allow for higher diversification 
and  hence  maximise  the  number  of  projects  that  can  be  supported  by  the  CEF  Debt 
Instrument.  Finally,  the  structuring  of  the  Debt  Instrument  will  cater  for  potential  future 
contributions of European Structural and Investment Funds. 
Following the conclusions of the Interim Report on the Project Bond Initiative concluded in 
2013,  the  CEF  Debt  Instrument  may  merge  with  the  existing  risk-sharing  financial 
instruments (i.e. LGTT/PBI), thus opening up the possibility of having a single multi-sector 
instrument. 

E -  Other key points and issues 

Not applicable as the instrument has not been launched yet 

3.6. Natural Capital Financing Facility (NCFF)   

A - Summary 

Policy DG in charge:   

DG ENV and DG CLIMA 

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

DG ENV 

EIB 
EUR 60 million173 

Current Overall Budget: 

EUR 60 million (2014-2017) 

NCFF  provides  direct  and  indirect  financing  for  natural  capital  investment  projects.  The 
financing  may  consist  in  loans  or  equity.  It  finances  revenue-generating  or  cost-saving 
projects  which  promote  the  conservation,  restoration,  management  and  enhancement  of 
natural capital that contribute to the Union's objectives for biodiversity and climate change 
adaptation,  e.g.  through  ecosystem-based  solutions  to  challenges  related  to  land,  soil, 
forestry, agriculture, water and waste.  
The  NCFF  is  a  risk  sharing  financial  instrument  which  is  implemented  under  indirect 
management  by  the  European  Investment  Bank.  The  delegation  agreement  was  signed  on 
17th and 18th December 2014.  
The target leverage effect as indicated in the Delegation Agreement is 2-4 by 31st December 
2019.  The  EU  budget  allocation  foreseen  (but  not  fixed  yet)  for  the  programming  period 

173 The overall budget envelope of the NCFF is defined in the Commission Implementing Decision C(2014)1709 
of 19 March 2014 on the adoption of the LIFE multiannual work programme for 2014-2017 and it is referred to 
the period 2014-2017.  

134 

 
                                                 
(2014-2017)  amounts  to  EUR  60  million  (including  EUR  10  million  for  the  Technical 
Support Facility). On this basis, the EIB intends to provide finance of € 100-125 million by 
2019. The NCFF will finance up to 75% of total project cost for direct investments. When 
investing in equity funds, the maximum share is 33%.. 

B -  Description 

(a)  Identification of the financial instrument and the basic act;  

Regulation  (EU)  N°  1293/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  on  the  establishment  of  a  Programme  for  the  Environment  and  Climate 
Action (LIFE) Article 17174. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution;  

Policy objectives and scope 
NCFF  provides  direct  and  indirect  financing  for  natural  capital  investment  projects.  The 
financing may consist in loans or equity. It finances upfront investment and operating costs 
for revenue-generating or cost-saving projects which promote the conservation, restoration, 
management and enhancement of natural capital that contribute to the Union's objectives for 
biodiversity  and  climate  change  adaptation,  e.g.  through  ecosystem-based  solutions  to 
challenges related to land, soil, forestry, agriculture, water and waste.  
Projects will fall into four broad categories: 

 Payments  for  Ecosystem  services  (PES):  projects  involving  payments  for  the  flows of 
benefits resulting from natural capital, usually a small scale bilateral transaction with a 
well  identified  buyer  and  seller  of  an  ecosystem  service.  They  are  based  on  the 
beneficiary  pays  principle,  whereby  payments  take  place  to  secure  critical  ecosystem 
services. 

 Green  Infrastructure  (GI):  GI  is  a  strategically  planned  network  of  natural  or  semi-
natural areas with other environmental features designed and managed to deliver a wide 
range of ecosystem services. It incorporates green spaces (or blue if aquatic ecosystems 
are concerned) and other physical features in terrestrial (including coastal) and marine 
areas. On land, GI is present in rural and urban settings. GI projects have the potential to 
generate revenues or save costs based on the provision of goods and services e.g. water 
management,  air  quality,  forestry,  recreation,  flood/erosion/fire  control,  pollination, 
increased resilience to the consequences of climate change. 

 Biodiversity  offsets:  these  are  conservation  actions  intended  to  compensate  for  the 
residual,  unavoidable  harm  to  biodiversity  caused  by  development  projects.  They  are 
based on the polluter pays principle, whereby offsets are undertaken for compliance or 
to mitigate reputational risks. Projects aimed at compensating damages done to Natura 
2000  sites  according  to  Article  6.4.  of  the  Habitats  Directive  are  not  eligible  for 
financing under the NCFF. 

 Innovative pro biodiversity and adaptation investments: these are projects involving the 
supply  of  goods  and  services,  mostly  by  SMEs,  which  aim  to  protect  biodiversity  or 
increase the resilience of communities and other business sectors. 

174 OJ L116/1, 17.04.2014 

135 

 
                                                 
Implementation arrangements 
The  NCFF  is  a  risk  sharing  financial  instrument  which  is  implemented  under  indirect 
management  by  the  European  Investment  Bank.  The  delegation  agreement  was  signed  on 
18th December 2014.  
The  NCFF  is  currently  implemented  in  a  pilot  phase,  which  will  allow  testing  different 
financing options to focus on the most suitable approaches in a potential second phase. The 
EIB has the possibility to invest the available funds up to the end of 2019. The overall EU 
budget contribution foreseen for this period is EUR 60 million including EUR 10 million for 
the Technical Support Facility. 

Added value 
The added value of the NCFF is to address current market gaps and barriers to the private 
financing of projects in the field of biodiversity and climate change adaptation. The aim is to 
establish  a  pipeline  of  replicable,  bankable  investments  that  will  serve  as  a  "proof  of 
concept" and that demonstrate to private investors the attractiveness of such investments for 
the longer term. A further aim is to leverage funding from private investors for this pipeline 
of investments. 
The NCFF will support projects that the EIB normally does not invest in, because they are 
too  small,  the  time  to  ensure  an  investment  return  is  too  long  or  because  of  the  perceived 
high credit risk of biodiversity and climate change adaptation investments. To this end the 
EIB  and  the  Commission  agreed  on  a  risk  sharing  mechanism  whereby  the  EU  funds  will 
absorb  first  losses  in  case  of  project  failure,  thereby  reducing  the  credit  risk  faced  by  the 
EIB.  
When assessing the EU added value of potential projects, the EIB will investigate not only 
the contribution to the nature, biodiversity and climate change adaptation objectives, but also 
the  potential  for  demonstration  effect,  replicability,  transferability  and  the  ability  of  the 
investment to leverage additional funding. The aim is invest in some 9 to 12 operations. A 
the broad geographical coverage is to enhance the effectiveness of the pilot phase. 
A  technical  support  facility  is  provided  for  capacity  building  measures  to  help  the 
development of successful projects. This support will be provided to operations expected to 
be  eligible  for  receiving  finance  from  the  NCFF  and  will  develop  competences  in 
preparatory, management, monitoring, evaluation, audit and control activities. 

(c)  Financial institutions involved in implementation;  

European Investment Bank (EIB) 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget;  

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

           EUR 10 000 000  
           EUR 3 250 000175 

(e)  The performance of the financial instrument, including investments realised;   

The  Delegation  Agreement  having been  signed  in  December  2014,  no operation  started in 
2014. 

175 The payment of 3 250 000 EUR was made on the 29 December 2014 and arrived on the fiduciary account on 
the 6th of January 2015. 

136 

 
 
                                                 
(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

Not applicable 

(g)  The balance of the fiduciary account;    

The  payment  of  3  250  000  EUR  was  made  on  the  29  December  2014  and  arrived  on  the 
fiduciary account only on the 6th of January 2015.  

(h)   Revenues and repayments (Art.140. 6);    

Not applicable 

(i)  The value of equity investments, with respect to previous years;  

Not applicable 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments;  

Not applicable 

(k)  The target leverage effect, and the achieved leverage effect;  

 The target leverage effect. 
The EU budget allocation foreseen in the LIFE regulation for the programming period 2014-
2017 amounts to EUR 60 million. This amount includes EUR 50 million for the Investment 
Facility  and  EUR  10  million  for  the  Technical  Support  Facility,  which  is  not  to  be 
considered in the calculation of the leverage effect.  
The total amount of investments/loans made by the EIB is expected to reach EUR 100-125 
million.  An  amount  of  EUR  200  million  is  the  expected  aggregate  amount  of  finance 
available  to  eligible  final  recipients  supported  by  the  Financial  Instrument.  For  the 
avoidance of doubt, this amount does not include the financing that eligible final recipients 
make available from their own resources. 
Hence the target leverage effect as indicated in the Delegation Agreement is 2-4 (EUR 100-
200  million  divided  by  EUR  50  million  of  Union  contribution)  over  the  lifetime  of  the 
financial instrument (31st December 2019). 

 The achieved leverage effect: NA for 2014 

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification;  

The  Delegation  Agreement  having been  signed  in  December  2014,  no operation  started in 
2014.  

E -  Other key points and issues 

 Three main issues for the implementation:  

although  the  implementation  of  the  NCFF  started  only  very  recently  and  no  financing  has 
yet  been  awarded  to  any  operation,  the  key  implementation  issues  to  meet  the  aims  and 
requirements of the facility are:   

i)  to  identify and  develop financially viable projects  which have  a positive impact on 

biodiversity and climate adaptation; 

137 

 
ii) to ensure sufficient uptake in a broad range of sectors, in view of future replicability; 
iii) to ensure a good geographical spread among Member States, in particular in smaller 

Member States or where financing constraints are more acute. 

 Main risks identified: 

i)  when  implementing  the  NCFF,  it  will  be  taken into  account  that  the  EIB,  financial 
intermediaries and final recipients may have limited experience with the nature and 
biodiversity  aspects  of  investments  projects,  including  the  proper  monitoring  and 
reporting. This is inherent to the innovative and pilot character of the instrument. The 
Support Facility may be used to address such issues.  

ii) Projects  will  be  closely  monitored  to  ensure  that  biodiversity  and  climate  adaptation 

objectives are achieved, in line with LIFE Regulation.  

iii) Taking  into  account  the  targeted  sectors,  low  uptake  is  a  risk.  Publicity  and 

communication, and the support facility will be important in this context. 

 General outlook: 

the most recent EIB pipeline received in summer 2015 lists seven potential operations: two 
indirect  loans,  three  direct  loans  and  two  investments  in  equity  funds.  Most  potential 
operations cover more than one project category, in  particular  projects using  payments  for 
ecosystem  services,  Green  Infrastructure  and  Pro  Biodiversity  and  Adaptation  businesses. 
The  entities  proposing  the  potential  operations  come  from  six  different  MS  but  the 
investments  would  involve  a  larger  number  of  MS.  This  is  in  line  with  the  aim  to  have  a 
balanced geographical spread.  

3.7. EU SME Initiative  

A - Summary 

Policy DG in charge:   

DGs ECFIN, RTD, GROW and REGIO 

Implementing DG in charge:   

DGs RTD, GROW and REGIO 

Operating Body in charge: 

EIF 

Initial Overall Budget Envelope: 

EUR 8 500 million (aggregate ceiling for ERDF 
and EAFRD according to Art. 39 CPR) 
EUR 175 million (ceiling for contributions from 
each COSME and Horizon 2020) 

Current Overall Budget: 

EUR 815 million (ERDF) 

SME support  is a  main focus of the European Structural and Investment Funds (ESIF),  and 
financial  instruments  play  an  increasingly  important  role.  Within  the  financial  instruments 
"family",  the  SME  Initiative  is  a  real  novelty,  in  that  it  combines  different  EU  funding 
resources  in  one  financial  instrument,  thereby  increasing  the  leverage  of  (both  public  and 
private) additional resources to be mobilised for SME support. Its overall aim is to enhance 
access  to  finance  for  SMEs,  to  stimulate  economic  growth  and  entrepreneurship.  Access  to 
finance  is  a  real  issue  in  the  economy  of  at  least  several  Member  States  in  Southern  and 
Eastern Europe: the problem is not so much the lack of liquidity in the market, but the missing 
transmission  of  that  liquidity  into  the  real  economy,  so  that  SMEs  have  adequate  access  to 
finance at reasonable conditions, which enables them to invest, develop their competiveness 

138 

 
and grow. Often, a lack of collateral on the SME side is the main reason why banks are not 
willing  to  lend.  There  are  several  crucial  elements  of  the  SME  Initiative  which  ensure  its 
contribution  to  the  objectives  of  better  SME  access  to  finance  and,  thereby,  enhanced  SME 
competitiveness,  innovativeness  and  growth  –  e.g.  its  unique  and  targeted  products,  the 
enhanced  leverage,  the  early  deployment  and  frontloading  of  payments,  but  also  the 
streamlined and comparatively light documentation necessary to implement it. The aspect of 
geographical  diversification  in  the  sense  of  Cohesion  Policy,  i.e.  the  fact  that  the  policy 
focuses  explicitly  on  less  developed  regions,  is  also  fully  taken  into  account:  the  single 
dedicated  national  programme  (SDNP),  although  being  a  national  Operational  Programme, 
can have regional compartments so that the regional allocations to the SME Initiative remain 
clearly visible. 
The target volume of new loans to be generated for all Spanish regions is EUR 5 723 million, 
out of which EUR 2 976 million are guaranteed by the ESIF contribution. 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

The EU SME Initiative may receive funding from the following four programmes. 

COSME: 
Regulation  (EU)  No  1287/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December 2013 establishing a Programme for the Competitiveness of Enterprises and small 
and  medium-sized  enterprises  (COSME)  (2014  -  2020)  and  repealing  Decision  No 
1639/2006/EC  (OJ  L  347/33  of  20  December  2013).  The  European  Commission  has 
established  financial  instruments  that  aim  to  facilitate  and  improve  access  to  finance  for 
SMEs  in  their  start-up,  growth  and  transfer  phases,  complementary  to  the  Member  States' 
use of financial instruments for SMEs at national and regional level. 

H2020: 
Regulation  (EU)  No  1291/2013  of  the  European  Parliament  and  of  the  Council  of  11 
December  2013  establishing  Horizon  2020  -  the  Framework  Programme  for  Research  and 
Innovation  (2014-2020)  and  repealing  Decision  No  1982/2006/EC  (OJ  L  347/104  of  20 
December  2013)  and  pursuant  to  the  Decision  No  2013/743/EU  of  the  Council  of  3 
December  2013  establishing  the  Specific  Programme  implementing  Horizon  2020  –  the 
the  European 
Framework  Programme  for  Research  and  Innovation  (2014-2020), 
Commission  has  established  financial  instruments  that  aim  to  ease  access  to  the  risk 
financing for final recipients carrying out research and innovation projects. 

ERDF and EAFRD (Article of the 39 CPR): 
On 17 December 2013, Regulation (EU) No 1303/2013 of the European Parliament and the 
Council laying down common provisions on the European Regional Development Fund, the 
European  Social  Fund,  the  Cohesion  Fund,  the  European  Agricultural  Fund  for  Rural 
Development  and  the  European  Maritime  and  Fisheries  Fund  and  laying  down  general 
provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund,  the 
Cohesion  Fund  and  the  European  Maritime  and  Fisheries  Fund  and  repealing  Council 
Regulation (EC) No 1083/2006 (OJ L 347/320 of 20 December 2013) was adopted. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope  
The SME Initiative has been presented on 27-28 June 2013 in the Commission's and EIB's 
joint report to the European Council, to complement and utilise synergies between existing 

139 

 
SME support programmes at national and EU level. More specifically, the SME Initiative is 
a  joint  instrument,  combining  EU  funds  available  under  COSME  and  Horizon  2020  and 
ERDF-EAFRD  resources  in  cooperation  with  EIB/EIF  in  view  of  generating  additional 
lending to SMEs. 

Implementation arrangements 
Three financial instruments could  be implemented  under the SME Initiative, and they boil 
down in substance to two alternative ways of operating, namely:  
(*) uncapped guarantees providing capital relief to financial intermediaries for new portfolio 
of debt finance to SMEs and  
(**)  securitisation  instruments  (with  two  possibilities,  i.e.  option  n°2  securitisation 
instrument with MS contribution used exclusively for the participating MS and option n°3 
securitisation  instrument  with  several  MS  contributions  pooled  and  used  to  provide 
protection on the aggregate exposure, particularly to the mezzanine tranches guaranteed by 
EIF).  
The period of time during which the participating Member State may commit some funds to 
the EIF shall expire on 31 December 2016. As it will be defined in the funding agreement 
that  shall  be  signed  between  the  EIB  and  the  participating  MS,  the  selected  financial 
intermediary  will  originate  new  debt  finance  no  later  than  the  end  of  the  eligibility  period 
(i.e. 31/12/2023).  
In  terms  of  budget,  the  Common  Provision  Regulation  foresees  a  global  ceiling  (for  all 
Member States) of EUR 8,5 billion of aggregate ERDF-EAFRD to be committed under the 
SME Initiative, and a ceiling by Member State of 7 % of their allocation from the ERDF and 
EAFRD.  In  that  scenario,  the  corresponding  maximum  COSME  and  Horizon  2020 
contributions would amount to EUR 175 million each over the 2014-2016 period.  
As  of  end-2014,  two  Member  States  confirmed  their  participation  and  signed  the  relevant 
Inter-Creditor  Agreements  with  the  EIF:  Spain  (ERDF  contribution  of  EUR  800  million) 
and Malta (ERDF contribution of EUR 15 million). Estimated budget allocation foreseen for 
the total programming period amounts to approximately EUR 815 million (ERDF) for Spain 
and Malta. 

Added value 
As indicated in the legal base, the added value of the EU contribution results in a minimum 
leverage effect of 4 over the lifetime of the financial instrument for the ERDF contribution 
in Spain and Malta. Based on the minimum leverage of the instrument agreed in the Single 
Dedicated  National  Programme,  it  is  estimated  that  the  total  amount  of  investments/loan 
volumes mobilised would be around EUR 6 billion for Spain and Malta (based  (based on all 
available funds, i.e. ERDF, H2020, EIB/EIF and private (bank) funds). 
A portion of the new Debt Finance portfolio equal to at least 20 times the contribution under 
the  COSME  Regulation  and/or  H2020  Regulation  should  fulfil  respectively  the  COSME 
and/or  H2020  eligibility  criteria.  Therefore,  the  table  under  point  i)  is  summarising  the 
overall leverage that should be reached for each option. The new debt finance originated by 
the  selected  financial  intermediary  should  also  include  an  amount  equal  to  20  times  the 
COSME and/or H2020 contribution. 

(c)  The financial institutions involved in implementation; 

The EIB is the entrusted entity for the implementation of this initiative, practical aspects of 
implementation  such  as  selection  of  financial  intermediaries  and  management  of  payment 
flows are managed by the EIF.  

140 

 
C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

No commitment and payment as of end-2014. 

(e)  The performance of the financial instrument, including investments realised; 

Not applicable as of end-2014. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable as of end-2014. 

(g)  The balance of the fiduciary account; 

Not applicable as of end-2014. 

(h)  Revenues and repayments; 

Not applicable as of end-2014. 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

Not applicable as of end-2014. 

(k)  The target leverage effect; 

The target leverage effect  
The following table illustrates the calculation of the target leverage for the SME Initiative in 
Spain, in accordance with the agreed approach for such calculation. The figures represent the 
different  risk  covers/risk  takers  as  defined  in  the  Intercreditor  Agreement:  in  absolute  and 
percentage terms, the loan portfolio will have a senior tranche/risk cover accounting for 69% 
of  its  size,  an  upper  mezzanine  (4,5%),  middle  mezzanine  (0,5%)  and  lower  mezzanine 
(3,0%)  part  as  well  as  a  junior  tranche  (23%).  Summing  these  amounts  up,  the  part  of  the 
portfolio that is backed by the guarantee is obtained: EUR 2 862 million.  

Since  for  the  SME  Initiative  in  Spain  a  guarantee  rate  of  50%  was  agreed,  the  originating 
banks will retain 50% of the risk, and the overall portfolio is thus double the amount above, 
i.e. EUR 5 723 million. These are loans to SMEs Dividing this aggregate amount of EUR 5 
723 million by the aggregate support provided through ERDF and Horizon 2020, EUR 816,8 
million, provides the leverage targeted, namely 7,0. 

141 

 
Calculation of target leverage for the SME Initiative in Spain 

SIUGI Risk Cover 

Risk taker  Maximum Risk Cover 

EIB 

EIF 

Size (EUR) 

1.974.461.53846 

128.769.230,77 

Horizon 2020 

14.307.692,31 

ESIF 

ESIF 

Target Rating 
(at least) 

Aa3 

Baa3 

Ba1 

Ba2 

Senior Risk Cover  

Upper Mezzanine Risk Cover  

Middle  Mezzanine  Risk 
Cover  

Lower Mezzanine Risk Cover  

Junior Risk Cover  

Guaranteed  Portfolio  without 
originator 
(corresponds to 50% because 
of a 50% guarantee rate) 

Originator's  risk  (bank  own 
risk) 

Total 
guaranteed 
(100%) 

amount 

the 
of 
loan  portfolio  

Total 
ERDF/COSME/Horizon2020 

in  relation 

to 
Leverage 
ERDF (but based on ERDF, 
H2020, EIB and EIF funds) 

* EU contribution including management costs and fees  

The achieved leverage effect 
Not applicable as of end-2014. 

D -  Strategic importance/relevance 

85.846.153,85 

658.153.846,15 

Not Rated 

2.861.538.461,54 

50% 

5.723.076.923,08 

816.800.000,00* 

7,0 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

SME support is a main focus of the European Structural and Investment Funds (ESIF). This is 
reflected  by  the  CPR176's  thematic  objective  3  "Enhancing  the  competitiveness  of  SMEs", 
under  which  in  2014-2020  according  to  preliminary  figures  about  EUR  59  billion  will  be 
devoted  to  supporting  SMEs  (EUR  32,4  billion  by  the  ERDF  and  EUR  26,6  billion  by  the 

176 Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying 
down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion 
Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and 
laying  down  general  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund,  the 
Cohesion  Fund  and  the  European  Maritime  and  Fisheries  Fund  and  repealing  Council  Regulation  (EC)  No 
1083/2006 

142 

 
 
 
 
 
 
 
 
 
 
 
                                                 
EAFRD).  The  investment  priorities  as  laid  down  in  the  ERDF  Regulation  (No  1301/2013) 
illustrate  the  objectives  of  the  ESIF  programmes:  promoting  entrepreneurship,  developing 
new business models for SMEs, supporting SMEs' growth and innovation capacities. 
While  much  of  this  support  is  still  provided  through  grants,  financial  instruments  play  an 
increasingly important role. Within the financial instruments "family", the SME Initiative is a 
real novelty, in that it combines different EU funding resources in one financial instrument, 
thereby  increasing  the  leverage  of  (both  public  and  private)  additional  resources  to  be 
mobilised  for  SME  support.  Its  overall  aim  is  to  enhance  access  to  finance  for  SMEs,  to 
stimulate  economic  growth  and  entrepreneurship.  Alongside  the  ESIF  resources  contributed 
by  the  Member  States,  the  SME  Initiative  is  co-funded  by  the  EU  through  COSME  and/or 
Horizon 2020 resources and EIB Group resources. 
In the Single Dedicated National Programmes (SDNPs)_ that Member State have to establish 
to  devote  ESIF  resources  to  the  SME  Initiative,  the  progress  in  implementing  the  SME 
Initiative is measured against output indicators (e.g. the number of SMEs receiving support, 
the  ERDF  amount  committed  to  cover  the  New  Debt  Finance  portfolio  (for  the  uncapped 
guarantee option) and the ERDF amount used to cover the existing portfolios of debt finance 
to SMEs (for the securitisation option)) as well as against result indicators (e.g. reduction in 
the market failure for debt finance/improvement of SMEs' access to finance). 
There are several crucial elements of the SME Initiative which ensure its contribution to the 
objectives  of  better  SME  access  to  finance  and,  thereby,  enhanced  SME  competitiveness, 
innovativeness and growth – e.g. its unique and targeted products, the enhanced leverage, the 
early deployment and frontloading of payments, but  also  the streamlined and comparatively 
light documentation necessary to implement it. 
The  aspect  of  geographical  diversification in  the  sense  of  Cohesion  Policy, i.e.  the  fact that 
the  policy  focuses  explicitly  on  less  developed  regions,  is  also  fully  taken  into  account:  the 
SDNP, although being a national Operational Programme, can have regional compartments so 
that  the  regional  allocations  to  the  SME  Initiative  remain  clearly  visible  and  traceable.  The 
target volume of new loans to be generated for all Spanish regions is EUR 5 723 million, out 
of which EUR 2 976 million are guaranteed by the ESIF contribution.  

E -  Other key points and issues 

 Main issues, for the implementation: 

o  the  firm  political  will  and  commitment  to  implement  the  SME  Initiative  with  all  its 
novel elements (e.g. the various funds it brings together) is a conditio sine qua non for 
implementing  it.  This  also  means  that  the  different  services  involved  within  the 
Government (even more so if national and regional players come in) have to cooperate 
very effectively and efficiently. 

o  Moreover, a continuous reality check and reassessment will be carried out regarding the 
two  options/financial  products  –  are  they  really the  ones  best  placed  to  improve  SME 
access  to  finance?  Are  they  adequately  designed  to  meet  the  needs  of  SMEs  (and 
financial  intermediaries)?  Is  the  financial  volume  dedicated  to  them  appropriate?  The 
SME  Initiative  has  to  ensure  it  complements  –  through  its  particular  set-up  and  its 
specific products – existing financial instruments and provides synergies with them. 

 Main risks: 

o  not applicable as of end-2014 

 General outlook: 

o  as  of  end-2014  it  remains  difficult  to  envisage  the  general  development  of  the  SME 
Initiative, as it was not implemented yet in any Member State, although negotiations to 

143 

 
reach the underlying agreements were already well advanced between the EIB Group 
and the Commission with both Spain and Malta. 

o  The central problem of the economy of at least several Member States in Southern and 
Eastern Europe is not the lack of liquidity in the market, but the missing transmission 
of that liquidity into the real economy, so that SMEs have adequate access to finance 
at  reasonable  conditions,  which  enables  them  to  invest,  develop  their  competiveness 
and grow. Often, a lack of collateral on the SME side is the main reason why banks 
are not willing to lend. In such a context, products offered by the SME Initiative such 
as the uncapped guarantee instrument are very well-suited to tackle the main obstacles 
for SMEs to get appropriate access to finance. 

4.  Dedicated Investment Vehicles 

4.1. The European Progress Microfinance FCP-FIS (PMF FCP-FIS)  

A - Summary 

Policy DG in charge: 

DG EMPL, with participation of DG ECFIN 
for the design of the instruments 

Implementing DG in charge:   

Implementing Body in charge: 

Initial Overall (2007-2013) Programme 
Budget: 

Current Overall (2007-2013) Programme 
Budget**: 

Executed Budget since beginning until 
31/12/2014: 

DG ECFIN 

EIF 

EUR 78 million* 

EUR 80 million 

Commitments: EUR 80 million 
Payments: EUR 63,4 million 

*Initial voted commitments out of which EUR 75 million from DG EMPL and EUR 3 million from EPPA 
(DG REGIO).  
** According to information available as at 3 March 2014, including increase in budget commitments from 
2008 to 2013. 

The  FCP-FIS  is  managed  by  the  Management  Company  (EIF)  which  is  vested  with  the 
broadest powers to administer and manage the Fund and the sub-fund(s) in accordance with 
the  Management  Regulations  and  Luxembourg  laws  and  regulations  and,  in  the  exclusive 
interest of the Unit-holders, to exercise all of the rights attaching directly or indirectly to the 
assets of the Fund. 
The EIF has the exclusive authority with regard to any decisions in respect of the Fund or any 
sub-fund(s),  and  shall  act  with  the diligence  of  a  professional  management  company  and  in 
good faith in the exclusive interests of the Unit-holders. 
The  specific  investment  objective  of  the  Fund  is  to  increase  access  to,  and  availability  of  a 
range of financial products and services in the area of microfinance for: 
 Persons starting their own enterprise, including self-employment; 
 Enterprises, especially microenterprises; 
 Capacity  building,  professionalization  and  quality  management  of  microfinance       

institutions and of organisations active in the area of microfinance; 

 Local and regional employment and economic development initiatives. 

144 

 
 
 The Fund provides mainly debt products priced below market for the final benefit of the 

eligible final recipients. 

As  of  30/12/2014,  EIF  had  signed  41  loan  agreements  in  14  member  states  including  a 
Commission  contribution  of  EUR  63,4  million. As  of  30/09/2014,  16  025  micro-enterprises 
and vulnerable persons had been supported under the Facility for a total microloans volume of 
EUR 113,7 million and they had created 25 347 jobs177. 
As  at  31/12/2014,  the  entire  programme  provided  31  371micro-loans  to  final  recipients, 
reaching the volume of EUR 291,7 million. 

B -  Description 

(a)  Identification of the financial instrument and the basic act;  

Decision  No  283/2010/EU178  of  the  European  Parliament  and  of  the  Council  of  25  March 
2010  establishing  a  European  Progress  Microfinance  Facility  for  employment  and  social 
inclusion.179 
EU Microfinance Platform MICROFINANCE PLATFORM (the “Fund”) is structured as a 
Luxembourg “fonds commun de placement – fonds d’investissement spécialisé” (FCP - FIS) 
governed by the law of 13 February 2007 relating to specialised investment funds (the “2007 
Law”) and launched on 22 November 2010.  
It is established as an umbrella fund, which may have several sub-funds. The Fund has been 
launched with an unlimited duration provided that the Fund will however be automatically 
put into liquidation upon the termination of a sub-fund if no further sub-fund is active at that 
time.  At  31 December  2013,  the  Fund  has  had  a  single  sub-fund  -  the  European  Progress 
Microfinance  Fund  (the  “Sub-fund”)  -  created  with  a  limited  duration  ending  on  30  April 
2020. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The Fund is an unincorporated co-ownership of securities and other eligible assets. The Fund 
does not have legal personality. The Fund is therefore managed in the exclusive interests of 
the Unit-holders (the European Union, represented by the Commission, and the EIB) by the 
Management  Company  (EIF)  in  accordance  with  Luxembourg  laws  and  the  Management 
Regulations. 
The  specific  investment  objective  of  the  Fund  is  to  increase  access  to,  and  availability  of  a 
range of financial products and services in the area of microfinance for the following target 
groups (see also the objectives under the EPMF-Guarantee Facility above): 
  persons starting their own enterprise, including self-employment; 
  enterprises, especially microenterprises; 
  capacity  building,  professionalization,  and  quality  management  of  microfinance       

institutions and of organisations active in the area of microfinance; 
  local and regional employment and economic development initiatives. 

177 EPMF FCP – 2014 Annual Implementation Report  
178 European Progress Microfinance Facility includes both Guarantees (EPMF-G) and Funded instruments (FCP-
FIS). 
179 (OJ L 87/1, 7.4.2010) 

145 

 
                                                 
Implementation arrangements 
The  Fund  issues  unit  classes,  which  are  redeemable  at  the  option  of  the  Management 
Company on a pro rata basis among existing investors in accordance with the provisions of 
the management regulations and the commitment agreements. 
Unit  classes  are  issued  and  redeemed  at  the  option  of  the  Management  Company  at  prices 
based on the Fund’s net asset value per Unit of the related redeemable Unit classes at the time 
of issue or redemption. 
The following classes of Units are available for subscription under the single sub-fund of the 
Fund: 

 Junior Units 

Junior Units are subordinated to the Senior Units and shall bear the first net losses in the Sub-
Fund's assets. Junior Units are reserved for the European Commission. 

 Senior Units 

Senior Units are senior to Junior Units and shall only suffer a net loss in the Sub-fund's assets 
if the cumulated Net Asset Value of all Junior Units together has been reduced to zero. 
The  financial  contribution  from  the  Union  budget  to  the  EPMF  Fonds  Commun  de 
Placement  –  Fonds  d’Investissement  Spécialisé  (EPMF  FCP-FIS)  for  the  period  from  1 
January 2010 to 31 December 2014 amounts to EUR 80 million. In addition, the European 
Investment Bank has matched the overall Union contribution into the EPMF. Consequently, 
the Commission is a founding investor in the Specialised Investment Fund, contributing with 
44% (80 million EUR) of the total funding. The EIB is the other investor with a contribution 
of 100 million EUR. The Commission has subscribed for junior units, thus bearing the first 
loss. 
In  accordance  with  the  EPMF  FCP-FIS's  Management  Regulations,  the  Investment  Period 
ends  on  7  April,  2016.  However,  the  Management  Company  may  decide  to  extend  the 
Investment Period subject to the unanimous approval of the Sub-Fund's Meeting of Investors. 
The Facility is implemented via debt and equity instruments (FCP-FIS); the implementation 
foresees also support measures, such as communication activities, monitoring, control, audit 
and evaluation which are directly necessary for the effective and efficient implementation of 
the Decision No 283/2010/EU and for the achievement of its objectives. 
The  EIF  shall  evaluate  and  select  the  Financial  Intermediaries  ('FI')  by  applying  selection 
criteria  and  processes  set  out  in  the  Special  Section  of  the  Management  Regulations.  The 
approvals are in the remit of the European Investment Fund as a Management Company. The 
Management  Company  has  full  discretion  in  the  review  and  assessment  of  projects.  The 
investors  are  not  involved  in  the  day-to-day  management  of  the  Fund,  or  in  the  decision-
making on specific projects. The final approval is given by the EIF Board of Directors. 

Added Value 
The  Fund  constitutes  one  of  the  EU  core  measures  to  mitigate  the  consequences  of  the 
economic crisis. By providing debt, equity and funded risk sharing instrument to MFIs located 
within the EU, it aims to increase the access to, and availability of, microfinance for the most 
vulnerable.  The  microenterprise  segment  is  the  cornerstone  of  the  EU  economy:  more  than 
90%  of EU  businesses  and almost  all  start-ups are microenterprises.  Some 66%  of  business 
start-ups  are  made  by  unemployed  people.  The  Fund  enables  economic  independence  for 
micro-entrepreneurs  who  might  otherwise  have  difficulties  in  accessing  funds  for  business 
start-ups,  in  the  current  context  of  reduced  credit  supply.  It  provides  concrete  support  for 
economic growth, employment creation and social inclusion. 

146 

 
(c)  The financial institutions involved in implementation;  

The Fund is managed by the EIF as a Management Company. The Management Company 
has to comply with the requirements of the investors as set out in the legal documentation 
(Management  Regulations  and  Prospectus)  and  with  the  obligations  arising  from  the 
governing law of Luxembourg. 
EIF  is  vested  with  the  broadest  powers  to  administer  and  manage  the  Fund  and  the  sub-
fund(s) with the diligence of a professional management company and in good faith in the 
exclusive interests of the Unit-holders. 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

EUR 80 000 000  
                       EUR 63 428 857 

(e)  The performance of the financial instrument, including investments realised (as 
of 30/09/2014); 

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 
and corresponding number of eligible final 
recipients; 

Amount of investments expected to be made 
by eligible final recipients due to the financing, 
if applicable 

Amount of financing already provided by the 
instrument to eligible final recipients, 
and the corresponding number of recipients;  

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if applicable. 

EUR 292,1 million 

41 060  eligible FRs 

N/A 

EUR 114 million 
16 025   eligible FRs 

N/A 

Note:  No  further  budgetary  commitments  have  been  made  by  the  Commission  since  the  end  of  the 
commitment period on 31/12/2013. 

Additional operational information 
As  of  31/12/2014  the  total  contributions  of  the  shareholders  (Commission  and  EIB)  to  the 
EPMF FCP amounted to EUR 148 million (Commission contribution = EUR 63,4 million to 
FLP and EIB contribution to second loss piece = EUR 84,6 million) therefore any investment 
of  the  Fund  (mainly  senior  loans)  was  made  in  accordance  to  the  ratio  1:1,33  between  the 
Commission and EIB. 
As of 31/12/2014, 41 Agreements have been signed in 14 Member States including a Union 
contribution  of  EUR  63,4  million,  with  a  clear  geographical  balance  between  Eastern  and 
Western Europe. 
On 31/12/2014, the signed agreements between EIF and the Intermediaries amounted to some 
EUR 149,2 million (Commission contribution = EUR 64 million and EIB contribution = EUR 
85,2  million)  and  aimed  at  leveraging  an  additional  contribution  from  the  intermediaries  of 

147 

 
              
 
 
 
EUR 143,1 million, in order to have a total of EUR 292,1 million (expected volume) in micro-
loans to final recipients. 

Impact on employment 
For the entire period as of 30 September 2014 (latest data available as at writing date), EPMF 
achievements for the FCP-FIS component of the programme were as follows: 

 Total amount of micro-loans: EUR 114 million  
 Total number of employees (in the supported micro-enterprises): 25 347 180 

Information  at  the  aggregate  EPMF  level,  including  both  Guarantee  facility  and  Funded 
instruments  
As  of  31  December  2014,  the  European  Progress  Microfinance  Facility  including  both 
Guarantees and Funded instruments already provided 31 371 micro-loans to final recipients 
reaching  the  volume  of  EUR  291,7  million,  compared  to  the  initial  programme  target  of 
46,000 micro-loans with the volume of EUR 500 million. The Facility is on track to reach 
the initial programme target, as new loan inclusions will take place until 2018. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

NA 

(g)  The balance of the fiduciary account; 

NA 

(h)  Revenues and repayments; 

Revenues:                                                                                      EUR   8,7 million 
Repayments:                                                                                  EUR  13,4 million 

(i)  The value of equity investments, with respect to previous years;  

EUR 59,9 million181 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  and  on  called 
guarantees; 

Not available 

(k)  The target leverage effect, and the achieved leverage effect; 

As  of  30/09/2014,  based  on  the  signed  loan  agreements  the  total  target  volumes  of  micro-
loans to final recipients are estimated to EUR 292,1 million, bringing the expected leverage 
effect  to  4,6  (the  expected  volumes  of  microloans  divided  by  EUR  63,4  million  of 
Commission's contribution); this is much higher than the minimum target leverage of 2,33. 
As for achieved leverage until 30/09/2014, the Commission's contribution paid of EUR 63,4 
million has supported so far EUR 114 million of new micro-loans, implying a leverage of 1,8. 

180 EPMF FCP-FIS Annual Implementation Report – 2014, data as of  30th  September , 2014. 
181 NAV, source : 2014 audited accounts EPMF FCP-FIS 

148 

 
                                                 
D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

(See part C above under European Progress Micro-finance Facility – Guarantee under section 
11.2.) 

E - Other key points and issues 

 Main issues for the implementation: 

o in terms of the number of micro-loans disbursed, the European microfinance sector 
as  a  whole  continued  to  grow  in  2014,  which  is  also  reflected  by  the  increased 
lending activity under EPMF FCP. The Microfinance Institutions’ demand for stable 
access to funding clearly remains as inter-bank lending and other sources of funding 
have not yet picked up again. 

o The  continuously  decreasing  bank  lending,  the  limited  capacity  and  priority  of 
national  governments  to  support  microfinance,  and  the  strong  market  demand  for 
microfinance suggest that there is a clear rationale for intervention at EU-level. 

o Despite its positive effects in the area of employment and social inclusion, without 
access to stable funding and without the necessary  capacity building component, the 
growth  and  sustainability  prospects  of  the  sector,  particularly  for  non-bank  MFIs 
which are focused on social inclusion lending, remain limited. 

 Main risks : 

o risk is inherent in the Fund’s activities but is managed through a process of on-going 
risk  identification  and  measurement,  monitoring  of  the  benefited  MFIs  and  other 
controls regarding the observance of specific portfolio limits and restrictions in order 
to ensure that the investments are diversified to an extent that an adequate spread of 
the investment risk is warranted.  

o The  EIF  as  Management  Company  is  responsible  for  the  overall  risk  management 

approach and for approving the risk strategies and principles. 

  The  Management  Company  monitors  these  investments  on  an  on-going  basis  by 
analysing  regular  reports  (i.e.  quarterly  financial  covenants  compliance,  quarterly 
financial  statements  and  key  performance  indicators  such  as  portfolio,  liquidity, 
capitalisation  and  profitability)  and    through  direct  contact  with  each  financial 
intermediary and site visits. 

o The  Management  Company  has  in  place  monitoring  process  to  identify  potential 
deterioration of counterpart creditworthiness and anticipate potential impairments on 
the portfolio and/or review of the counterpart internal rating. 

 General outlook:  

o based on forecasts subject to variations, a further EUR 63,25 million is envisaged in 

new commitments.  

149 

 
 
 
 
 
 
 
 
4.2. The  2020  European  Fund  for  Energy,  Climate  Change  and  Infrastructure  – 

(Marguerite)   

A - Summary 

Policy DG in charge:   

Implementing DG in charge:  

DG MOVE 

DG ECFIN 

Operating Body in charge: 

Marguerite Adviser (the Fund Manager) 

Initial Overall Budget Envelope: 

EUR 80 million 

Current Overall Budget: 

EUR 80 million from the TEN-T budget 
(06 03 03 — Financial support for projects 
of common interest in the trans-European 
transport network (in 2013 budget 
nomenclature)) 

The  Marguerite  Fund  is  a  Pan-European  equity  fund  developed  in  the  context  of  the 
financial  crisis  and  in  recognition  of  the  need  for  successful  long-term  infrastructure 
investment  in  Europe.  It  supports  infrastructure  investment  within  the  transport  (TEN-T), 
energy  (TEN-E)  and  renewables  sectors  in  Member  States  and  invests  primarily  in 
Greenfield Projects. 
The  core  sponsors  include  public  long-term  investors  from  France  (CDC),  Italy  (CdP), 
Germany (KfW), Spain (ICO) and Poland (PKO) as well as the EIB and a key investor, the 
European  Commission.  In  total,  the  fund  raised  EUR  710  million  of  available  capital  for 
equity  investments  (final  close  reached  in  December  2012).  The  Commission  aggregate 
budgetary commitment is EUR 80 million and sourced through the TEN-T budget. 
An estimate of the generated leverage effect with regards to the Union contribution shows the 
following: each euro invested in the Marguerite fund by the European Union supports a total 
capital investment of circa 125 euros in  infrastructure and renewable energy projects across 
the EU. 
As of December 2014 the Marguerite fund has invested in ten projects from different Member 
States  of  the  European  Union.  The  projects  originate  from  different  economic  sectors 
including  renewable  energy  as  well  as  air  and  road  transport  infrastructure  with  a  total 
committed  equity  investment  volume  by  the  fund  of  EUR  295  million  to  ten  projects 
representing  EUR  4,9  billion  of  mobilized  finance  (equity  and  debt).  More  projects  are 
currently being developed and the investment pipeline for 2015 is expected to translate into 
further signings and closings over the course of the year 2015. 

150 

 
B - 

Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  680/2007  of  the  European  Parliament  and  of  the  Council  of  20  June 
2007 laying down general rules for the granting of Community financial aid in the field of 
the trans- European transport and energy networks (OJ L 162, 22.6.2007, p.1). 182 
Commission Decision C(2010) 941 of 25 February 2010 on European Union participation in 
the  2020  European  Fund  for  Energy,  Climate  Change  and  Infrastructure  (the  Marguerite 
Fund). 

(b)  Description of  the financial instrument, implementation  arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  Marguerite  Fund  is  a  Pan-European  equity  fund  developed  in  the  context  of  the 
financial  crisis  and  in  recognition  of  the  need  for  successful  long-term  infrastructure 
investment  in  Europe.  It  supports  infrastructure  investment  within  the  transport  (TEN-T), 
energy  (TEN-E)  and  renewables  sectors  in  Member  States  and  primarily  invests  in 
Greenfield Projects 
Expected results: 

 at least 3,5 times the EC commitment to be invested into TEN-T eligible projects 

(at least EUR 280 million), 

 30  to  40  %  of  the  total  commitments  invested  in  the  Transport  sector  (TEN-T 

network), 

 25 to 35 % invested in the Energy sector, 
 35 to 45 % invested in the Renewables Energies sector. 

The investment period ends in December 2016 (with a possible extension of two more years) 
while the end-date/maturity of the fund has been set at a maximum term of 20 years from the 
start  of  the  initial  closing  (December  2009)  but  may  be  extended  for  up  to  two  additional 
one-year periods (up to December 2031). 

Implementation arrangements 
The  Commission  directly  manages  its  investment  in  the  Marguerite  Fund;  there  is  no 
delegation  or  sub-delegation  agreement  to  any  entrusted  entity.  The  cash  contributions  are 
paid  directly  by  the  EU  hence  no  trust  account  is  established.  The  Commission  is  a  pari-
passu investor alongside its co-investors, sharing equally with other co-investors both costs 
and returns. 
The  Investment  Adviser  "Marguerite  Adviser  S.A."  employs  the  Advisory  Team  and 
provides investment advisory services to the Fund under an Advisory agreement. As such, it 
is  responsible  for  the  day-to-day  management  and  on-going  activity  of  the  Fund.  The 
Advisory  Team  is  in  charge  of  origination,  due  diligence  (appraisal),  structuring  and 
execution of the investments as well as of monitoring and asset management. 

Added value of the Union contribution 
There  is  significant  added  value  of  the  Union  contribution  to  the  Marguerite  fund  both 
directly and indirectly. 

182 (OJ L 162/1, 22.6.2007) 

151 

 
                                                 
Directly, the Union contribution has enabled other equity providers to be attracted in to form 
a pool of equity aimed at projects with trans-European dimension and/or contributing to the 
delivery  of  the  EU2020  objectives.  This  funding  pool  crowded  in  other  sponsors'  equity 
invested in ten projects as of December 2014 as well as crowding in debt investment from 
project finance banks. This funding is then made available for investment in TEN-T projects 
and  other  policy-driven  projects  and  contributes  to  filling  missing  links,  reducing 
fragmentation  and  creating  positive  spill-overs  in  the  region  in  which  each  project  is 
implemented. 
Indirectly,  the  Union  Contribution  to  the  Fund  delivered  EU  added  value  by  creating 
synergies with other EU, national and regional policy objectives, internalising externalities 
and reducing coordination costs. 
Concretely,  the  Marguerite  Fund  has  demonstrated  that  six  public  financial  institutions, 
along  with  the  EU,  can  co-invest  in  an  equity  fund  that  operates  on  market  terms  and  is 
considered  as  a  credible  investor  by  other  players  in  the  market.  Furthermore,  this 
cooperation  between  public  financial  institutions  in  launching  a  single  pan-European  fund 
reduces the likelihood of financial instrument duplication. 
Also,  this  experience  has  increased  the  EC’s  in-house  capacity  to  engage  with  direct 
investment in equity funds. Finally, the Fund’s focus on investing in greenfield projects with 
a policy dimension has allowed it to close deals in less mature infrastructure markets, like 
those  in  Croatia,  Poland  and  Romania.  This  paves  the  way  for  an  increase  of  delivery  of 
infrastructure projects via Project Finance structures in these regions. 

(c)  The financial institutions involved in implementation; 

The  Marguerite  Fund  was  established  as  a  Luxembourg  SICAV-FIS  structure  in  the  legal 
form of a corporation (Société Anonyme). The management and administration of the Fund 
is  under  the  responsibility  of  the  Management  Board,  which  is  composed  of  one 
representative  of  each  core  sponsors,  two  representatives  of  the  Advisory  Team  and  three 
independent experts. 
The  core  sponsors  include  public  long  term  investors  from  France  (CDC),  Italy  (CdP), 
Germany (KfW), Spain (ICO) and Poland (PKO) as well as the EIB and a key investor, the 
European Commission. 

C - 

Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

  Aggregate budgetary commitments as at 31/12/2014 
  Aggregate budgetary payments as at 31/12/2014 

 EUR 80 000 000 
 EUR 31 320 000  

(e)  The performance of the financial instrument, including investments realised; 

As of 31 December 2014 the Marguerite Fund has committed to invest in ten projects: three 
projects in TEN-T transport and seven in the renewable energy sector. This represents a total 
equity  commitment  by  the  Fund  of  EUR  295  million  supporting  a  total  project  cost  of 
EUR 4 922 million.183  

183  The  figure  reflects  the  amount  of  finance  mobilized  based  on  signed  commitments  at  financial  close  when 
Marguerite invested in a project. At a given project level, it is the sum of equity investment and contingent equity 
committed by all investors, the total debt of the project, any pre-completion earnings of the project and any other 
amounts of finance mobilized. In the case of Massangis and Toul photo-voltaic farms where Marguerite owns sub-

152 

 
                                                 
 
Out of the EUR 295 million, the Fund committed EUR 66,8 million of equity to the three 
TEN-T transport projects (23%). The Fund, is thus progressing towards the target of EUR 
280 million equity investment to TEN-T projects (i.e. 3,5x the EUR 80 million committed 
by the EU) by the end of the investment period. The other EUR 228,2  million (77% ) were 
committed to the seven projects in the renewable sector. The table below shows the detailed 
list of the projects. 

Projects in fund portfolio (as at 31-12-2014), in EUR million(1) 

Project name (Country) – year 

Sector 

Totals 

C-Power (Belgium) – 2011 

Toul (France) – 2011 

Massangis (France) – 2012 

Aeolus (Poland) - 2012 

Chirnogeni (Romania) – 2012 

Autovia Arlanzon (A1) (Spain) - 2012 

Poznan Waste-to-Energy (Poland) – 2013 

Butendiek (Germany)(3) - 2013 

Zagreb Airport (Croatia) - 2013 

N17 – N18 motorway (Ireland) - 2014 

TOTAL EQUITY COMMITMENT(2) 

TOTAL AMOUNT OF MOBILIZED FINANCE(3) 

Renewables 

Renewables 

Renewables 

Renewables 

Renewables 

TEN-T 

Renewables 

Renewables 

TEN-T 

TEN-T 

295 

4 922 

Source: Services calculations based on fund reports as at 31-12-2014 

Notes:  
(1) The EC has a 11,27% share in the fund   
(2)  Includes  contingent  equity  commitment,  from  the  fund  i.e.  representing  100%  of  the  fund.  Net  of 
divestment of 1/3 stake to CDC Infrastructure that occurred in December 2013.  (3) The figure reflects 
the  amount  of  finance  mobilized  based  on  signed  commitments  at  financial  close  when  Marguerite 
invested  in  a  project.  At  a  given  project  level,  it  is  the  sum  of  equity  investment  and  contingent  equity 
committed by all investors, the total debt of the project, any pre-completion earnings of the project and 
any  other  amounts  of  finance  mobilized.  In  the  case  of  Massangis  and  Toul  photo-voltaic  farms  where 
Marguerite owns sub-plots of a larger project, the project total was estimated on the basis of the share of 
megawatts owned. For the projects still under construction, not all of the finance mobilized was invested 
as of 31-12-2014. 

plots  of  a  larger  project,  the  project  total  was  estimated  on  the  basis  of  the  share  of  megawatts  owned.  For  the 
projects still under construction, not all of the finance mobilized was invested as of 31-12-2014. 

153 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                                                                             
The ten projects in the portfolio are at various stages of development: some are already fully 
constructed  and  operating,  some  are  under  construction.  In  the  course  of  2014,  the  fund 
received distributions from several projects well in excess of EUR 10 million. This allowed 
the fund to cover its operating costs without drawing on investors' capital calls to fund them. 
However, no cash was distributed by the Fund to investors. 

The Marguerite Fund has a strong pipeline of projects and is expected to close sign several 
new projects in 2015. 

Amount  of  EU  Contribution  committed  to 
financial intermediaries, 
and  the  corresponding  number  of  financial 
intermediaries;  

EUR 80 million of commitment 
to  a  single  financial  intermediary,  the 
Marguerite Fund (EUR 31,3 million paid 
into the Fund as at 31 December 2014) 

Amount of financing expected to be provided 
by financial intermediaries to eligible final 
recipients , 
and expected number of eligible final 
recipients; 

intermediaries 

Amount  of  financing  already  provided  by 
final 
financial 
recipients, 
and the corresponding number of eligible final 
recipients;  

to  eligible 

Amount  of 
investments  already  made  by 
eligible  final  recipients  due  to  the  received 
financing, if applicable. 

Overall, the Fund is expected to invest in 
full the EUR 710 million into the equity 
of  circa  20  to  30  projects  (eligible  final 
recipients). 
The  total  amount  of  finance  mobilized 
across 
to  30  projects 
(Marguerite  equity  of  710  million,  co-
investor  equity  and  debt)  by 
the 
Marguerite equity investment is expected 
to represent some EUR 10 billion. 

these  20 

EUR 295 million of equity committed by 
the Fund to 10 projects (final recipients), 
which  mobilized  EUR  4,9  billion  of 
finance  in  total  (Marguerite  equity,  co-
investor equity and debt). 184 

EUR  4  922  million  of 
mobilized185 

finance 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

(g)  The balance of the fiduciary account; 

Not applicable, there is no fiduciary account: the Commission makes direct payments to the 
Fund on the basis of Capital Calls issued by the Fund. 

184  The  figure  reflects  the  amount  of  finance  mobilized  based  on  signed  commitments  at  financial  close  when 
Marguerite invested in a project. At a given project level, it is the sum of equity investment and contingent equity 
committed by all investors, the total debt of the project, any pre-completion earnings of the project and any other 
amounts of finance mobilized. In the case of Massangis and Toul photo-voltaic farms where Marguerite owns sub-
plots  of  a  larger  project,  the  project  total  was  estimated  on  the  basis  of  the  share  of  megawatts  owned.  For  the 
projects still under construction, not all of the finance mobilized was invested as of 31.12.2014. 
185 See detailed definition in the previous footnote 

154 

 
 
                                                 
(h)   Revenues and repayments (Art.140. 6);    

In the case of the Marguerite Fund, the revenues and repayments consist on the distribution 
of dividends or redemption of shares (net distributable cash).  
Article 20.1 of the Private Placement Memorandum establishing the fund specifies that the 
Net  Distributable  Cash  will  be  distributed  (either  through  the  payment  of  dividends  or 
through the redemption of Shares) to Investors pro rata as soon as possible in the reasonable 
discretion of the Board upon recommendation of the Investment Adviser after the relevant 
amount becomes available for distribution. 
Up to 31/12/2014, no distribution has taken place. 

(i)  The value of equity investments, with respect to previous years;  

Compared to the value for 31.12.2013 the Net Asset Value of the Commission investment in 
the  fund  has  increased  from  EUR  29,4  million  to  EUR  36,6  million.  Taking  into 
consideration 
to 
EUR 31,3 million, this implies a change of the non-realized capital gain of the Commission 
from EUR 0,9 million to EUR 5,2 million representing an increase of EUR 4,4 million over 
the course of the year 2014. 

from  EUR  28,5  million 

in  cumulated  payments 

increase 

the 

In EUR 

31/12/2013 

  31/12/2014 

Cumulated payments by EC 

28 520 000 

  31 320 000 

Fair value (NAV) of EC stake 

29 405 155 

  36 560 756 

Non-realized capital gain (loss) of EC 

885 155 

  5  240 756 

Source of Net Asset Value: Quarterly report of the Marguerite Fund to 31 December 2014, p.7 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments;   

No  impairments  have  been  registered  since  the  establishment  of  the  Fund  in  2010. 
Unaudited data for 2014 show no impairments either 

(k)  The target leverage effect, and the achieved leverage effect;  

 The target leverage effect: 

No target leverage effect was indicated in the legal base. However, the Commission uses an 
estimated leverage of 125.  
The  leverage  effect  was  estimated  using  the  following  method:  total  equity  commitment 
provided  by  the  Marguerite  Fund  is  assumed  to  represent  7,1%  of  the  amount  of  finance 
provided  to  projects  (final  recipients).  The  Commission  contribution  represents  11,27%  of 
total  equity  commitment  provided  by  the  Marguerite  Fund  or  in  other  terms  0,8%  of  the 
amount of finance mobilised by projects. This means that the leverage is 1/0,8% = 125.   
Based  on  this  leverage,  it  is  estimated  that  the  total  amount  of  finance  mobilised  by  the 
instrument (both equity and debt) at the project level (final recipient level) would be around 
EUR  10  billion  across  the  three  sectors  (of  which  circa  EUR  4  billion  are  expected  to  be 
allocated to TEN-T transport projects) for the entire duration of the programme compared to 
the Union contribution of EUR 80 million. 

155 

 
 The achieved leverage effect: 

The achieved leverage effect as of 31-12-2014 can be assessed by comparing the amount of 
finance mobilized to that date (EUR 4 922 million) and the amount of EU budget contribution 
paid into the fund to that date (EUR 31,3 million). This gives a leverage of EU contribution as 
at 31-12-2014 of 157x. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification;  

The Marguerite Fund was set up by a core group of European public long term investors and 
the  Commission  with  a  view  to  financing  the  implementation  of  infrastructure  projects  in 
Member States in the transport, energy and renewable sectors. The Fund has a priority focus 
on providing risk capital for the transport, energy and renewable sectors and within the two 
former sectors targets investment in trans-European networks in transport and energy. 
The  Commission  contribution  of  EUR  80  million  was  based  on  an  assessment  of  market 
needs and available supply. The Commission contribution is to be utilised towards supporting 
investment in trans-European transport network projects (TEN-T projects). To this effect, the 
Fund shall endeavour to invest a total sum equivalent to three and a half times the European 
by  the  end of  the  investment  period,  ie  assuming  no  extension  of  the investment  period,  by 
December 2016.186 
As of 31-12-2014, the Fund has committed to invest in three TEN-T projects a total of EUR 
66,8  million.  As  of  today  the  Commission  has  paid  in  EUR  31,3  million.  The  fund 
commitment represents a multiple of 2,1x of the amounts paid by the Commission to the fund 
as of 31-12-2014. This is still shy of the 3,5x target established for the end of the investment 
period,  however  the  fund  is  progressing  in  delivering  its  investment  pipeline  in  the  TEN-T 
transport sector.   
As of 31-12-2014, the Fund has been successful in helping the EU to deliver the 2020 targets 
by  a  successful  financing  of  seven  renewable  energy  projects  in  five  different  Member 
States.This includes investment in an innovative PPP scheme for the waste-to-energy plant in 
Poznan, Poland; the Chirnogeni on-shore windfarm project in Romania and Butendiek which 
is one of the largest off-shore windfarms in the German North Sea. 
The fund  was equally  successful in catalysing a transfer  of knowledge  in  terms of  financial 
structuring  into  new  markets:  the  Poznan  Waste-to-Energy  project  was  the  first  Waste-to-
Energy project in Poland to be structured as a Private Public Partnership (PPP) with the use of 
EU  structural  funds.  In  Romania,  the  Chirnogeni  project  was  the  first  non-recourse  project 
financed transaction in the on-shore wind renewable energy sector. Also, the Zagreb Airport 
transaction  has  sent  an  important  signal  that  greenfield  PPPs  with  traffic  risk  in  Eastern 
Europe  can  be  closed,  and  bring  attractive  market-returns.  The  transaction  is  considered  a 
benchmark  for  PPP  bankability  in  the  region.  Zagreb  Airport  also  was  the  first  PPP  in  the 
Western Balkans with debt financing contributed by the EIB. Market participants considered 
that  the  expertise  of  the  Marguerite  Advisor  team  was  crucial  in  ensuring  the  deal’s 
workability  as  the  first  PPP  to  close  under  Croatia’s  new  concession  law.  Finally,  the 
N17/N18 motorway deal closed in April 2014 signalled a revival in Irish PPP market. 

186  As  per  the placement  memorandum,  the  investment  period can be  extended  two  times  by one  year,  i.e. until 
December 2018 at the latest. 

156 

 
                                                 
The Marguerite fund also serves as a role model for innovative financial instruments investing 
in  European  infrastructure  projects.  It  is  unique  in  bringing  several  European  Development 
Banks  together  to  finance  a  common  pan-European  investment  vehicle.  It  is  successful  in 
attracting  private  funding  (via  co-investors  and  commercial  bank 
lending)  while 
demonstrating the business case behind these investments and creating a credible track record 
of  EUR  295  million  of  equity  commitment  to  ten  projects  representing  EUR  4,9  billion  of 
mobilized finance (equity and debt). 

E -  Other key points and issues 

 Three main issues for the implementation: 

i)  The December 2012 payment was subject to a Court of Auditors verification. In its 
findings,  the  Court  stated  that  the  Commission's  participation  in  the  Marguerite  fund 
which  invests  across  three  sectors  (TEN-T  transport,  renewable  energy  and  Energy) 
violates  the  principle  of  specification  as  defined  in  the  Financial  Regulation187.  The 
Commission considers that specification principle needs to be applied only at the end of 
the investment period and not on a payment-by-payment basis.  
From a risk management perspective a high level of diversification is usually preferred. 
This  is  especially  true  for  portfolios  which  are  diversified  over  different  economic 
sectors (e.g. transport, energy, renewables) and is seen as a way to avoid concentration 
risk and sectoral correlation. 
ii) However,  DG  ECFIN  has  reflected  the  findings  of  the  Court  in  the  design  of  new 
financial  instruments  under  the  Multi-Annual  Financial  Framework  2014-2020.  The 
experience  from  the  Marguerite  audit  case  allowed  to  preserve  a  maximum  grade  of 
diversification and stay at the same time in line with the principle of specification. 
iii) For the Marguerite fund, the decision was made to create a new bespoke fund with a 
relatively original structure. While this allowed to fully respect the requirements of the 
initial public sponsors in terms of investment guidelines, the fund was not successful in 
crowding-in private investors' commitments in the successive fundraising rounds. Other 
investment  structures  could  be  explored  for  future  financial  instruments  with  EU 
participation,  such  as  a  co-investment  vehicle  alongside  a  privately  raised  fund, 
investment in an existing fund, etc. 
iv) When the Marguerite fund was set up it was decided that a bespoke Fund Manager 
would be created to service it. This had the benefit of creating a new team on the market 
with a clear policy objective. By all measures the team is well respected in the market 
and performs well. However, the process took quite some time (which is normal when a 
new  investment  team  is  brought  together).  This  timing  issue  could  be  avoided  in  the 
future  when  implementing  new  Commission  participation  to  financial  instruments  by 
either  attributing  a  mandate  to  manage  the  new  vehicle  by  an  existing  Investment 
Manager or by investing (or co-investing) alongside an already existing structure. 

 Main risks identified: 

The Commission Decision has laid down clearly defined rules, terms and conditions as well 
as specific investment criteria in the Investment Guidelines to be followed by the Fund. The 
Investment Committee, as well as the Management and Supervisory boards closely monitor 
the compliance with these guidelines. 

187 Council Regulation (EC, Euratom) 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the 
general budget of the European Communities, now replaced by Regulation (EU) 966/2012   

157 

 
                                                 
The Fund operates in full compliance with its Investment Guidelines and other governance 
and operational provisions. 

 General outlook: 

The Fund constantly develops a pipeline of investment opportunities across the three target 
sectors (TEN-T transport, renewable energy and energy). It is in close contact with market 
participants and actively seeks out new transactions. 
In the near-term, the fund is expected to close its first transaction in the Energy sector in the 
Baltic region and is also pursuing other opportunities. 
Other numerous opportunities are in the medium-to-long-term pipeline. 

4.3. European Energy Efficiency Fund (EEEF)  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

DG ENER 

DG ENER 

Operating Body in charge: 

Deutsche Bank as Fund manager 

Initial Overall Budget Envelope: 

Current Overall Budget: 

EUR 146 334 644,50 

EUR 146 334 644,50 

The  Fund  was  established  in  2011  with  a  global  volume  of  EUR  265  million,  more  than 
double  the  direct  EU  contribution  (EUR  125  million),  in  line  with  the  objective  of 
leveraging188.  In  addition  a  EUR  20  million  technical  assistance  grant  to  support  project 
development  services  was  made  available.  The  Fund  provides  tailored  financing  (both  debt 
and  equity  instruments)  in  particular  for  energy  efficiency  projects  but  also  for  renewable 
energy and clean urban transport projects. Beneficiaries are local or regional public authorities 
or entities acting on their behalf. 
The fund has an investment manager, Deutsche Bank, which undertakes the pre-selection and 
due diligence of the projects before the Management Board (in which the Commission seats) 
approves  them.  The  Fund  has  also  an  Investment  Committee  and  a  Supervisory  Board  (in 
which  the  Commission  holds  2  seats  out  of  3)  to  give  general  orientations  and  grant 
derogation from the investment guidelines.  
The  fund  had  allocated  the  full  EU  contribution  by  the  end  of  the  investment  period  (31 
March  2014)  providing  innovative  financing  solutions  to  energy  efficiency  projects.  The 
technical assistance support has proved to be also very useful to support public authorities in 
preparing their projects that will subsequently be financed by the Fund. As of December 31, 
2014, EUR 185 million have been allocated to 12 projects which will generate some EUR 333 
million  of  final  investments.  Until  December  2014,  EUR  216  million  of  final  investments 
were already generated. 

188  In  addition  to  the  EU  contribution,  i.e.  €125m  in  the  form  of  junior  tranches  (first  loss  piece),  the  EIB 
invested € 75m, Cassa depositi e prestiti (CDP) € 60m and Deutsche Bank (DB) € 5m in more senior shares of the 
Fund. 

158 

 
                                                 
For 2015, the project pipeline contains 6 projects with a total volume of EUR 243 million for 
which the envisaged EEE F share is EUR 92 million. 
By now, the Fund has progressively established a solid track record of profitable investments 
(net profit registered from 2013) and is now actively looking for additional investors. It is also 
envisaged to further extend the scope of the Fund to SMEs/private sector beneficiaries once 
additional investors join in189.  

B -  Description 

(a)  Identification of the financial instrument and the basic act;  

Regulation (EU) No 1233/2010 of the European Parliament and the Council of 15 December 
2010  amending  regulation  (EC)  No  663/2009  establishing  a  programme  to  aid  economic 
recovery by granting Community financial assistance to projects in the field of energy190  

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution;  

Policy objectives and scope 
On  1  July  2011,  EUR 146,3 million  from  the  European  Energy  Programme  for  Recovery 
(EEPR) were allocated to a new European Energy Efficiency Fund — EEEF (in the form of a 
specialised  investment  fund  (SICAV).  The  EEEF  invests  in  energy  efficiency,  renewable 
energy  projects,  and  clean  urban  transport  particularly  in  urban  settings,  achieving  at  least 
20 % energy saving or GHG/CO2 emission reduction. 
The beneficiaries must be public authorities or public or private entities acting on their behalf, 
including ESCOs191. 
The  Fund  was  launched  on  1st  July  2011  with  an  initial  volume  of  EUR 265 million:  in 
addition  to  the  EU  contribution  (EUR 125 million  in  junior  ‘C-shares’),  the  European 
Investment Bank (EIB)  invested EUR 75 million (mainly senior ‘A shares’), Cassa Depositi e 
Prestiti SpA (CDP) EUR 60 million (mainly senior ‘A shares’); and the designated investment 
manager (Deutsche Bank) EUR 5 million (mezzanine ‘B shares’).  
Finally,  a  EUR 1,3 million  programme  has  been  established  to  raise  awareness  of  financing 
methods  and  options  for  EE  and  RE  among  national  and  regional  authorities  managing 
Cohesion/Structural funds. EPEC192 manages this programme. 
In  accordance  with  the  amending  Regulation,  the  deadline  for  allocating  EU  funds  to 
investment projects and Technical assistance (TA) was 31 March 2014. As of 31 December 
2014,  12  projects  were  approved  for  EUR  185  million.  Apart  from  this,  there  is  no  fixed 
deadline  for  proposals.  The  winding  down  of  the  instrument  will  take  place  probably  after 
2024. 

189 The deadline of 31 March 2014 was only applicable for the allocation of funds from the EU Contribution, not 
from other investors. 
190 (OJ L 346, 30.12.2010, p. 5) 
191 An energy service company (ESCO), via an energy performance contract (EPC), can enable a public authority 
to implement upfront investments (e.g. to upgrade the performance levels of public buildings or to install efficient 
street lighting) without taking the financial risk. 
192 The European PPP Expertise Centre (EPEC) is a joint initiative of the EIB, the European Commission and EU 
Member States and candidate countries. EPEC helps strengthen the capacity of its public sector members to enter 
into Public Private Partnership (PPP) transactions. 

159 

 
                                                 
Implementation arrangements 
Fund/Investment Manager 
Deutsche Bank (DB) is responsible i.e. for selecting projects and conducting a due diligence 
process before submitting the projects to the Fund's Investment Committee for advice and to 
the  Management  Board  for  approval.  DB  also  manages  the  TA  component,  submitting  TA 
propositions to DG ENER for approval. 

Investment Committee 
The  Investment  Committee  (IC)  is  responsible  for  assessing  projects  submitted  to  it  by  the 
fund  manager  and  giving  recommendations  to  the  Management  Board.  Two  EIB  members 
and one member from CDP were appointed to the IC. 

Management Board 
The  Management  Board  (MB)  has  broad  powers  to  administrate  and  manage  the  Fund;  it 
decides  on  the  investments  upon  recommendation  by  the  IC.  However,  it  cannot  decide  on 
major  issues  (such  as  change  of  the  statutes  and  documentation)  without  approval  by  the 
Supervisory Board (SB). It reports quarterly to the SB. It is composed of representatives from 
the European Commission (1), the EIB (1, the chair) and the CDP (1). 

Supervisory Board 
The supervisory board's main duties include a permanent supervision of the management of 
the  Fund,  giving  strategic  advice  to  the  MB,  proposing  the  annual  Fund  business  plan  for 
Shareholder  approval,  and  approving  changes  in  the  investment  guidelines  etc.  It  is 
composed of representatives from the European Commission (2), the EIB (1) and the CDP 
(1). 

Added value 
The Fund offers a  range  of non-standard  financial products such  as  senior and junior loans, 
guarantees,  equity  participation  or  forfeiting  schemes  which  can  be  combined  in  a  flexible 
way  with  standard  finance.  The  Fund  is  also  intended  to  attract  further  private  and  public 
investors (up to a total volume of EUR 700 million). 
In addition, about EUR 20 million of the EU funding is available for technical assistance (in 
the form of grants) to help sponsors make projects bankable for the Fund. 
Finally,  a  EUR 1,3 million  programme  has  been  established  to  raise  awareness  of  financing 
methods  and  options  for  EE  and  RE  among  national  and  regional  authorities  managing 
Cohesion/Structural funds. EPEC193 manages this programme. 

(c)   The financial institutions involved in implementation; 

EIB  was  entrusted  through  a  Delegation  Agreement  signed  in  March  2011  with  the 
Commission to establish the Fund and manage the Union contribution.  
Deutsche  Bank  has  been  appointed  Investment  Manager  and  was  sub-delegated  the 
Management of the Technical Assistance facility. CDP is a core investor in the instrument. 

193 The European PPP Expertise Centre (EPEC) is a joint initiative of the EIB, the European Commission and EU 
Member States and candidate countries. EPEC helps strengthen the capacity of its public sector members to enter 
into Public Private Partnership (PPP) transactions. 

160 

 
                                                 
C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget;  

in EUR 

Fund 

Technical Assistance 

Total 

Aggregate Budgetary 
Commitments 

125 000 000 

21 334 644,50 

146 334 644,50 

Aggregate budgetary payments as at 31/12/2014 

in EUR 

Fund 

Technical Assistance 

Total 

Aggregate Budgetary 
Payments as at 
31/12/2014 

88 230 884,95 

10 321 419,14 

98 552 304,09 

(e)   The performance of the financial instrument, including investments realised194;  

The EEE F has successfully allocated the full Union contribution by the end of the investment 
period  (31  March  2014)  providing  innovative  financing  solutions  to  energy  efficiency 
projects. The technical assistance support has proved to be also very useful to support public 
authorities in preparing their projects that will subsequently be financed by the Fund. In total, 
EUR  185  million  have  been  allocated  to  12  projects  which  will  generate  some  EUR  333 
million of final investments195.  

Amount of EU Contribution committed to 
financial intermediaries, 
and the corresponding number of financial 
intermediaries;  

Amount of financing expected to be provided 
by the instrument (including EU contribution 
committed) to eligible final recipients, 
and corresponding number of eligible final 
recipients; 

EUR 125 million (committed to the 

EEEF) 
N/A 

EUR 265 million  
not yet determined 

Amount of investments expected to be made 
by eligible final recipients due to the financing, 
if applicable 

EUR 441 million (based on current 

investment ratio) 

194 EEEF Annual Report 2013 and Quarterly Reports for 2014 (www.eeef.eu) 
195 Out of these, the Fund has signed contracts with 9 projects for EUR 114 million, generating 216 million final 
investments. 

161 

 
 
 
  
        
 
 
 
 
                                                 
Amount of financing already provided by the 
instrument to eligible final recipients, 

and the corresponding number of recipients; 

EUR 185 million (allocated amount) 
12 eligible FRs 

Amount of investments already made by 
eligible final recipients due to the financing 
provided through the instrument, if applicable. 

EUR 216 million for 9 projects (signed) 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;   

NA 

(g)  The balance of the fiduciary account;  
EUR 26,8 million196 

(h)  Revenues and repayments (Art.140.6);    

In line with the contractual arrangements, no revenues nor repayments are expected to 
be recovered by the Union budget before the closure of the instrument. 

Additional information: 
The fund has generated an income of EUR 6,1 million in 2014197 which are distributed 
along  the  income  waterfall  in  order  to  cover  direct  operating  expenditures,  distribute 
target  dividends  to  A  and  B  shares  (Commission’s  C-shares  are  not  entitled  to  target 
dividend) and fully replenish the Commission C shares to their original nominal value.  

(i) 

 The value of equity investments, with respect to previous years;  

The nominal value of the equity investments of the Commission into the Fund is EUR 
64,29 million as at 31 December 2014. It was EUR 23, 51 million as at 31  December 
2013198. There is no difference between the issue price of the Commission's shares (C 
Shares)  and  their  Net  Asset  Value  (NAV),  following  the  replenishment  of  the  NAV 
Deficiency amount as of 31/12/2014. 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments;  

NA. 

196  Two  Trust  accounts  have  been  created  but  they  are  not  fiduciary  accounts  as  defined  in  the  "Annex  5 
Guidelines art. 140.8". The Fund Trust account is credited with the part of the EU contribution to be used for the 
Fund  as  well  as  interest  earned  and  debited  with  the  payments  of  EU  Contribution  to  the  Fund.  Its  balance  on 
31/12/2014 was EUR 24,9 million. The TA Trust Account is credited with the part of the EU Contribution to be 
used  for  the  Technical  assistance,  interest  earned,  funds  recovered  from  Technical  Assistance  and  debited  with 
payments of EU Contribution to eligible costs for Technical Assistance, external audit costs, funds to be returned 
to the Commission and the Technical assistance management fee. Its balance on 31/12/2014 was EUR 1,9 million. 
197 Source: 2014 Annual accounts. 
198 Source: 2014 Annual accounts. 

162 

 
 
                                                 
(k)  The target leverage effect, and the achieved leverage effect;  

The achieved leverage (total size of the Fund/EU contribution) is 2,12.  This is calculated as 
the ratio between the total amount of the EEEF (265 million EUR) and the EU contribution 
(125  million  EUR).The  target  leverage  effect  is  5,6  (based  on  a  contribution  of  EUR  125 
million to the fund and expected fund volume up to EUR 700 million) over the lifetime of the 
financial instrument. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  first  objective  of  the  Amending  Regulation  was  to  establish  a  specialised  investment 
Fund to reallocate the EEPR uncommitted appropriations leveraging additional contributions. 
This has been achieved in 2011 with the support of the European Investment Bank to which 
the establishment of the Fund and the management of the EU contribution were delegated. 
The  second  objective  of  the  EEE-F  was  to  facilitate  the  financing  of  energy  efficiency 
investments  (portfolio  target  of  70%),  renewable  energy  (20%)  and  clean  urban  transport 
(10%). The Fund thus mostly concentrates on alleviating specific financial and non-financial 
barriers  to  energy  efficiency  such  as  high  transaction  costs,  fragmented  and  small 
investments,  limited  access  to  credit,  complex  deal  structuring,  and  low  confidence  of 
investors and lack of capacity of project promoters. In order to do so, the Fund supports the 
development  of  a  credible  energy  efficiency  market  through  the  provision  of  non-standard 
project finance and dedicated financial products (both debt & equity) supporting in particular 
the  development  of  Energy  Performance  Contracting.  The  portfolio  of  the  Fund  currently 
consists of 67% senior debt, 22% subordinated debt and 11% equity199. 78% of the financing 
has been provided directly to beneficiaries, while 22% has been provided through a financial 
intermediary.  
To tackle the lack of financing and the risk aversion of investors, the EEE-F was established 
as  a  layered  investment  Fund,  with  three  classes  of  shares.  The  European  Commission 
invested  in  junior  C  shares,  absorbing  the  first  losses  and  taking  most  of  the  risk  to  attract 
additional investors, including private ones.  
The EEE- F also serves as a role model for innovative financial instruments investing in cost-
effective and mature sustainable energy projects (with payback periods of up to 20 years) that 
can attract private capital while demonstrating the business case behind these investments and 
creating a credible track record. For instance, as of December 2014, the Fund's financing of 
EUR 114 million has allowed the mobilisation of an additional EUR 102 million on Energy 
efficiency, Renewable Energies and Clean urban transport projects, thereby generating EUR 
216 million of total investments. 

E - Other key points and issues 

 Three main issues for the implementation:  

Experience  with  the  EEE-F  is  very  useful  to  understand  the  dynamics  of  the  energy 
efficiency: 

199 The total value (EUR 12,4 million) of the two projects which have an equity investment component has been 
taken into account. 

163 

 
                                                 
1)  Financing  instruments  for  sustainable  energy  need  to  be  flexible,  reflecting  local 
market needs; 
The  gap  in  capacity  to  develop  and  finance  energy  efficiency  investments  can  be 
effectively  tackled  by  the  provision  of  project  development  assistance,  which  would 
enable  the  creation  of  a  verified  track  record  of  the  impacts  of  energy  efficiency 
investments, building the sector's credibility and investor confidence;
EU-level  instruments  should  address  common  barriers,  market  failures  and  impacts 
of  the  financial  crisis,  while  complementing  national  or  regional  schemes  in  place, 
avoiding duplication and avoiding crowding out private investments. 

 Main risks identified: 

o  In  line  with  the  requirements  of  the  amending  regulation  (EU  1233/2010),  the 
Commission has laid down clearly defined rules, terms and conditions as well as specific 
investment criteria in the Investment Guidelines to be followed by the Fund Manager and 
closely monitored by the governing boards.  

o  Significant  changes  to  the  founding  documents  of  the  fund,  the  Issue  Document  and 
Articles  of  Incorporation  need  to  be  approved  by  all  core  investors,  so  that  the 
Commission cannot be overruled. 

o  In addition, the Investment Guidelines of the EEE F may only be amended by resolution 
of  the  Management  Board  and  the  Supervisory  Board.  In  the  Supervisory  Board,  the 
Commission has two of four members, including the Chairperson who has a casting vote 
in case of a tied vote.   

o  From  an  operational  perspective,  governing  boards  hold  meetings  frequently  to  exert 

regular control on the fund's investment manager and its operations.  

o  It  is  essential  to  stress  that  the  investment  manager  is  charged  to  comply  with 
requirements, in particular procurement rules, and that the  fund put in place its own "risk 
management function"  and a "conflict of interest policy". 

o  As  regards  performance,  the  Investment  Manager's  fees  are  calculated  on  disbursed 
amount200 and against key performance indicators to allow for an alignment of interests. 

 General outlook: 

For 2015, the project pipeline contains 6 projects with a total volume of EUR 243 million for 
which the envisaged EEE F share is EUR 92 million. 
By now, the Fund has progressively established a solid track record of profitable investments 
(net profit registered from 2013) and is now actively looking for additional senior investors to 
leverage further the Union contribution.  

200  The  Investment  management  fee  is  calculated  as  a  percentage  of  the  average  total  outstanding  amount  of 
performing  investments  in  Partner  Institutions  and  Investments  in  Partner  Institutions  under  active  restructuring 
and/or collection within the quarter. 

164 

 
                                                 
5.  Financial Instruments in the Enlargement Countries  

5.1.  Guarantee  Facility  under  the  Western  Balkans  Enterprise  Development  and 

Innovation Facility  

A - 

Summary 

Policy DG in charge:   

Implementing DG in charge:   

DG NEAR 

DG NEAR 

Operating Body in charge: 

European Investment Fund 

Initial Overall Budget Envelope: 

Current Overall Budget: 

EUR 21,9 million 

EUR 21,9 million 

The  WB  EDIF  Guarantee  Facility  guarantees  SME  loan  portfolios  issued  by  commercial 
banks  for  new  SME  lending.  It  will,  therefore,  improve  SME  access  to  lending  and 
potentially lower the cost of borrowing in the Western Balkans, where access to loan finance 
remains one of the biggest difficulties for SMEs. 
The  Facility  is  implemented  under  indirect  management,  with  the  implementation  tasks 
entrusted to the EIF. The budget for the instrument amounts to EUR 21,9 million (of which 
EUR 1,9 million is a provision for fees to the EIF as the Manager and EUR 20 million is the 
guarantee capital). 
The  financial  intermediaries  have  been  selected  through  an  open  call  for  expression  of 
interest  published  in  2013  and  the  entire  amount  of  the  capital  had  been  allocated  to 
guarantees in the course of 2014, of which the last agreement was pending signature at the 
end  of  2014.  Following  the  signature  of  this  last  agreement,  the  leverage  effect  of  the 
Facility is expected to increase from 4,5 to around 5,5, which means that the budget of EUR 
21,9 million will mobilise some EUR 120 million of new loans. 
The Guarantee Facility presents a significant scale-up potential and will be replenished by 
EUR  17,5  million  in  2015.  The  provision  of  regulatory  capital  relief  in  2014  should  also 
further boost the potential of the Facility in pooling sufficient number of qualified applicants 
and the selection of the most suitable for the deployment of the instrument. 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA), and in particular Article 14(3) thereof (OJ L 210, 31.7.2006, p. 
82). 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

The  Financial  Instrument  of  the  European  Union  for  the  Guarantee  Facility  contributes  to 
achieving the objectives of enhancing socio-economic growth of the Western Balkans. 
Its  major  objectives  are  the  creation  of  preconditions  for  the  emergence  and  growth  of 
innovative  and  high-potential  companies.  The  instrument  guarantees  SME  loan  portfolios 
issued by commercial banks for new SME lending. This will entail improving SME access 
to lending and potentially lowering the cost of borrowing. 

165 

 
Under  the  instrument,  guarantees  of  first  loss  of  new  loans  to  targeted  SMEs  with  a 
guarantee rate of up to 70 % and a guarantee cap of up to 25 % in the overall loan portfolio 
can be used. Exact guarantee rate and cap is being determined on a case-by-case basis.  
The  instrument  started  in  2013  and  guarantees  loans  with  maturity  until  2023.  The 
geographical  coverage  is  the  Western  Balkans  in  line  with  the  Common  Implementing 
Regulation. 

Implementation Arrangements 
The Commission implements the instrument under indirect management in accordance with 
Article 139 of the Financial Regulation (through a Fiduciary and Management Agreement). 
Under  indirect  management,  the  Commission  may  entrust  implementation  tasks  to  the 
European Investment Bank (EIB) Group, including the European Investment Fund (EIF).  

Added value 
Under  the  respective  guarantee  agreements,  the  intermediary  banks,  commit  to  a  range  of 
benefits to be transmitted to the final beneficiaries, which is determined on a case-by-case 
basis.  These  include:  lower  interest  rates,  lower  collateral  requirements  or  longer  loan 
maturities. Under the EU guarantee, a new SME loan portfolio is to be created reaching out 
to those companies that would otherwise not be served by the intermediary. 

(c)  The financial institutions involved in implementation; 

The  Facility  is  implemented  under  indirect  management,  with  the  implementation  tasks 
entrusted  to  the  EIF.  The  financial  intermediaries  selected  through  an  open  call  for 
expression of interest in 2013, with whom guarantee agreements had been signed until end-
2014 include (figures in million EUR): 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

EUR 21 900 000 
EUR 21 900 000 

(e)  The performance of the financial instrument, including investments realised; 

The first three operational agreements with the banks were signed in December 2013. Two 
further agreements were subsequently signed in 2014 with UniCredit Serbia (in August) and 
CKB Montenegro (September). In total, they will make EUR 98 million available to SMEs 
in  these  countries,  allowing  them  to  benefit  from  reduced  collateral  requirements  for  new 
loans for investment and/or working capital. 

166 

 
 
 
 
 
Amount  of  financing  expected  to  be  provided 
by  the  instrument  (including  EU  contribution 
committed) to eligible final recipients, 
and  corresponding  number  of  eligible  final 
recipients; 

Amount of investments expected to be made by 
eligible final  recipients due to  the financing, if 
applicable 

Amount  of  financing  already  provided  by  the 
instrument to eligible final recipients, 
and the corresponding number of recipients; 

Amount  of 
investments  already  made  by 
eligible  final  recipients  due  to  the  financing 
provided through the instrument, if applicable. 

EUR 97 900 000  
N/A 

N/A 

EUR 32 460 000  
532 eligible FRs 

N/A 

(f)   An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

                                                                                                   In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months (cash equivalent) 

7 553 435 

13 015 331 

Term deposits > 3 month < 1 year (current assets) 

13 015 331 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

NA 

20 568 766 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments  and  on  called  guarantees  for 
guarantee instruments; 

NA 

167 

 
 
 
 
 
 
(k)  The target leverage effect, and the achieved leverage effect; 

The  financial  envelope of  EUR  21,9  million is  estimated  to  leverage  a  total  investment  of 
around 120 million once the EU guarantee is fully allocated, implying the leverage factor of 
5,5. So far, the achieved leverage as at 31/12/2014 is 1,5 (amount of financing of EUR 32,46 
million  provided  so  far  to  final  recipients,  supported  by  EUR  21,9  million  of  Union 
contribution).  
The expected leverage based on signed agreements with financial intermediaries is 4,5 (EUR 
97,9 million expected to be provided, supported by 21,9 million of Union contribution). 

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

Access  to  loan  finance  remains  one  of  the  biggest  difficulties  for  SMEs  in  the  Western 
Balkans, in spite of SMEs becoming the most efficient segment of their transition economies 
and  a  pillar for  growth  and  employment.  This  is  borne  out  by  high  interest  rates  and  high 
collateral requirements. 
Additionally,  access  to  bank  financing  for  SMEs  in  their  early  stage  is  almost  impossible 
due to the lack of financial history of the SMEs.  
In recent years access to finance of Western Balkans SMEs has increased a lot, in particular 
thanks to the rapid development of EIB SME loans: 

However,  there  is  a  segment  of  the  SME  market,  made  of  start-up,  newly  established 
enterprises  or  in  general  SMEs  that  do  not  have  the  appropriate  financial  history  or  are 
lacking  sufficient  level  of  collaterals  and  thus  fall  outside  the  current  credit  criteria  of  the 
commercial banks. The GF instrument is targeting this market segment in priority.  
The  benefits  from  the  GF  could  take  a  number  of  forms  and  thus  respond  to  the  key 
constraints  in  each  beneficiary.  However,  all  of  the  benefits  will  improve  the  investment 
climate by: 

168 

 Western Balkans and Croatia - SME lending - 2007-2011 (*)010020030040050060070020072008200920102011 (*)Allocated /disbursed amount (EUR m)-3000300600900120015001800Number of allocationsTotal allocated amount (EUR m)Total disbursed amount (EUR m)Total number of allocations 
 
  reducing collateral requirements;  
  creating lower cost of borrowing for SMEs; 
  resulting in longer loan maturities. 

In the case of innovative companies, the availability of public sector supported guarantees is 
usually  a  precondition  for  access  to  credit.  Thus  the  GF  is  looking  to  bolster  lending  into 
start-up firms in the medium term. 
By  the  end  of  2014,  the  banks  have  already  provided  to  SMEs  one  third  of  the  intended 
portfolio  volumes  under  the  Guarantee  Facility,  i.e.  EUR  32  460  000  out  of  EUR  97  900 
000, showing a balanced take-up across the countries. In total, 532 SMEs where served in a 
wide array of sectors, with the average loan maturity between 2 and 3 years and the average 
loan size of close to EUR 60 000. 
GF  is  managed  by  the  European  Investment  Fund  (EIF).  ElF  is  the  European  Union  body 
specialised in SME risk financing and is member of the EIB Group201.  

E -  Other key points and issues 

 Main issues for implementation: 

o Provision of regulatory capital relief:  

The provision of regulatory capital relief under the Guarantee Agreements has been 
identified as a pivotal characteristic and its importance in the pooling of a sufficient 
number  of  qualified  applicants  and  the  selection  of  the  most  suitable  ones  for  the 
deployment of the instrument cannot be overemphasised. What is more, in individual 
cases  of  Intermediaries  that  have  been  pre-selected  and  entered  legal  negotiations 
with  EIF,  it  has  been  presented  as  sine  qua  non  condition  for  the  conclusion  of 
negotiations with the signature of a Guarantee Agreement if the benefit transferred to 
the  SMEs  includes  pricing  reduction.  This  should  be  viewed  in  the  context  of  the 
implementation  of 
that  strengthens  bank  capital 
requirements.  Against  this  background,  in  2014,  DG  Enlargement  consented  to  the 
granting  of  the  regulatory  capital  relief  to  the  intermediaries  under  the  Guarantee 
Facility.  This  was  done  on  the  basis  of  the  provisions  of  the  Fiduciary  and 
Management Agreement that stipulates that “in order to further the objective of the 
Action,  Guarantees  should  aim 
for 
Intermediaries”. 

the  Third  Basel  Accord 

regulatory  capital 

to  provide 

relief 

o Increase of budgetary allocation:   

The budgetary allocation of EUR 20 million has been fully committed to operations 
by the end of 2014 (with one deal pending signature till 1Q 2015). Under the current 
call for expression of interest, the aggregate amount under the applications received 
exceeded  the  budget  available.  It  should  also  be  noted  that  even  under  the  signed 
operational  agreements,  the  allocated  budget  per  intermediary  is  less  than  the  one 
requested by the intermediary, thus, leading to the deployment of portfolios of lower 
volume. The build-up of the loan portfolio of EUR 120 million should be seen in the 
broader framework of more than 300 thousand SMEs of the region that contributed 
approximately  EUR  22  billion  to  the  GDP  of  the  Western  Balkan  Beneficiary 

201  As  Europe's  leading  developer  of  risk  financing  for  entrepreneurship  and  innovation,  ElF  delivers  a  wide 
spectrum of SME financing solutions through selected intermediaries. By sharing the risk in SME development, 
ElF  promotes  the  implementation  of  EU  policies,  particularly  in  the  field  of  entrepreneurship,  technology, 
innovation and regional development. 

169 

 
                                                 
Economies in 2012. Hence, the multi-country IPA 2014 allocated a further EUR 17,5 
million to the instrument. 

 Main risks identified: 

Contractual  and  process  compliance  is  ensured  through  continuous  reporting  and 
monitoring  after  the  signature  of  the  operational  agreements  in  accordance  with  the 
EIF  internal  procedures.In  order  to  encourage  utilisation,  a  commitment  fee  will  be 
charged if not at least a contractually set percentage of the Agreed Portfolio Volume 
(the  maximum  loan  portfolio  volume  that  should  be  supported)  is  reached. 
Furthermore, a trigger event shall occur if halfway through the availability period the 
committed amount of loans in the portfolio is less than a contractually set percentage 
of the Agreed Portfolio Volume – in such a case, EIF may forbid the inclusion of more 
loans in the portfolio. 

 General outlook: 

The current call for expression of interest expired on 30 June 2014. As indicated in the 
call, EIF may, at its sole discretion, determine that the deadline will end on an earlier 
date  or  will  be  extended,  depending,  inter  alia,  on  the  availability  of  the  budgetary 
resources  for  the  West-Balkans  EDIF  Guarantee  Facility.  EIF  has  received  nine 
applications  (more  than  one  for  some  of  the  WB  Beneficiary  Economies)  and  two 
expressions  of  interest.  On  this  basis  the  2014  Multi-country  Programme  IPA 
allocation  was  made  and  is  to  be  contracted  in  2015  with  an  intention  to  serve  the 
existing  pipeline.  Utilisation  of  this  and  further  replenishments  will  however  depend 
on the rules which will ensure compliance with the legal framework in place, taking 
into  account  the  transition  from    the  old  and  to  the  new  Financial  Regulation,  and 
which remain to be decided. 

5.2. Enterprise  Expansion  Fund  (ENEF)  under  the  Western  Balkans  Enterprise 

Development and Innovation Facility (EDIF)  

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

DG NEAR 

DG NEAR 

Operating Body in charge: 

European Investment Fund as trustee for the 
European Commission 

Initial Overall Budget Envelope: 

EUR 11,0 million 

Current Overall Budget: 

EUR 11,0 million 

ENEF will target SMEs with high growth potential located in the Western Balkan countries, 
with  the  objective  of  achieving  long-term  capital  growth.  The  strategy  envisaged  for  ENEF 

170 

 
will  be  a  continuation  of  the  one  successfully  developed  by  EBRD  with  the  existing  LEF 
facility throughout the region. 
•Sector: Generalist – investing in all eligible economic sectors 
•Stage:  Expansion  and  development  capital.  The  team  will  adopt  a  hands-on  approach  to 
foster the implementation of best market practices as promoted by EBRD and EIF. 
•Geographical  focus:  Western  Balkan  countries  (Albania,  Bosnia  and  Herzegovina,  Croatia, 
the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Kosovo 202). 
•Capital deployment: ENEF will provide equity and quasi-equity as well as convertible bonds 
to encourage the expansion of high growth SMEs in the Western Balkans and will create an 
investment  portfolio  with  a  target  capital  of  EUR  55  million  (EUR  38,5  million  initial), 
associated  with  an  EBRD  EUR  55  million  co-financing  facility  from  the  Local  Enterprise 
Facility  (LEF)203.  Portfolio  is  envisaged  comprising  a  group  of  app.  15-20  companies  with 
deals approximately ranging from EUR 1-8 million with a total amount of EUR 110 million. 

B - Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA), and in particular Article 14(3) thereof (OJ L 210, 31.7.2006, p. 
82). 

(b)  Description of  the financial instrument,  implementation arrangements  and the 
added value of the Union contribution; 

The Financial Instrument of the European Union for the Enterprise Expansion Fund (ENEF) 
contributes to achieving the objectives of enhancing socio-economic growth of the Western 
Balkans.Its major objectives are the creation of preconditions for the emergence and growth 
of  innovative  and  high-potential  companies.  The  instrument  will  finance  development  and 
expansion capital in established SMEs with high-growth potential in their respective markets 
through equity participation. Under the instrument, equity and quasi-equity investment can 
be used. 

Implementation arrangements 
The Commission is implementing the instrument under indirect management in accordance 
with Article 139 of the Financial Regulation. Under indirect management, the Commission 
may entrust implementation tasks to the European Investment Bank (EIB) Group, including 
the  European  Investment  Fund  (EIF).  The  instrument  is  implemented  under  indirect 
management  with  the  implementation  tasks  entrusted  to  the  EIF.  ENEF  Management:  the 
European  Bank  for  Reconstruction  and  Development  (EBRD)  is  the  Investment  Advisor 
responsible  for  origination,  structuring,  executing  and  monitoring  investments.  An 
Independent  Investment  committee  decides  on  investment  and  divestment  proposals.  The 
fund is supervised by the Board of Directors, comprised of EIF, EBRD and DEG.204 EBRD 
manages  ENEF  through  its  offices  in  each  beneficiary  country.ENEF  was  formally 

202 This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ 
Opinion on the Kosovo Declaration of Independence. 
203 EBRD developed the Local Enterprise Facility (LEF) in order to provide various financing instruments such as 
debt, quasi-equity and equity financing to small and medium-sized enterprises (SMEs) in the Western Balkans. So 
far, the LEF has reached a portfolio of EUR 165m invested in 70 deals. Expansion, restructuring or acquisitions of 
existing private businesses (both locally or internationally controlled) are all eligible investments according to the 
LEF. 
204 Deutsche Investitions- und Entwicklungsgesellschaft 

171 

 
                                                 
incorporated under Luxembourgish Law on 14th of February 2014 and in the course of the 
year  concentrated  on  deal  origination.  The  investments  under  the  instrument  will  start  in 
2015. Following an investment period of maximum 5 years, its portfolio will be wound up in 
a subsequent period of maximum 5 years (duration until 2025). The geographical coverage 
will be the Western Balkans in line with the Common Implementing Regulation. 

EU added value 
At  the  level  of  the  finance-pooling,  ENEF  will  add  value  through  attracting  private  sector 
investors to what is  perceived  as a  risky  and complex SME market (the  Western Balkans) 
with small, fragmented economies. Furthermore, building on the EBRD experience, ENEF 
will  diversify  sources  of  financing  for  the  high-potential  companies,  enabling  growth  and 
employment creating investments. 

(c)  The financial institutions involved in implementation; 

  EIF – acting as a trustee on behalf of DG NEAR's contribution and investor in ENEF 
  EBRD – Investment Adviser of ENEF as well as its investor 
  The DEG – Investor in ENEF 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014                          
 Aggregate budgetary payments as at 31/12/2014 

EUR 11 000 000  
EUR 10 400 000 

 Additional Information: 
Out  of  the  EUR  11,0  million  in  the  financial  envelope  envisaged  for  the  instrument,  EUR 
1,1 million is a  provision for fees to the EIF as the Trustee for the Commission,  EUR 0,4 
million is a provision for technical assistance and EUR 9,5 million is the equity. EUR 10,4 
million was paid out to the EIF in its function as a trustee in December 2012. 

(e)  The performance of the financial instrument, including investments realised; 

The  investments  under  the  instrument  had  not  started  in  2014  but  EBRD  had  built  up  a 
pipeline of deals which were undergoing due diligence as at 31/12/2014. 

Amount  of  EU  Contribution  committed 
financial intermediaries, 
and 
intermediaries;  

the  corresponding  number  of 

financial 

to 

Amount  of  financing  expected  to  be  provided  by 
financial intermediaries to eligible final recipients, 
and expected number of eligible final recipients;  

Amount  of 
financing  already  provided  by 
financial intermediaries to eligible final recipients, 
 and  the  corresponding  number  of  eligible  final 
recipients; 

Amount  of  investments  already  made  by  eligible 
final  recipients  due  to  the  received  financing,  if 
applicable. 

172 

EUR 9 500 000  
1 FI 

EUR 77 000 000  
10-14 

No financing was provided in 2014, due 
diligence was done however allowing the 
first investments in the first half of 2015, of 
the approximate value of EUR 15 million to 
3 companies in 3 different countries. 

N/A 

 
 
             
(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

(g)  The balance of the fiduciary account; 

For Equity Instruments                                                           (in EUR) 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 

Equity investment (see also point i)205 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments;  

 Not applicable 

4 528 019 

5 418 718 

5 418 718 

 24 004 

9 970 741 

(i)  The value of equity investments, with respect to previous years; 

The first equity investment in ENEF by EIF on behalf of the Commission of EUR 74 766 was 
made in 2014 with NAV at 31.12.2014 of EUR 24 004. 

(j)  The  accumulated  figures  on  impairments  /  on  called  guarantees  for  guarantee 
instruments; 

Not applicable 

(k)  The target leverage effect, and the achieved leverage effect; 

The  financial  envelope  of  EUR  11,0  million  shall  leverage  a  total  investment  by  other 
investors  in  ENEF  targeting  an  amount  of  EUR  110  million  approximately  of  finance  to 
SMEs with initial fund size of EUR 38,5 million. Given the association of ENEF, of which 
the  target  fund  size  is  EUR  55  million,  to  EBRD’s  co-financing  facility  (Local  Enterprise 
Facility)  which  will  always  match  ENEF  investment  at  a  ratio  of  1:1,  the  target  leverage 
factor is  10. The achieved leverage as  at end 2014, given the initial  fund size, is  7 (initial 
fund size of EUR 38,5 million matched by the EBRD, divided by the Union contribution of 
EUR 11 million). 

205  Furthermore,  non-current  assets  (such  as  shares  and  other  variable-income  securities)  are  already  reported 
under point (i) ‘the value of equity investments’. 

173 

 
 
 
 
 
 
                                                 
D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

There is a growing demand in the markets of the Western Balkans for tailor-made financing 
(complementary to local banks) to finance expansion capital of local SMEs. The market in the 
WB has been unable to provide successful experiences with (quasi) equity funds at regional 
level likely because of: (i) perceived risks, (ii) cost associated to a regional operation in 7-8 
countries, and (iii) lack of fund managers with proven track record in the region.  
The  Enterprise  Expansion  Fund  will  provide  equity  and  quasi-equity  as  well  as  convertible 
bonds  to  encourage  the  expansion  of  high  growth  SMEs  in  the  Western  Balkans  and  will 
create  an  investment  portfolio  with  a  target  capital  of  EUR  55  million  (EUR  38,5  million 
initial),  associated  with  an  EBRD  EUR  55  million  co-financing  facility  from  the  Local 
Enterprise  Facility  (LEF)206.  Portfolio  is  envisaged  comprising  a  group  of  app.  15-20 
companies  with  deals  approximately  ranging  from  EUR  1-8  million  with  a  total  amount  of 
EUR  110  million,  but  with  the  possibility  to  finance  marginally  smaller  or  larger  deals, 
depending on market needs and financing gaps, and provided that deals are in line with ENEF 
strategic and operational objectives. 

E -  Other key points and issues 

 Three main issues for the implementation: 

o  Quality Deal flow: The sufficient deal flow of potential investees is necessary to 
allow ENEF to invest in viable companies with high growth prospects within the 
defined  Investment  Period.  Traditionally  the  economies  in  the  WB  region  are 
characterised by companies that are less innovative with low value added products 
which naturally makes it more difficult to identify viable investee companies. 
o  Lack  of  knowledge  /  access  to  alternative  funding  instruments  in  the  target 
region:  The  predominant  reliance  of  entrepreneurs  on  traditional  banking 
products  is  an  inherent  characteristic  of  certain  economies.  Such  reliance, 
however,  makes  entrepreneurs  less  used  and  willing  to  consider  alternatives  to 
traditional  funding  such  as  equity  funds  considering  them  as  “too  complicated”. 
Therefore it could be expected to take more time from deal identification to deal 
closure in the region than in more developed economies. 

o  Lack  of  exit  routes:  Due  to  the  characteristics  explained  above  and  the  remote 
interest of equity funds in the WB region, it will be substantially more difficult to 
realise  exits  than  in  other  economies.  Thus  it  is  considered  more  appropriate  to 
use  quasi-equity  instruments  which  naturally  pre-empt  an  exit  route  in  their 
structure.  Another  consideration  with  a  view  of  future  instruments,  is  that  they 
could  act  as  a  catalyst  and  attract  the  attention  of  regional  and  pan-European 
equity players to the WB region by co-investing with them on a deal-by-deal basis 
while providing certain incentives for the participating investors. The latter could 
be  used  to  efficiently  address  both,  the  shortage  of  private  capital  and  the 

206 EBRD developed the Local Enterprise Facility (LEF) in order to provide various financing instruments such as 
debt, quasi-equity and equity financing to small and medium-sized enterprises (SMEs) in the Western Balkans. So 
far, the LEF has reached a portfolio of EUR 165m invested in 70 deals. Expansion, restructuring or acquisitions of 
existing private businesses (both locally or internationally controlled) are all eligible investments according to the 
LEF. 

174 

 
                                                 
difficulties  of  realising  exits  due  to  lack  of  critical  mass  of  follow-on  equity 
investors. 

 Main risks identified: 

o  Fund  Management  expertise:  The  local  expertise  in  structuring  and  managing 
equity  funds  is  largely  underdeveloped  in  the  WB  Region  leading  to  a  very 
compressed  group  of  individuals  that  can  adequately  make  and  subsequently 
manage  venture  capital  investments.  In  order  to  address  such  a  shortfall, 
involvement of specialised investors (International Finance Institutions) is sought 
to  ensure  a  responsible  lay-out  and  implementation  of  best  industry  practices  in 
fund management and selection of the right combination of experts and skill sets 
for  management  of  such  instruments.  In  the  case  of  ENEF,  EBRD  has  been 
selected  as  Investment  Adviser  responsible  for  sourcing  and  structuring  deals 
which are approved by an independent Investment Committee. The overall control 
and  ultimate  responsibility  of  ENEF  rests  within  its  Board  of  Directors 
comprising the representatives of EIF, DEG and EBRD. 

 General outlook: 
o  Following  the  1st  closing  of  ENEF,  EBRD  as  Investment  Adviser  has  been 
actively involved in pipeline building and a number of deals had undergone due 
diligence in the course of 2014. This has however not led to investments in 2014; 
first investments being expected in early 2015. 

5.3. Enterprise  Innovation  Fund  (ENIF)  under  the  Western  Balkans  Enterprise 

Development and Innovation Facility (EDIF)  

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

DG NEAR 

DG NEAR 

European Investment Fund as trustee for the 
European Commission 

Initial Overall Budget Envelope: 

EUR 21,2 million 

Current Overall Budget: 

EUR 21,2 million 

ENIF  will  benefit  SMEs  in  the  region  through  attracting  private  sector  investors  to  what  is 
perceived as a risky and complex SME market (the Western Balkans) with small, fragmented 
economies.  Furthermore,  ENIF  will  diversify  sources  of  financing  for  the  innovative 
companies, enabling growth and employment creating investments.  
ENIF  is  particularly  innovative  in  that  it  is  to  finance  the  riskiest  segments  of  the  SME 
population,  innovative  SMEs  and  start-ups/early  stage  development,  typically  of  interest  to 
venture capital investors, who have so far avoided the region. Hence, ENIF will also serve as 
a market test for the venture capital investment potential in the region. 
ENIF expects to create an investment portfolio comprising a group of app. 20 to 50 innovative 
companies  (depending  on  its  final  closing)  at  various  stages  of  business  development,  from 
start-up to early expansion. ENIF will provide equity and quasi-equity funding to SMEs.  

175 

 
A  diversified  portfolio  of  around  20-25  companies  from  the  entire  Western  Balkans 
geography, should be built with an average investment per company in the range of EUR 1 – 
1,5 million (provided in several tranches). At the same time, an amount of EUR 1,5 million 
within ENIF is to be invested exclusively in 25-30 companies in pre-seed and seed companies 
across the entire Western Balkans Region.  
ENIF will target innovative SMEs in all technology sectors with potential for high growth.  In 
addition,  the  Fund  envisages  paying  special  attention  to  the  ICT  sectors  (software,  telecom, 
consumer electronics, mobile technologies, Internet and media) due to their high innovation 
potential  in  the  Western  Balkans  Region.  The  generalist  approach  of  the  ENIF  Manager  in 
terms of stage and sectors is in line with the Western Balkans entrepreneurial market that is 
still  too  immature  to  allow  for  a  more  focussed  strategy.  At  the  same  time,  due  to  the 
practically inexistent competition on this market, the Fund should manage to benefit from the 
first mover advantage and attract the best opportunities early on. 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA), and in particular Article 14(3) thereof (OJ L 210, 31.7.2006, p. 
82). 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

The Financial Instrument of the European Union for the Enterprise Innovation Fund (ENIF) 
contributes to achieving the objectives of enhancing socio-economic growth of the Western 
Balkans. Its major objectives are the creation of preconditions for the emergence and growth 
of  early  stage  innovative  companies  through  equity  investments.  The  instrument  will 
finance early to development and, possibly, up to early expansion stage capital in innovative 
SMEs. Under the instrument, equity and quasi-equity investment can be used. 

Implementation Arrangements 
The  Commission  will  implement  the  instrument  under  indirect  management  in  accordance 
with Article 139 of the Financial Regulation. Under indirect management, the Commission 
may entrust implementation tasks to the European Investment Bank (EIB) Group, including 
the  European  Investment  Fund  (EIF).  The  instrument  will  be  implemented  under  indirect 
management, with the implementation tasks entrusted to the EIF. 
Investments  under  the  instrument  will  start  in  2015.  Following  an  investment  period  of 
maximum  5  years,  its  portfolio  will  be  wound  up  in  a  subsequent  period  of  maximum  5 
years (up to 2025). The geographical coverage will be the Western Balkans in line with the 
Common Implementing Regulation. 
Funds must be committed by all stakeholders at outset and will be drawn down over years. 
Reflows of funds will be either distributed to investors or, reused. 
ENIF management: Given the expertise needed to manage such a fund, an international Call 
of  Expression  of  Interest  was  published  and  an  appropriate  manager  was  selected  by  the 
European  Investment  Fund  in  the  end  of  2013.  Since  local  knowledge  and  contacts  are 
important  elements  of  the  viability  of  the  fund,  the  fund  manager  will  be  required  to 
demonstrate  its  ability  to  ensure  full  regional  coverage.  Individual  investment  and 
divestment decisions are to be taken by the fund manager on commercial grounds following 
industry’s  practice  of  the  arm’s  length  approach  under  which  the  investors in  the  fund  are 
not responsible for taking investment / divestment decisions. 

176 

 
Following  the  appointment  of  the  Fund  Manager,  EIF  has  concentrated  on  completing  the 
commercial and legal negotiations whilst supporting the Fund Manager in selecting the most 
suitable legal jurisdiction to incorporate the Fund. The EDIF Platform Advisory Group has 
decided to domicile ENIF in the Netherlands with the expected launch of the instrument in 
the first half of 2015.The  ENIF incorporation should  consequently be expected in  2015 in 
the Netherlands. 

EU added value 
At  the  level  of  the  finance-pooling,  ENIF  will  add  value  through  attracting  private  sector 
investors to what  is  perceived  as a risky and complex SME market (the  Western Balkans) 
with  small,  fragmented  economies.  Furthermore,  ENIF  will  diversify  sources  of  financing 
for the innovative companies, enabling growth and employment creating investments. ENIF 
is particularly innovative in that it is to finance the riskiest segments of the SME population, 
innovative  SMEs  and  start-ups/early  stage  development,  typically  of  interest  to  venture 
capital  investors,  who  have  so  far  avoided  the  region.  Hence,  ENIF  will  also  serve  as  a 
market test for the venture capital investment potential in the region. 

(c)  The financial institutions involved in implementation; 

 EIF – acting as a trustee on behalf of DG NEAR’s contribution and investor in ENIF 
 EBRD – Investor in ENIF 
 KfW – Investor in ENIF 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

      EUR 21 200 000  
      EUR 21 200 000 

Additional Information: 
Out  of  the  EUR  21,2  million  financial  envelope  envisaged  for  the  instrument,  EUR  0,9 
million is a provision for fees to the EIF as the Trustee for the Commission, EUR 6,2 million 
is  a  provision  for  technical  assistance  and  EUR  14,1  million  is  earmarked  for  the  equity 
investments.  

(e)  The performance of the financial instrument, including investments realised; 
ENIF  is  expected  to  be  incorporated207  in  2015.  The  instrument  has  not  started  as  at 
31/12/2014.  The  EDIF  Platform  Advisory  Group  has  decided  to  domicile  ENIF  in  the 
Netherlands with the expected launch of the instrument in the first half of 2015. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

207 Legally established 

177 

 
 
                                                 
(g)  The balance of the fiduciary account; 

For Equity Instruments                                                        (in EUR) 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 

Equity investment (see also point i)208 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments;  

Not applicable 

4 034 260 

17 221 263 

17 221 263 

21 255 523 

(i)  The value of equity investments, with respect to previous years; 

Not applicable 

(j)  The  accumulated  figures  on  impairments  /  on  called  guarantees  for  guarantee 
instruments; 

Not applicable 

(k)  The target leverage effect, and the achieved leverage effect; 

The  financial  envelope  of  EUR  21,2  million  shall  leverage  a  total  investment  of 
approximately  EUR  40  million  (equalling  a  total  fund  size),  implying  the  target  leverage 
factor of 2. 

D - 

Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

In the Western Balkans, venture capital is either absent or its availability is very limited. The 
Market  Assessment  prepared  by  EIF  and  Venturexchange  Ltd  in  November  2010  finds  that 
venture capital market is in an embryonic stage in terms of number of fund managers as well 
as experience and best market practices. The Assessment indicates a market gap of app. EUR 
20million  per  year  as  well  as  necessity  of  further  reforms  designed  to  create  an  enabling 
environment and supporting ecosystem for equity financing. 
Currently,  only  small  financial  allocations  have  been  made  into  equity  investment 
instruments. They are mainly made available by IFIs for specific sectors in a sporadic manner 

208  Furthermore,  non-current  assets  (such  as  shares  and  other  variable-income  securities)  are  already  reported 
under point (i) ‘the value of equity investments’. 

178 

 
 
 
 
 
 
 
                                                 
and without them, most companies in the Western Balkans will continue to face difficulties in 
accessing finance needed to develop and market their innovative products. Companies in the 
seed stage find themselves in even more difficult situation as no structured means of access to 
finance  are  available  thus  either  discouraging  entrepreneurship  or  making  innovative 
entrepreneurs relocating to more developed markets in order to seek finance and mentorship. 
At the same time,  R&D expenditure is low thus preventing the expansion of the R&D base 
and  the  technology  transfer  record  is  poor  and  closing  the  door  for  applying  different 
scientific solutions in industry. According to the 2010-2011 World Economic Forum Global 
Competitiveness  Index, the  Western  Balkans,  with  the  exception  of  Montenegro,  performed 
poorly in the field of innovation and the availability of venture capital, despite the relatively 
good quality of scientific research institutions and progress in the economy.  
As a result, innovative SMEs are not sufficiently stimulated and supported to commercially-
exploit research excellence. This feeds into the wider picture where the private sector alone 
finds  it  difficult  to  build  an  economy  based  on  expertise  and  knowledge.  Furthermore,  the 
global  economic  crisis  has  particularly  hit  innovative  companies.  It  is  more  difficult  for 
innovative  businesses  to  reduce  their  cost  base  whilst  maintaining  their  research  and 
development  activities.  Innovative  and  R&D  focused  SMEs  are,  by  definition,  highly 
specialised, and  often  have  a  weaker  financial  structure  and  as  a  result  a  lower  or  no  credit 
rating. This means that they are usually considered high risk and more vulnerable to market 
turbulence. Equity investment instruments can address these shortcomings to some extent and 
at least set the basis for further development of those companies. 
The Enterprise Innovation Fund expects to create an investment portfolio comprising a group 
of  app.  20  to  50  innovative  companies  (depending  on  its  final  closing)  at  various  stages  of 
business  development,  from  start-up  up  to  early  expansion.  ENIF  will  provide  equity  and 
quasi-equity funding to SMEs.  
A  diversified  portfolio  of  around  20-25  companies  from  the  entire  Western  Balkans 
geography, should be built with an average investment per company in the range of EUR 1 – 
1,5 million (provided in several tranches), targeting a stake at entry of ca. 30%. At the same 
time,  an  amount  of  EUR  1,5  million  within  ENIF  is  to  be  invested  exclusively  in  25-30 
companies  in  pre-seed  and  seed  companies  ("Seed  Pocket"209)  across  the  entire  Western 
Balkans  Region.  Together  with  the  Seed  Pocket,  the  total  number  of  companies  to  be 
supported through ENIF at minimum fund size is expected to be 45-55.  

E -  Other key points and issues 

 The three main critical issues for the implementation: 

o Insufficient Deal flow: The sufficient deal flow of potential investees is necessary to 
allow ENIF to invest in innovative and viable companies with high growth prospects 
within  the  defined  Investment  Period.  Traditionally,  the  economies  in  the  Western 
Balkans  region  are  characterised  by  companies  that  are  less  innovative  with  low 
value add products which naturally makes it more difficult to identify viable investee 
companies which is even more applicable to companies in seed / start-up phase. To 
partially address such a problem and ensure building sufficient and quality deal flow 
to  the  Fund,  it  has  been  envisaged  to  allocate  exclusively  EUR  1,5  million  under 
ENIF to be invested in up to 30 pre-seed/seed companies. The latter should be used 
to  test  the  pre-seed  /  seed  market  in  the  Western  Balkans  Region  with  a  view  of 
designing and implementing a dedicated facility in the future; 

209 Seed Pocket will fund seed capital, i.e. the initial capital used to start a business. 

179 

 
                                                 
o Anchor investor participation: Fundraising for venture capital has been extremely 
difficult  in  Europe  following  the  crisis  with  2010  and  2011  seeing  the  bottom  of 
investor  participation  in  such  asset  class.  The  situation  in  the  Western  Balkans 
Region  is  even  more  difficult  stemming  from  the  underdeveloped  market, 
insufficient deal flow and lack of fund management expertise and track record on the 
market.  Against  this  background,  participation  of  an  anchor  investor  (such  as 
International  Finance  Institution)  is  a  catalyst  of  other  private  capital  by  ensuring 
expertise and implementation of best industry practice. This is the approach taken by 
ENIF to attract private capital and achieve leverage; 

o Lack  of  other  venture  capital  investors  to  make  follow-on  /  co-investments: 
Generally,  venture  capital  investors  seek  the  participation  of  other  such  investors 
(syndication) in follow-on rounds as a company develops more and requires further 
capital  injections  and  expertise.  Due  to  the  characteristics  explained  above  and  the 
remote interest of equity funds to the Western Balkans region, it will be substantially 
more difficult to attract follow-on investors that are normal for venture capital funds, 
than in more developed markets. To address this problem future instruments could be 
contemplated to act a catalyst and attract the attention of regional and pan-European 
equity players to the Western Balkans region by co-investing with them on a deal-by-
deal basis while providing certain incentives for the participating investors. The latter 
could  be  used  to  efficiently  address  both  the  shortage  of  private  capital  and  the 
difficulties  of  co-investing  stemming  lack  of  sufficient  and  sizeable  follow-on 
venture capital investors in the region. 

 Main risks identified: 

o Fund Management expertise: as outlined above the expertise in the venture capital 
industry is largely underdeveloped in the Western Balkans region leading to a very 
compressed group of individuals that can adequately make and subsequently manage 
venture  capital  investments;  In  order  to  address  such  a  shortfall,  involvement  of 
specialised investors (International Finance Institutions) is sought to ensure the lay-
out and implementation of best industry practices in fund management and selection 
of  the  right  combination  of  experts  and  skill  sets  for  management  of  such 
instruments. In the case of ENIF, EIF has been appointed to select appropriate fund 
manager and provide support in setting up the fund;  

o Investors  in  the  fund:  ENIF  was  initially  structured  so  that  each  of  the  IPA 
beneficiary governments will make financial contribution in ENIF corresponding to 
its  GDP.  Given  the  pioneer  nature  of  such  investments  by  the  beneficiary 
governments,  it  remains  to  be  seen  how  they  will  be  able  to  mobilise  funds  and 
participation modalities in ENIF. EIF works closely with all of them with a view to 
mitigating  these  risks.  In  addition, KfW  identified  investment  constraints  related  to 
the ODA eligibility requirements linked to their participation. 

 General outlook: 

o Following  the  appointment  of  a  Fund  Manager  of  ENIF,  the  EIF  has  lead  the 
commercial and legal negotiation process to be finalised with the incorporation and 
first closing of the fund, expected in early 2015. The Fund Manager (RSG Capital) is 
already a known-name based on the fact that it manages the only Fund dedicated to 
making venture capital investments in the Western Balkans region and has positive 
track record. It should be expected that the Fund Manager quickly build pipeline of 
companies subsequently after the formal incorporation of ENIF. 

180 

 
5.4. European Fund for Southeast Europe (EFSE)  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:  

Operating Body in charge: 

DG NEAR 

DG NEAR 

European Investment Fund as trustee for the 
European Commission 

Initial Overall Budget Envelope: 

Current Overall Budget: 

EUR 26 234 995 

EUR 87 684 935  

EFSE is a public-private-partnership, attracting private capital and thereby leveraging public 
donor funds. EFSE extends loans to local commercial banks and micro-finance institutions in 
the Western Balkans, Turkey and Eastern Neighbourhood for on-lending to micro and small 
enterprises and households. EFSE is the worldwide model of catalysing finance for small and 
medium enterprises. 
The  fund  has  performed  well  despite  the  economic  crisis  and  the  overall  financial  sector 
situation. ROM and monitoring "on situ" confirms that the fund has a very high penetration 
down to the end borrowers. NPLs are limited and frequently monitored. The total amount of 
finance to end borrowers exceeded EUR 4 billion, as at 31/12/2014, of which some EUR 3,2 
billion in the Enlargement region. 
EFSE  is  at  the  "cruising  speed"  and  while  Commission  should  not  withdraw  or  transfer  its 
shares,  on  which  the  financial  construct  lies,  it  remains  to  be  assessed  whether  the  EU 
participation in EFSE would need to be increased. 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA) (OJ L 210, 31.7.2006, p. 82). 
European  Fund  for  Southeast  Europe  (EFSE),  Community  Assistance  for  Reconstruction, 
Development and Stabilisation (CARDS) 2006/018-264, IPA 2007/019-344, IPA 2008/020-
300 and IPA 2009/021-373. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  EFSE  is  a  form  of  public-private-partnership.  The  Fund  aims  at  fostering  economic 
development  and  prosperity  primarily  in  the  Southeast  Europe  region  but  also  in  the 
European  Eastern  Neighbourhood  region  through  the  sustainable  provision  of  additional 
development  finance.  Its  objective  is  to  attract  capital  from  the  private  sector  thereby 
leveraging  public  donor  funds  that  will  assist  the  development  of  the  private  sector  in  the 
region. EFSE extends loans to local commercial banks and micro-finance institutions in the 
Western Balkans for on lending to micro and small enterprises and households.  

Implementation Arrangements 
European Investment Fund (EIF) manages the EFSE.  

181 

 
 
Furthermore, the EFSE operates through financial intermediaries in the region of Southeast 
Europe, including the European Eastern Neighbourhood Region. These include commercial 
banks,  microfinance  banks,  microcredit  organisations  and  non-bank  financial  institutions 
such as leasing companies. They on-lend funds received from EFSE to the Fund’s ultimate 
target group: micro and small enterprises and low-income private households. All of EFSE’s 
partner lending institutions are carefully selected: In addition to being financially stable, the 
institutions must treat their clients fairly and in a transparent manner. 
The  EFSE  also  has  a  Development  Facility  endowed  with  grants  and  replenished  with 
reflows  to  enable  technical  assistance,  consulting  and  training  measures  to  strengthen 
financial institutions in the region. It aims to enhance the long-term development impact of 
the  Fund’s  investments.  The  EU  contribution  does  not  cover  the  Development  Facility 
funding. 

Added value  
The EFSE generates impacts at three different levels: 

 supporting micro and small enterprises as the backbone of the local economies, thereby 

contributing to generating income and creating employment, 

 satisfying the basic need of adequate shelter, 
 strengthening local financial markets. 

(c)  The financial institutions involved in implementation: 

 European Investment Fund as Trustee for the European Commission 
 International Financial Corporation (IFC) 
 European Bank for Reconstruction and Development (EBRD) 
 KfW Development Bank (KfW) 
 Netherlands Development Finance Company (FMO) 
 Oesterreichische Entwicklungsbank (OeEB) 
 European Investment Bank (EIB) 
 Sal. Oppenheim 
 BN&P Good Growth Fund 
 Credit Coopératif 
 ESPA VINIS Microfinance  
 Steyler Bank 
 Versorgungsfonds des Landes Brandenburg 
 Finance in Motion 
 Deutsche Bank 

C -  Implementation of the financial instrument 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

EUR 26 234 995 
EUR 26 029 558 

Additional  information:  The  total  amount  of  the  EU  contributions  to  the  instrument,  i.e. 
EUR  87  684  935,,  includes  share  and  cash  transfers  from  pre-existing  EU-financed 
instruments during the period 2006 – 2011. 

182 

 
 
                
                           
(e)  The performance of the financial instrument, including investments realised; 

EFSE was subject for Result Oriented Monitoring (ROM) in 2012. Their performance was 
considered  very  good  in  all  aspects.  EFSE  has  been  an  international  role  model  for 
microfinance  funding210.  The  performance  so  far  has  been  very  good  with  key  figures 
steadily growing and the number of NPLs insignificant. 

Amount  of  EU  Contribution  committed 
financial intermediaries, 
and  the  corresponding  number  of  financial 
intermediaries;  

to 

for risk-sharing instruments, total amount of the 
risk-sharing,  including  the  EU  Contribution, 
committed to financial intermediaries, 
and  the  corresponding  number  of  financial 
intermediaries; 

EUR 112 631 752 (NAV as at 31/12/2014) 
1 FI 

N/A 

Amount of financing expected to be provided by 
financial 
final 
recipients , 
And expected number of eligible final recipients; 

intermediaries 

eligible 

to 

intermediaries 

Amount  of  financing  already  provided  by 
final 
financial 
recipients, 
 and  the  corresponding  number  of  eligible  final 
recipients;  

eligible 

to 

EUR 1 032 000                                                  

(total funding committed to the Fund) 

N/A 

EUR 4.1 billion for the Fund, of which EUR 
3.2 billion EUR in the Enlargement region 
(see also the table under point l) 
496 716 Final Recipients in the Enlargement 
region 

Amount of investments already made by eligible 
final  recipients  due  to  the  received  financing,  if 
applicable. 

NA 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

(g)  The balance of the fiduciary account; 

 Not applicable 

(h)  Revenues and repayments; 

Not applicable 

210  At  the  2010  G20  summit  in  Seoul,  EFSE  was  presented  with  the  G20  SME  Finance  Challenge  Award.  A 
determining success factor of the Fund‘s award-winning concept was its public-private partnership structure as one 
of the most effective models worldwide to catalyse private capital for micro, small and medium enterprises. 

183 

 
  
 
                                                 
(i)  The value of equity investments, with respect to previous years; 

EUR 112 631 752 (at the level of the EFSE) 

(j)   The accumulated figures on impairments / on called guarantees for guarantee 
instruments; 

Not applicable 

(k)  The target leverage effect, and the achieved leverage effect; 

The financial envelope of EUR 88 million has so far leveraged a total amount of financing 
available to the final recipients in the Enlargement region of EUR 3,2 billion  implying the 
leverage factor of 36. 

D -  Strategic importance/relevance 

(l) 
 The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The European Fund for Southeast Europe provides sustainable funding to entrepreneurs and 
private  households  in  Southeast  Europe,  including  the  European  Eastern  Neighbourhood 
Region,  helping  small  businesses  to  grow  and  generate  additional  income,  and  to  create  as 
well as to sustain employment. In addition, it assists low-income families in the improvement 
of their housing conditions. Overall, in both regions of operations, the EFSE performance was 
the following: 

EFSE performance overall (as of December 2014) 

Outstanding Amount Invested in Partner Lending Institutions 

Outstanding Loan Amount Disbursed to End-Borrowers 

Number of Active End-Borrowers 

Average Size of Loans Outstanding to End-Borrowers 

EUR 

940.5 

million 

EUR 

798.5 

million 

146,828 

EUR 5,438 

Micro and Small Enterprise Loans Disbursed to End-Borrowers below EUR 20,000 

94% 

Cumulated  Amount 

of  Approved 

Investments 

in 

Partner 

Institutions 

EUR 1.9 billion 

since inception in December 2005  

Cumulated 

Amount 

of 

Loans 

Disbursed 

to 

End- 

Borrowers 

EUR 4.1 billion 

since inception in December 2005  

Cumulated 

Number 

of 

Loans 

Disbursed 

to 

End-Borrowers 

593,332 

since inception in December 2005  

E - Other key points and issues 

 Three main issues for the implementation: 

o At  present  EFSE  is  up and  running  under stable  conditions.  To  make  the  fund  more 
robust (following relevant regulations, in particular IPA) the trend has been to move 
from National allocations to further Regional allocations.  

o At present, the C share allocation of the Commission seems sufficient compared to the 

Fund's exposure.  

o The Fund Manager has indicated however, that additional EU participation may need 
to be considered in the future, including specific allocations for Turkey, the country 
being a market in its own right. 

184 

 
 
 
 
 
 
 
 
 
 General outlook: 

o The Fund has a revolving nature and has an undetermined duration. Extension of the 
underlying delegation agreement establishing a trusteeship for the IPA funds in EFSE 
with  EIF  is  planned  under  IPA  II,  Multi-country  Programme  2015  (subject  to 
decision). 

o Fund Manager argues for additional C-share investments from the EU part. These will 
however need to be based on a market assessment and weighed against the potential 
implications of the new Financial  Regulation, which  introduces new rules  applicable 
to the financial instruments. 

5.5. Green for Growth Fund (GGF)  

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG NEAR 

DG NEAR 

European Investment Fund (as Trustee of the 
European Commission) 

EUR 19,6 million 

EUR 38,6 million 

The Green for Growth Fund has continued to foster economic development and prosperity in 
South  East  Europe  and  Turkey  by  providing  additional  development  finance  for  Energy 
Efficiency (EE) and Renewable Energy (RE) projects to broaden the financial base for these 
kinds  of  investments.  First  signs  of  attracting  private  sector  capital  to  the  Fund  have  been 
noticed, and will be reported in this next report. Private sector investment in GGF is expected 
to leverage Commission's investments into the region for the development of the EE and RE 
projects. The Fund continued achieving 20% energy savings and/or 20% CO2 savings across 
the energy efficiency portfolio and promoting the use of renewable energy sources. 
The current portfolio of projects is EUR 185,1m, invested in 20 Partner Institutions (“PI”) in 9 
Target Partners, with 11 375 final recipients.  
From the perspective of the participating country Partner Institutions (PI), adequate financing 
for  the  particular  purpose  of  EE  and  RE  is  important  in  terms  of  a  growing  demand  at  the 
level of households and Small and Medium-size Enterprises (SME) and a shortage of funds 
available to lend to these groups in the countries.  

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA) (OJ L 210, 31.7.2006, p. 82). 
Crisis Response Package, IPA 2009/021-373. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

The Green for Growth Fund (GGF) is an innovative fund initiated in 2009 by the European 
Investment  Bank  (EIB)  and  the  KfW  Entwicklungsbank  (KfW)  with  the  support  of  the 

185 

 
European  Commission.  The  Fund  provides  dedicated  financing  for  energy  efficiency  and 
renewable  energy  projects  to  help  the  target  countries  reduce  CO2  emissions  and  energy 
consumption. 
This  is  achieved  by  lending  to  businesses  and  households  via  financial  institutions  and 
through  direct  funding.  The  Commission  is  investing  in  the  GGF  on  behalf  of  the 
beneficiaries,  to  support  the  stabilisation  of  financial  markets  and  economies.  These 
investments are made in the Fund's first-loss tranche ensuring that finance remains available 
to the public and private energy sector and countries keep high their potential to achieve the 
Energy Community's energy efficiency and renewable energy targets. The activities of GGF 
are complemented by a Technical Assistance Facility. 
Subject to programming 2014–2020.211 
The  Financial  Instrument  of  the  European  Union  for  energy  efficiency  and  renewable 
energies  (Green  for  Growth  Fund)  contributes  to  achieving  the  objectives  of  the  Multi-
annual  Indicative  Planning  Document  (MIPD)  2010-2013,  i.e.  support  for  investments  in 
energy  efficiency  as  a  potential  key  driver  of  recovery  from  the  economic  crisis  and 
sustained economic growth. 
Its  major  objectives  are  to  contribute  in  the  form  of  a  public-private  partnership  with  a 
layered  risk/return  structure,  to  enhancing  energy  efficiency  (EE)  and  renewable  energies 
(RE)  in  South-East  Europe,  Turkey,  and  Neighbourhood  East  regions  predominantly 
through  the  provision  of  dedicated  financing  to  businesses  and  households  via  partnering 
with financial institutions and direct finance. 
The  instrument  finances  Financial  Institutions  (commercial  banks  and  non-bank  financial 
institutions, such as leasing companies) to finance mainly EE and RE investments in private 
households  and  small  and  medium-sized  enterprises;  direct  financing  of  Energy  Service 
Companies (ESCOs), small renewable energy projects as well as companies and municipal 
entities.  
Under  the  Instrument,  medium  to  long-term  senior  loans,  subordinated  loans,  syndicated 
loans,  letters  of  credit,  guarantees,  mezzanine  debt  instruments,  local  debt  securities  and 
equity can be used. 

Implementation arrangements 
The Commission implements the instrument under indirect management in accordance with 
Article 139 of the Financial Regulation. Under indirect management, the Commission may 
entrust 
the  following  multilateral  Development  Financial 
Institution: European Investment Fund (EIF). 

implementation 

tasks 

to 

Added value of the European Union contribution 
C-shares bought by the European Union and the German Government are of highest risk and 
lowest gains, in order to stimulate the private sector to buy A-shares or Private Notes which 
are, vice versa, of lowest risk and highest gains. In this way, the European Union leverages 
private sector investments.  

(c)  The financial institutions involved in implementation; 

The  main  investors  in  the  Fund,  besides  the  Commission  (with  the  European  Investment 
Fund - EIF as Trustee), are the European Investment Bank (EIB), KfW, European Bank for 
Reconstruction  and  Development  (EBRD),  International  Finance  Corporation  (IFC), 

211 In the context of probable additional buying of C-shares by DG NEAR, most probably via IPA 2016.  

186 

 
                                                 
 
German Federal Ministry for Economic Cooperation and Development (BMZ) (with KfW as 
Trustee), and the Netherlands Development Finance Company (FMO).  
The Fund expects the addition of the first large private sector investor, Gemeinschaftsbank 
für Leihen und Schenken (GLS) from Germany, in early 2015.  

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014  
Aggregate budgetary payments as at 31/12/2014 

                    EUR 38 633 232  
                    EUR 38 633 232 

Additional  information:  the  financial  envelope  of  the  instrument  amounts  to  EUR  38,6 
million that was committed and paid out (of which EUR 19 581 014 were contracted as an 
initial  buying  of  C-shares  (with  EIF  as  Trustee)  and  paid  by  DG  NEAR  under  centralised 
indirect  management  contract,  while  EUR  19  052  218  were  subscribed  with  a  second 
contract via the Transfer and Delegation Agreement between KfW, EIF, and the European 
Commission).  

(e)  The performance of the financial instrument, including investments realised; 

The European Commission committed EUR 38,6 million for South East Europe and Turkey, 
leveraging  the  total  size  of  the  Fund  of  EUR  281  million  as  of  end  December  2014.  This 
amount corresponds to the amount of loans expected to be provided to the end beneficiaries.  
The current portfolio of projects is EUR 185,1m, invested in 20 Partner Institutions (“PI”) in 
9 Target Partners, with 11 375 final recipients.  
81,6% of the Fund’s committed capital has already been disbursed, committed or approved 
for  investments  in  PIs.  Taking  into  account  schedules  repayments  and  pending  new 
investments in the Fund itself, GGF has sufficient capital to meet these obligations. 
The number of active Partner Institutions has increased from 18 to 20. 

New Investments & Pipeline 
During  Q2  2014,  six  investment  proposals  for  the  amount  of  EUR  85  million  were 
approved: 

  Partner MCO (Bosnia & Herzegovina), 
  Yapi Kredi Leasing (Turkey), 
  Bank of Georgia (Georgia), 
  Access Bank (Azerbaijan) 
  Ak Lease (Turkey), and 
  Dariali HPP (Georgia). 

It has to be highlighted that immediately after the end of the quarter; the IC approved two 
additional  investments,  EUR  10  million  to  Fibabanka  (Turkey)  and  EUR  2  million  to 
Microinvest (Moldova). 

(f)   An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

GGF has a self-revolving character – revenue is reinvested, according to the same criteria as 
for the initial budget envelope. It has indeed been reinvested so.  

(g)  The balance of the fiduciary account; 

NA 

187 

 
 
 
(h)  Revenues and repayments; 

NA 

(i)  The value of equity investments, with respect to previous years; 

      EUR 39 324 943 (at the level of GGF) (2013 EUR 39 186 417) 

(j)   The accumulated figures on impairments / on called guarantees for guarantee 
instruments; 

NA 

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect of the Fund at present is in the order of 7,2 (total size of the Fund 
EUR  281  million,  divided  by  EU  Contribution).  It  is  estimated  that  the  leverage  will 
generate an excess of EUR 281 million of loans to eligible final recipients.  
The achieved leverage target is in the order of 4,8 (disbursements/loans to end beneficiaries 
of 185,1 million divided by EU contribution).  

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

188 

 
 
Compliance Monitoring 
The Issue Document regulates GGF’s risk diversification by placing limits on the exposure to 
individual Partner Institutions. These diversification ratios are taking into consideration in the 
Fund Advisor’s planning and decision-making process of all investments, and are ultimately 
tracked  by  the  Fund  Custodian.  At  the  end  of  Q2  2014,  GGF  is  in  compliance  with  all  PI 
limits. 

Asset Impairment 
No asset impairment was recorded in Q2 2014. 

Sub-Loan Monitoring / Environmental Impact 
Sub-loan monitoring is done by the Fund Advisor through a combination of internal systems 
(for loan amounts, maturity, etc.) and the programme eSave (for the energy and CO2 savings) 
from data provided by the PIs as part of their quarterly reporting requirements. GGF requires 
its  Partner  Institutions  to  monitor  and  report  energy  savings  and  CO2  reductions  using  an 
acceptable reporting system. 
All PIs are using the eSave system, which was presented to the Board in 2010. In light of the 
rapid  development  of  the  Fund’s  investment  portfolio,  a  series  of  eSave  implementation 
projects was proposed in order to respond to the Fund’s and FIs’ need for a monitoring and 
reporting tool. 
The current portfolio of projects is EUR 185,1m, invested in 20 Partner Institutions (“PI”) in 
9 Target Partners, with 11 375 final recipients.  
Measures financed through GGF funding have produced annualized energy savings of 1 049 
745  MWh/year  and  annualized  CO2  reduction  of  428  447  tons/year.  On  average,  these 
measures  are  62%  and  50%  more  efficient  in  terms  of  emissions  and  energy  consumption 
respectively. This figure is well in excess of the Fund’s minimum of 20% for each category. 

189 

 
 
E - Other key points and issues 

 Three main issues for the implementation: 

1) Additional buying of C-shares – ongoing discussions on how to contract the additional 
Commission's  purchase  of  C-shares  regarding  the  stipulations  of  the  new  Financial 
Regulation presents a concern. It is a cross-cutting issue, and expected to be resolved as 
such. In addition, with focus on WBIF co-financing of big infrastructure projects within 
the Connectivity Agenda, the challenge is to secure appropriate continuation of funding 
of the GGF.  
2)  Coordination  of  GGF  with  other Commission  mechanisms  –  GGF  is since  late  2014 
participating at the regular meetings of the Energy Community's EE Coordination Group 
(EECG).  In  this  way,  the  instrument  is  being  coordinated  with  the  other  main 
Commission  facility,  the  Regional  EE  Programme  (REEP),  and  with  other  non-
Commission EE stakeholders in the region, as well as with the Energy Community. The 
GGF  started  reporting  on  its  contribution  to  the  EE  and  RE  targets  of  the  Energy 
Community. The challenge remains to properly address the EE and RE needs via our two 
main mechanisms.  
3) Additional funding for Turkey – it is the position of the Regional Programmes unit that 
any  additional  purchase  of  C-shares  for  the  GGF's  Turkish  operations  needs  to  be 
financed from the national IPA exclusively. The discussion is ongoing, and it remains a 
challenge if, how, and when this will be possible.  

 Main risks identified: 

None detected on part of the Trustee and the Fund. However, new Financial Regulation 
has reporting requirements that are beyond either the date or the scope as agreed in the 
contracts  between  the  Commission  and  the  IFIs.  This  discrepancy  would  need  to  be 
addressed appropriately. 

 General outlook:  

The perspective of the sustainable development of GGF is positive, but its full adoption 
depends on the pace of development and the quality of EE/RE policy and the regulatory 
frameworks.  Equally  important  is  the  establishment  of  the  institutional  framework 
which  will  ensure  implementation  of  these  policies  and  the  legislative  provisions 
(independent regulators and enforcement agencies that can guarantee implementation of 
these common rules). 

The  policy  framework  varies  across  countries.  In  BA  and  Serbia the  environmental policy 
framework  is  at  different  stages  of  development.  Important  progress  in  the  policy  driven 
agenda  in  Serbia  is  evident,  while  some  improvements  in  Bosnia's  policy  framework  are 
expected  to  enable  the  fund  to  operate  in  a  more  sustainable  manner.  The  necessary 
liberalisation  of  the  retail  electricity  price  in  Albania,  BA  and  Serbia  would  create 
favourable conditions to the fund operations and investments in EE and RE.  
Both the quality of lending to the PIs and the quantity of energy and CO2 savings are good 
and  contribute  to  the  achievement  of  the  goals  of  the  Fund.  The  main  purpose  of  the  EC 
contribution to the Fund, (to support the beneficiary countries in the stabilisation of financial 
markets and economies in the Western Balkans and Turkey, thereby alleviating the impact 
of  the  global  financial  and  economic  crisis  in  the  region)  has  been  achieved,  through 
establishment of the full functionality of the GGF. 
The particular structure where the EC takes up C shares is to make the Fund attractive to the 
private  investors.  To  date  of  this  report,  the  Fund  had  attracted  only  a  limited  number  of 
private investors. As the first four years of implementation are seen as an early stage of the 
GGF existence, it is expected that the interest of private investors will progressively grow as 
the results from the increase in disbursements in the last two years are made public. 

190 

 
The description of the action provided for an interaction with municipalities, but this is not 
yet  taking  place.  The  municipalities  in  the  region  have  limited  technical  capacity  and 
chronically  limited  budgets,  but  it  is  expected  that  they  should  in  the  future  be  more 
proactive  in  taking  advantage  of  funds  such  as  the  GGF  to  achieve  common  goals,  like  a 
better integration of the EE/RE solutions within their local development strategies. For the 
time being, they are state/donor dependent and fragmented. The small, rural municipalities 
should pursue EE and RE objectives in partnership with neighbouring larger, better off ones. 
The  awareness  of  the municipalities  should  be  progressively  built  up  and  in  the long-term 
they  should  become  the  main  promoter  of  the  EE  benefits  to  their  citizens,  following  the 
example of the more advanced EU countries. 

5.6. SME Recovery Support Loan for Turkey (RSL)  

A - Summary 

Policy DG in charge:  

Implementing DG in charge:  

Implementing Body in charge: 

Initial Overall Budget Envelope: 

Current Overall Budget: 

DG NEAR 

DG NEAR 

EIB (EUR 120 million) 

EUR 30 million 

EUR 30 million 

The SME Recovery Support Loan Facility for Turkey (RSL) is a joint European Union (EU) 
/European Investment Bank (EIB) action consisting of blending €120 million EIB loan funds 
allocated with €30 million EU funds, aiming at enabling Turkish banks to expand their SME 
lending  and  provide  more  attractive  and  longer  term  lending  to  SMEs.  The  Turkish 
intermediary banks match the amount of finance made available to the final beneficiaries 1:1, 
hence doubling the final total amount of loans. Up to date the amount of financing provided 
by  the  instrument  to  eligible  final  recipients  is  EUR  299,64  million.  The  project  has  a 
“recovery” nature, as part of IPA 2009 Crisis Response Package but is also in line with EU 
policies for SME sector development and supports Turkey's efforts for preparation in view of 
EU accession. 
From  a  strategic  perspective,  the  RSL  is  consistent  with  the  objectives  of  the  Multi-Annual 
Indicative Planning Document (MIPD) 2008-2010 for Turkey, the Turkish SME Strategy and 
Action Plan 2007-2009 and the general objective to develop synergies between IPA initiatives 
and  EIB  lending  activities.  The  SME  Action  Plan  identified  access  to  finance  as  one  of  the 
main  problem  for  SMEs,  which  prevents 
their 
competitiveness. 

their  further  growth  and  harms 

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-
Accession Assistance (IPA) (OJ L 210, 31.7.2006, p. 82). 
Crisis Response Package, IPA 2009/021-373. 
Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 
2014 establishing an Instrument for Pre-accession Assistance (IPA II) (OJ L 77, 15.3.2014, 
p. 11) 

191 

 
(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

The overall objective of the SME Recovery Support Loan for Turkey is to mitigate the crisis 
impact  for  SMEs  and  contribute  to  the  development  of  the  Turkish  economy  and 
employment  sector.  The  main  objective  is  to  support  SMEs  with  concrete  productive 
investments  by  providing  access  to  attractive  and  longer-dated  debt  financing.  The  co-
financing  of  loans  is  to  be  provided  to  local  commercial  banks  operating  in  Turkey  (the 
‘Financial  Intermediaries’)  for  the  benefit  of  eligible  investments  carried  out  by  SMEs.  In 
the context of the Action, the European Investment Bank (EIB) shall extend loans from its 
own  resources  together  with  the  Union  Contribution  loans.  The  SME  Recovery  Support 
Loan amounts to EUR 150 million, including EUR 120 million of EIB funds and EUR 30 
million of the EU Contributions financed from the IPA funds. 
Individual  SMEs  are  eligible  for  financing  from  a  Financial  Intermediary  using  funding 
available  through  the  Action  (each  a  ‘Sub-Loan’)  up  to  a  maximum  amount  of  EUR  5 
million and a minimum amount of EUR 200 000 and with a minimum maturity of 4 years. 

(c)  The financial institutions involved in implementation; 

EIB  is  the  Commission's  risk-sharing  partner,  contributing  EUR  120  million  in  lending  to 
the two intermediary banks, as follows: 

o  Halkbank: Their  share  of  the  Facility  (EUR  74,82  million)  is  fully  allocated  since  the 
end of 2011. The average size of allocation  is EUR 0,51  million. The number of  jobs 
created through the financed investments is 2 340; 

o  Akbank: Their share of the Facility (EUR 74,82 million) is fully allocated since the end 
of June  2012. The average size of allocation is EUR 0,8  million. The total  number of 
jobs created through the financed investments is 1 780. 

The  Union  contribution  does  not  benefit  from  any  guarantee  or  other  security,  nor  does  it 
bear  a  higher  risk  to  guarantee/secure  the  EIB  lending.  The  Union  resources  are  however 
provided on an interest-free basis to the Financial Intermediaries. The EIB resources and the 
Union resources will be clearly dissociated from each other but will be disbursed in parallel 
in  order  to  maintain  the  ratio  of  4/1  between  EIB  resources  and  Union  resources,  hence 
ultimately reducing the cost of borrowing for all end beneficiaries. 

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate budgetary commitments as at 31/12/2014 :                                 EUR 30 000 000 
Aggregate budgetary payments as at 31/12/2014:                                       EUR 30 000 000 

(e)  The performance of the financial instrument, including investments realised; 

Although  there  were  no  set  indicators  to  measure  the  Recovery  Support  Loan  (RSL) 
expected  outcomes  (job  creation/maintenance  and  growth  for  the  beneficiary  SMEs)  there 
was an EIB requirement that the SMEs report, at application stage, contained the expected 
number of jobs to be created following the implementation of the RSL supported projects.  
Accordingly, the 265 loans allocated to date are expected to help create almost 5 000 new 
jobs, which represent a 42% increase of the number of employees of the beneficiary SMEs, 
compared to the situation before receiving the loans. The average sub-project value is €1,53 
million,  the  average  sub-loan  size  (EIB  loans  +  loans  from  other  FI  resources)  is  €0,67 
million and the average individual EIB sub-loan is €0,56 million. Average maturity of loans 
is 4,4 years, slightly higher than the minimum tenure of 4 years imposed. 

192 

 
For Risk-sharing and Guarantee Instruments: the information shall indicate: 

Amount  of  financing  expected  to  be  provided 
by  the  instrument  (including  EU  contribution 
committed) to eligible final recipients, 
and  corresponding  number  of  eligible  final 
recipients; 

Amount of investments expected to be made by 
eligible final recipients due to the financing, if 
applicable 

EUR 299,64 million  

265 eligible FRs 

N/A 

Amount  of  financing  already  provided  by  the 
instrument to eligible final recipients, 
and the corresponding number of recipients;  

EUR 299,64 million 

265 eligible FRs 

Amount  of 
investments  already  made  by 
eligible  final  recipients  due  to  the  financing 
provided through the instrument, if applicable. 

N/A 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

NA 

(g)  The balance of the fiduciary account; 

EUR 52 840,07 

                                                                                                       In EUR 

Balance on the fiduciary account (current account) 

Term deposits/Bonds (if applicable) 

52 840 

NA 

Term deposits < 3 months (cash equivalent) 

Term deposits > 3 month < 1 year (current assets) 

Term deposits > 1 year (non-current assets) 

Bonds current 

Bonds non-current 

Loans 

= Total assets 

(h)  Revenues and repayments;  

Not applicable 

193 

18 979 166 

19 032 006 

 
 
 
 
 
 
 
 
 
 
 
 
(i)  The value of equity investments, with respect to previous years; 

Not applicable 

(j)  The  accumulated  figures  on  impairments  /  on  called  guarantees  for  guarantee  
instruments; 

There  are  no  impairments.  The  balance  sheet  value  of  the  instrument  at  31/12/2014  is  the 
result of exchange losses and actuarial adjustments as follows: 

In EUR 

Initial Capital 

Exchange Gain/(Loss) 

(Turkish lira/euro) 

Actuarial Adjustment 
increase/(decrease) 

Current Value 

Cumulative 

29 630 000 

(7 814 639) 

(2 836 195) 

18 979 166 

2014 

946 892 

1 503 208 

(k)  The target leverage effect, and the achieved leverage effect; 

The target and achieved leverage effect is 1:10 over the lifetime of the financial instrument. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives    of the programme concerned as measured by the established indicators, 
including, where applicable, the geographical diversification; 

The RSL was highly relevant at the time it was proposed but the immediate need had passed 
by the time it became operational. Attractive, very efficiently implemented and benefiting of 
reliable  credit  recipients,  the  facility  has  resulted  in  successful  projects,  able  to  produce 
positive impact at micro level, but unlikely to produce any relevant impact at sector level. The 
main  benefits  stem  from  lessons  learned  and  the  opportunity  to  better  shape  similar  future 
interventions.  
The  amount  available  under  the  facility  is  very  small  compared  to  the  size  of  the  Turkish 
SME  market  and  to  the  size  of  the  EIB  lending  in  Turkey.  There  were  no  logframe  or 
indicators of achievement set for the facility. The only measurable targets set were the number 
of  financial intermediaries  to  be  employed  (2-3),  the  minimum  number  of  SME  loans  to  be 
achieved  (100)  and  the  minimum  additional  volume  of  SME  loans  to  be  achieved  by  the 
financial intermediaries during the initial RSL allocation period (at least twice than the RSL 
loans).  All  these  could  be  considered  implicit  given  the  features  of  the  facility  and  the 
business profile of the Turkish banks envisaged as financial intermediaries.  

E - Other key points and issues 

 Three main issues for the implementation: 

o  at  the  moment,  further  engagement  planned  under  IPA  II  seems  to  be  unlikely, 
unless  the  EIB  will  demonstrate  that  a  second  phase  of  the  action  could  still  be 
relevant.  The  project  has  been  successful  for  all  involved  parts.  However, 

194 

 
 
 
 
 
 
 
following  the  spirit  of  the  Commission  Decision  under  the  Crisis  Response 
Package, the project purpose of the programme (to support the SMEs which have 
concrete  productive  investment  plans  by  providing  access  attractive  and  longer-
dated debt financing) seems to be achieved. 

 Main risks identified: 

o  well managed project. Risks are only subject for market conditions. 

 General outlook: 

o  no further engagement planned under IPA II. 

6.  Financial Instruments in Neighbourhood and Countries covered by the DCI 

6.1. Neighbourhood Investment Facility (NIF)  

A - Summary 

Policy DG in charge: 

Implementing DG in charge: 

DG NEAR 

DG NEAR 

Implementing Body in charge: 

Eligible Finance Institutions 

Initial Overall Budget Envelope: 

EUR 50 million 

Current Overall Budget: 

EUR 1 159,1 million 

In  general  terms,  the  NIF  has  proven  to  be  an  effective  instrument  within  the  European 
Neighbourhood  Policy  in  particular  by  leveraging  significant  financial  resources  through 
financial  instruments.  For  the  period  2007-2014,  the  Union  contribution  of  approximately 
EUR  1  159  million  has  leveraged  EUR  11,9  billion  in  loans  from  European  Financial 
Institutions (EFIs), with total project costs estimated at EUR 26 billion. 
The  independent  Mid-Term  Evaluation  report  of  the  NIF  confirms  the  relevance  of  funded 
projects  in  relation  to  the  NIF  strategic  objectives  which  are:  (1)  to  increase  energy  and 
transport  infrastructure  and  interconnectivity  in  the  region;  (2)  to  address  threats  to  the 
environment including climate change; (3) to promote socio-economic development through 
support  for  SMEs  and  the  social  sector.  The  MTE  reports  notes  the  steady  increase  in  the 
number  of  projects  presented  and  volume  of  operations,  and  confirms  that  the  NIF  is  an 
efficient instrument which has contributed to increased co-ordination and co-financing among 
Finance Institutions. 
The  Mid-Term  Evaluation  of  the  NIF  also  recommends  that  more  attention  be  devoted  to 
interconnectivity issues as well as to its crosscutting objectives, including a more structured 
policy dialogue and consultation with civil society. 

195 

 
 
 
B - Description 

The breakdown of the Current Overall Budget is as follows: 

Commission 
Decision No 

Initial 
Decision 

East 

South 

Top up 
East 

Top up 
South 

Total 

C(2007) 6280 

C(2008) 2698 

C(2009) 3951 

C(2009) 8985 

C(2010) 4400 

C(2010) 7989 

C(2011) 5547 

C(2012) 4533 

C (2013) 1276 

C(2013) 5300 

C(2014) 5750 

TOTAL 

50 

50 

70 

15 

85 

25 

100 

150 

200 

12,3 

361,7 

1 119 

25 

25 

25 

40 

22 

33,3 

50 

66,7 

12,3 

96.4 

395,7 

25 

25 

45 

15 

45 

3 

66,7 

100 

133.3 

265,3 

723,3 

12,7 

10,5 

7,7 

30,9 

50 

50 

70 

15 

85 

25 

100 

171,9 

210,5 

12,3 

369,4 

9,2 

9,2 

1 159,1 

(a) Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  1638/2006  of  the  European  Parliament  and  of  the  Council  of  24 
October 2006 laying down general provisions establishing a European Neighbourhood and 
Partnership Instrument.212  
Regulation (EU) N° 232/2014 of the European Parliament and of the Council of 11 March 
2014 establishing a European Neighbourhood Instrument.213   
Regulation  (EU)  No  236/2014  of  the  European  Parliament  and  of  the  Council  of  11  March 
2014  laying  down  common  rules  and  procedures  for  the  implementation  of  the  Union's 
instruments for financing external action, (OJ L 77, 15.04.2014, p. 95). 

(b)  Description  of  the  financial  instrument,  implementation  arrangements  and  the 
added value of the Union contribution; 

Policy objectives and scope 
The Financial Instrument of the European Union for the Neighbourhood Region contributes to 
achieving the objectives of the European Neighbourhood Policy (ENP) or related EU thematic 
policy priorities by leveraging additional financing for the region.  
The  NIF  overarching  objective  is  to  mobilise  additional  investments  to  support  the 
establishment  of  an  area  of  prosperity  and  good  neighbourliness  involving  the  EU  and 
neighbouring countries. In complementarity with other EU-funded programmes, the NIF can 

212 (OJ L 310/1, 9.11.2006) 
213 (OJ L 77, 14.03.2014) 

196 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
foster  a  sustainable,  inclusive  growth  and  a  favourable  investment  climate  in  our  partner 
countries. 

Within this framework, the NIF pursues three strategic objectives, notably: 

 establishing  better  and  more  sustainable  energy  and  transport  interconnections  between 
the EU and neighbouring countries and between the neighbouring countries themselves, 

 addressing climate change, as well as threats to the environment more broadly, 
 promoting smart, sustainable and inclusive growth through support to small and medium 
size  enterprises,  to  the  social  sector,  including  human  capital  development,  and  to 
municipal infrastructure development. 

The  NIF  operations  support  the  implementation  of  the  ENP  Action  Plans  and  focus on  five 
main sectors: Energy, Environment with a particular focus on climate change mitigation and 
adaptation, Transport, Social and Small and Medium Enterprise development. 
Geographical coverage and final recipients 
European  Neighbourhood  Policy  partner  countries  directly  eligible  to  the  NIF  are 
neighbourhood  countries  having  signed  an  action  plan,  except  for  those  that  do  not  qualify 
because  of  their  level  of  development.  Currently,  this  encompasses  Armenia,  Azerbeijan, 
Georgia,  Moldova  and  Ukraine  in  the  Neighbourhood  East  region,  and  Egypt,  Jordan, 
Lebanon, Morocco and Tunisia in the Neighbourhood South region. On a case-by-case basis, 
other countries, which are not directly eligible, may benefit from NIF interventions taking into 
account  regional  or  specific  circumstances.  Their  eligibility  will  have  to  be  decided 
unanimously by Member States and the Commission. Other final recipients will be the private 
sector  and,  in  particular  the  SMEs.  Both  multilateral  and  national  European  Development 
financial institutions may be direct partners and important stakeholders of the facility. They 
will be eligible as lead partners to propose lending operations that could benefit from a NIF 
support. 
Implementation arrangements 
The  NIF  finances  different  types  of  operations  such  as  risk  capital  (equity  and  quasi-equity 
investments),  risk-sharing  instruments,  guarantees,  loans,  investment  grants,  interest  rate 
subsidies  and  technical  assistance.  Until  2014,  implementation  of  the  NIF  was  possible 
through the following management modes: centralised management (direct and indirect), joint 
management, and partially decentralised management. From 2014 onwards, implementation is 
made according  to  the modalities foreseen  in  the new Financial  Regulation,  mainly  through 
Delegation  Agreements  with  Financial  institutions,  but  also  through  indirect  management 
with partner countries.  
The NIF has, since the beginning of 2011, included a Climate Change Window (CCW) under 
the  Programme  on  the  Environment  and  the  Sustainable  Management  of  Natural  Resources 
including  Energy  Thematic  Programme  (ENRTP)  of 
the  Development  Cooperation 
Instrument to support the implementation of projects, helping partner countries tackle climate 
change  through  mitigation  and/or  adaptation  measures.  The  NIF  CCW  is  managed  in  a 
streamlined way and has in general the same rules and the same financing and implementation 
modalities as the NIF. 
Duration and impact on the budget 
The  decisions  relating  to  this  instrument  are  valid  for  the  two  Multiannual  Financial 
Frameworks of 2007-2013 and 2014-2020 and may be extended further following decisions 
on the next Multiannual Financial Framework. 
The final date for contracting is 31st December 2015 relating to decisions from 2014. This is 
not  the  date  of  duration  of  the  facilities  but  the  final  date  for  contracting  of  the  individual 
decisions establishing the facility. The duration of individual projects is established on a case-

197 

 
by-case  basis  with  a  maximum  of  120  months  from  the  date  of  entry  into  force  of  the 
financing  agreement  or,  when  none  is  concluded,  from  the  adoption  of  the  2014  Action 
Document creating the NIF. The budgetary breakdown of EUR 1 159,1 million between the 
two Neighbourhood sub-regions is as follows214: 

CRIS reference 

Cumulated amount of 
global commitment 

Budget line 

Neighbourhood South 
ENPI/2007/019548 
ENPI/2011/023086 
ENI/2014/037510 
Total 
Neighbourhood East 
ENPI/2007/019549 
ENPI/2011/023087 
ENI/2014/037515 
Sub-total  
ENPI/2013/024746 
under "Current Overall Budget") 
Total 

(SUDeP,  cf.  note  

158 000 000 
309 220 334,34 
265 300 000 
732 520 334,34 

137 000 000 
173 200 000 
104 085 901,58 
414 285 901,58 
12 300 000 

426 585 901,58 

19 08 01 01 
19 08 01 01 
21 03 01 02/03 

19 08 01 03 
19 08 01 03 
21 03 02 02 

19 08 01 03 

Added value 
The  NIF  provides  a  simple,  clear,  structured  mechanism  to  examine  and  approve  blending 
projects  to  the  benefit  of  Neighbourhood  countries.  Through  the  use  of  the  NIF  for  the 
examination of all blending projects in the Neighbourhood, the Commission ensures that: 

  equal treatment is given to all projects and all partner financial institutions, 
  competition is promoted between projects in terms of their value for money, 
  all  projects  are  examined  according  to  an  agreed  set  of  fundamental  parameters, 
notably  regarding  their  leverage,  value-added,  additionality  and  compliance  with 
EU principles and EU policy objectives. 

The expected results of the NIF are increased investment in the following sectors contributing 
to: 

1) Better transport infrastructure.  
2) Better energy infrastructure. 
3) Increased protection of the environment and better focus and control of climate changes 

impacts. 

4) Improved social services and infrastructures.  
5) Creation and growth of SMEs and improvement of the employment situations. 

214 An endowment with EUR 17.3 million was adopted by the Commission in 2011 [C (2011)9538], to be shared 
between the NIF and the Latin America Investment Facility (LAIF). Finally, this endowment was integrally used 
for two projects under the Latin America Investment Facility (LAIF). 

198 

 
 
 
 
 
                                                 
(c)  The financial institutions involved in implementation; 

The  entrusted  budget  implementation  tasks  consist  in  the  implementation  of  procurement 
and grants following the rules of the Leading Financial Institution, which is also entrusted 
with  the  residual  tasks  of  ex  ante  or  ex  post  controls.  Payments  may  be  executed  by  the 
Leading  Financial  Institution  or  by  the  partner  country  under  the  control  of  the  Leading 
Financial Institution. In this particular case, the Commission  signs a Financing Agreement 
with  the  recipient  country  and  a  Delegation  Agreement  with  the  Leading  Financial 
Institution.  The  Commission  may  entrust  implementation  tasks  to  the  following  Financial 
Institutions: 

  Multilateral  European  Finance  Institutions:  currently,  the  European  Investment 
Bank  (EIB),  the  European  Bank  for  Reconstruction  and  Development  (EBRD),  the 
Council  of  Europe  Development  Bank  (CEB)  and  the  Nordic  Investment  Bank 
(NIB);  

  European bilateral development finance institutions from one of the Member States: 
currently, the Agence Fran aise de Développement (AFD), the Agencia Espa ola de 
Cooperación Internacional para el Desarrollo (AECID), the KfW Entwicklungsbank 
(KfW) and the Societ  Italiana per le Imprese all Estero (SIMEST). 

In  addition,  budget-implementation  tasks  may  be  entrusted  to  the  partner  countries  in 
accordance  with  Article  53c  of  Financial  Regulation  1605/2002  (partially  decentralised 
management)215. 

C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate Budgetary Commitments as at 31/12/2014       
Aggregate Budgetary Payments as at 31/12/2014 
(of which SANAD EUR 10,2 million, EFSE EUR 5 million and GGF EUR 13,4 million) 

EUR 1 159 100 000,00  
EUR 448 852 849,28 

(e)  The performance of the financial instrument, including investments realised; 

The  NIF  has  demonstrated  to  be  a  successful  operation  throughout  the  seven  years  of  its 
existence so far. It has fully delivered on its objectives, detailed in section b), by creating a 
favourable environment for investments to be made on its priority sectors and countries to a 
scale  never  achieved  in  previous  years  and  which  would  be  difficult  to  achieve  without  the 
existence of the Facility.  
In the period 2008-2014, the expected leverage of the investments made so far should reach 
21, far exceeding the target leverage of the instrument, initially set at 4 to 5. Because of that 
mobilisation capacity, the Commission is increasingly channeling ENI funds through the NIF, 
as  portrayed  in  the  steady  increase  of  the  annual  NIF  funding.  The  NIF  has  allowed  the 
financing of a total of 101 projects so far.  
In  2014,  the  Operational  Board  of  the  NIF  approved  contributions  to  19  projects 
totalling EUR 297,7 million. The total investment cost of these projects is estimated to exceed 
EUR  5,2  billion  (estimated  leverage  rate  of  17),  mobilising  EUR  2,  3  billion  from  eligible 
European Financial Institutions.  

215 Article 58 of the current Financial Regulation (No 966/2012) applicable to the general budget of the Union for 
the methods of implementation of the budget applying to commitments made as of 01-01-2014. 

199 

 
 
                                                 
A  Mid-Term  Evaluation  (MTE)  of  the  NIF  under  the  European  Neighbourhood  and 
Partnership Instrument (ENPI) 2007-2013216 was finalised in May 2013. It focussed on the 
analysis of the mechanism and its procedures since its inception until the end of 2011. The 
evaluation  was  carried  out  based  on  the  following  OECD/DAC  evaluation  criteria: 
relevance, effectiveness, efficiency, impact, and sustainability. 
The MTE stated that the NIF has proven to be an effective instrument within the European 
Neighbourhood Policy and highlights that the NIF achieved its goal of leveraging significant 
financial  resources  through  grants.  The  executive  summary  notes  “a  steady  increase  in 
number  of  projects  and  volumes  of  allocations”  and  “effective  coordination  amongst 
Financial Institutions.” 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not yet applicable 

(g)  The balance of the fiduciary account; 

GGF: EUR 2 662 910; SANAD: EUR 1 034 832 

(h)  Revenues and repayments; 

Reflows in 2014: not applicable 

(i)  The value of equity investments, with respect to previous years; 

SANAD fund for MSME-Debt Sub Fund in USD 
           Market Value as of 31/12/2012: 
Market Value as of 31/12/2013: 
Market Value as of 31/12/2014: 

9 344 931 USD 
9 311 447 USD 
7 826 972 USD 

SANAD fund for Equity Sub Fund in USD 
Market Value as of 31/12/2012: 
Market Value as of 31/12/2013: 
Market Value as of 31/12/2014: 

   927 616 USD 
   722 234 USD 
1 973 318 USD 

EFSE-SICAV SIF Fund in EUR        
Market Value as of 31/12/2012: 
Market Value as of 31/12/2013: 
Market Value as of 31/12/2014: 

4 986 980 EUR 
5 061 483 EUR 
4 981 305 EUR 

Green for Growth Fund, SICAV-SIF in EUR 
Market Value as of 31/12/2014: 

10 198 244 EUR 

(j)  The  accumulated  figures  on  impairments  of  assets  of  equity  or  risk-sharing 
instruments, and on called guarantees for guarantee instruments; 

NA 

216  Mid-Term  Evaluation  of  the  Neighbourhood  Investment  Facility  under  the  European  Neighbourhood  and 
Partnership Instrument (ENPI) 2007-2013, May 2013; Evaluation for the European Commission by Development 
Researcher's  Network,  European  Centre  for  Development  Policy  Management  and  Ecorys  (Research  and 
Consulting). 

200 

 
 
 
 
 
 
 
 
  
                                                 
(k)  The target leverage effect, and the achieved leverage effect; 

In 2014, Commission Implementing Decision C (2014) 5750 has been adopted on 20 August 
2014  for  a  contribution  of  EUR  369,4  million.  The  target  leverage  effect  indicated  in  that 
Decision  for NIF contributions is  4 to  5 over the lifetime  of the NIF.  This  target leverage 
effect has been kept throughout the different NIF Commission Decisions since 2008. 
The NIF expected leverage for 2014 is estimated as follows: the EUR 297,7 million NIF 
contributions  approved  during  2014  should  mobilise  over  EUR  5.2  billion  in  total 
investments,  from  which  EUR  2,3  billion  from  participating  Financial  Institution  alone. 
Therefore  for  each  euro  contributed  by  the  NIF,  more  than  17  should  be  invested,  7,7  of 
them from eligible Financial Institutions. 
The NIF expected leverage for the period 2008-2013 is estimated as follows: Total project 
cost (circa EUR 20,8 billion) / NIF contributions (789 million): 26,3; whereby the leverage 
of  Eligible  Finance  Institutions  is  calculated  as  Eligible  Finance  Institutions  ressources 
(circa EUR 9,6 billion) / NIF contributions: 12,7 
The high expected leverage is related to the success of the mechanism, which has succeeded 
to mobilise much more investment so far than foreseen initially.  
Following the same reasoning, the expected leverage over the period 2008-2014 should 
be around 21 (total project cost of 26 billion/NIF contribution of EUR 1,1 billion). 
The  NIF  cannot  report  yet  on  achieved  leverage,  since  the  number  and  size  of  projects 
concluded so far are not enough to provide a sizeable sample to the achieved leverage of the 
instrument. However, we expect the achieved leverage not to be too far from the expected 
leverage mentioned above for the first years of the instrument. 

D - Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  NIF  has  proven  to  be  an  effective  instrument  within  the  European  Neighbourhood 
Policy and achieved its goal of leveraging significant financial resources through  financial 
instruments. 
NIF  projects  are  overall  relevant  to  NIF  strategic  objectives.  However,  according  to  the 
MTE, more attention should be paid to its regional interconnectivity aspects as well as to its 
cross-cutting objectives, including policy dialogue.  
There is a relatively balanced geographical and sectorial distribution of projects. The MTE 
recommended, at the same time, establishing a system which could allow for prioritisation 
of projects according to their relevance and expected impact. 
In  terms  of  project  design,  sound  processes  and  good  standards  implemented  by  Financial 
Institutions  were  observed.  Social,  environmental  and  climate  change  concerns  were 
adequately addressed in the appraisal process.  
The three-tiered governance of the instruments has been effective, although there is room for 
improvement  for  some  of  its  aspects  such  as  for  example  the  resource  allocation 
mechanisms,  the  monitoring  and  evaluation  functions  and  transparency  of  the  decision 
making process. 
The NIF has significantly contributed to the development of partnerships and increased co-
ordination  between  the  Financial  Institutions  and  the  Commission,  as  well  as  amongst  the 
Financial  Institutions  themselves.  The  MTE  recommended  further  developing  the  co-
ordination mechanisms at national and regional levels. 

201 

 
Finally, the MTE recommended introducing a results-based monitoring system to be applied 
to all NIF projects, as well as strengthening the communication and the visibility aspects. 
The findings of the MTE have been used, with other reports, by the Platform for Blending in 
External  Cooperation  (EUBEC217).  This  Platform  was  set  up  in  December  2012  and  covers 
various  different  EU  facilities.  The  evaluation  recognised  the  relevance  of  EUBEC  and 
recommended continued support to its development. 
The  future  structure  and  operation  of  the  NIF  will  reflect  the  conclusions  of  the  EUBEC 
policy group, which were finalised and published through the Report COM (2014) 733 of 15 
December 2014 from the Commission to the Council and the European Parliament.  
It will also take into account the recommandations issued by the Special Report 16/2014 of 
the  Court  of  Auditors  on  "The  effectiveness  of  blending  regional  investment  facility  grants 
with financial institution loans to support EU external policies".  

E - Other key points and issues 

 Attention is to be given to the aspects of the regional interconnectivity, as well as to the 
cross-cutting objectives including the policy dialogue. For this it has been recommended 
establishing a system which could allow for prioritisation of projects according to their 
relevance and expected impact. 
Co-ordination with the EU Delegations, although steadily improving over the last two 
years,  could  still  be  further  improved.  Finance  Institutions  should  strengthen  their 
liaison  with  EU  Delegations  during  early  stage  definition  of  the  projects,  this  will 
allow room for the creation of synergies and efficiency. 
Connected to the previous point, further emphasis will be put in the monitoring, follow 
up  and  evaluation  of  projects.  A  results-based  monitoring  system  applied  to  all  NIF 
projects would further enhance project implementation. 
The  communication  and  visibility  aspects  should  be  reinforced.  Until  now,  visibility 
actions  have  been  implemented  and  visibility  clauses  are  included  in  NIF  contracts. 
Overall,  visibility would be reinforced through the  development of a communication 
and visibility strategy and action plan, in close coordination with key stakeholders. 
The added value and additionality of the EU grant provided to NIF projects should be 
clearly  determined  from  the  outset,  so  that  the  reasons  of  financing  each  project 
through the NIF are clear to everyone involved in the NIF approval process. 

 The Financial Regulation introduces rules specific to financial instruments. These rules 
are  applicable  from  2014  onwards.  The  Financial  Regulation  provides  an  important 
improvement  in  the  legislative  framework  through  the  definition  of  concepts  and 
principles,  the  simplification  of  the  management  modes  used  for  blending  and  the 
possibilities created for using innovative financing tools. 
It  is  expected  that  financial  allocation  to  the  regional  investment  facilities  will 
substantially increase during the next programming period. This might also be done by 
channelling  funds  from  the  National  or  Regional  Indicative  Programs  through  the 
blending  mechanisms.  The  management  of  such  an  increase  represents  a  significant 
challenge for the Commission. 

217 EUBEC has taken a wide-ranging look at many aspects of the EU's blending facilities. Its policy group has met 
on  several  occasions  and  considered  a  range  of  topics.  Experts  from  the  Commission,  Member  States,  the 
European  External  Action  Service,  and  participating  Financial  Institutions  work  together  in  this  Platform  (the 
European Parliament participates as an observer) to further increase the effectiveness of aid delivered by the EU 
through blending. 

202 

 
                                                 
6.2. Investment Facility for Central Asia (IFCA) & Asian Investment Facility (AIF)  

A - Summary 

Policy DG in charge:   

DG DEVCO 

Implementing DG in charge:   

DG DEVCO 

Operating Body in charge: 

Eligible Financial Institutions 

Initial Overall Budget Envelope: 

EUR 50 000 000 

Current Overall Budget: 

EUR 171 567 000 

Envisaged overall budget for IFCA and 
AIF concerning the period 2014-2020: 

EUR 490 000 000 (out of which              

EUR 140 000 000 for IFCA and EUR 350 
000 000 for AIF) 

In  general  terms  IFCA  and  AIF  have  proven  to  be  effective  instruments,  in  particular  by 
leveraging  significant  financial  resources  through  the  Union  contributions  under  both 
Facilities. 

Key investments are essential to implement reform strategies in line with the EU-Central Asia 
policy framework. Blending loans supported by the European Financial Institutions and by the 
Commission  will  be  an  important  tool  in  the  post  2015  financial  perspective  to  address  the 
investment  needs  in  energy  efficiency,  environment,  water,  climate  change  mitigation,  and 
SME development. 

For  IFCA  the  Commission  contributions  of  EUR  82  million  supported  a  total  investment 
volume of EUR 465 million, including also other public and private investments. 

For  AIF  the  Commission  contributions  of  EUR  62  million  supported  a  total  investment 
volume  of  EUR  projects  amounting  to  EUR  2  046  million,  including  also  other  public  and 
private investments. 

203 

 
B - Description 

The breakdown of the current overall budget is as follows: 

Decision Reference 

Cumulated amount of global 
commitment (maximum envelope) 

Budget line 

Investment Facility for Central Asia (IFCA) 

DCI-ASIE/2010/021-627 

DCI-ASIE/2011/023-117 

DCI-ASIE/2013/024-950 

DCI-ASIE/2011/022-036 

DCI-ASIE/2013/024-917 

DCI-ASIE/2014//037-548 

TOTAL 

20 000 000 

45 000 000 

20 567 000 

Asia Investment Facility (AIF) 

30 000 000 

30 000 000 

26 000 000 

86 000 000 

19 10 02 

19 10 02 

19 10 02 

19 10 01 01 

19 10 01 01 

19 10 01 01 

In comparison to the 2013 for IFCA; no changes have occurred whereas the budget for AIF 
has  increased  with  EUR  26  007  000  during  2014.  AIF  has  been  recreated  in  2014  for  the 
Multi-annual Financial Framework (MFF) 2014-2020, with an initial financing decision of 
EUR  26  million,  whereas  IFCA  will  be  recreated  in  2015.  A  total  amount  of  EUR  140 
million for IFCA and of EUR 350 million for AIF are foreseen for the current MFF.    

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  1905/2006  of  the  European  Parliament  and  of  the  Council  of  18 
December  2006  establishing  a  financing  instrument  for  development  cooperation,  (OJ  L 
378, 27.12.2006, p. 41). 
Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 
2014 establishing a financing instrument for development cooperation for the period 2014-
2020,  (OJ  L  77,  15.04.2014,  p.  44),  Regulation  (EU)  No  236/2014  of  the  European 
Parliament and of the Council of 11 March 2014 laying down common rules and procedures 
for  the implementation  of  the  Union's  instruments  for  financing  external  action, (OJ  L  77, 
15.04.2014, p. 95).  
Based  on  the  first  results  from  the  Neighbourhood  Investment  Facility  (NIF),  the 
Commission  proposed  to  set  up  investment  facilities  targeting  countries  under  the 
Development Cooperation Instrument (DCI) Regulation, initially in Central Asia, Asia, and 
Latin America. Two facilities were set up for Asia: the Investment Facility for Central Asia 
(IFCA) in 2010 and the Asian Investment Facility (AIF) in 2011. These two facilities have 
been modelled based on the NIF and have the same types of objectives and scope as those 
defined in the NIF General Framework agreed in March 2008 (cf. section of this report on 
NIF) 

204 

 
 
(b)  Description of  the financial  instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The IFCA's main purpose is to promote additional investments and key infrastructures with 
a  priority  focus  in  the  first  implementation  period  on  energy  and  environment.    The  AIF's 
main  purpose  is  to  promote  additional  investments  and  key  infrastructure  with  a  priority 
focus  on  climate  change  and  ‘green’  investments  in  the  areas  of  energy,  environment  and 
transport.  In  addition,  capital  may  be  provided  in  particular  to  small  and  medium  sized 
enterprises (SMEs) and to social sector investments.   

Geographical coverage and final recipients 
The final recipients of these two facilities are the countries of these two regions. Other final 
recipients will be the private sector and, in particular SMEs. 

Main technical characteristics 
The types of operations to be financed can be the following: 

investment co-financing in public infrastructure projects, 
loan guarantee cost financing, 
interest rate subsidy, 
technical assistance, 
risk capital operations, 

 
 
 
 
 
  any other risk-sharing instruments. 

Implementation arrangements at Blending framework level   
In order to improve the effectiveness of blending operations (including the ones for IFCA and 
AIF) in meeting their policy objectives of poverty reduction and socio-economic development 
as well as the efficiency of their management including a reduction of transaction costs, it was 
agreed in the context of the EU Platform for Blending in External Cooperation (EUBEC) to 
organise  four  blending  "frameworks"  according  to  the  financing  instruments  (EDF  –  ENI  – 
DCI – IPA)218. At the same time, in order to be able to address the different regional strategic 
priorities,  to  increase  policy  leverage  and  effectively  use  blending  operations  for  policy 
dialogue,  and  for  reporting  purposes,  it  was  agreed  to  designate  under  each  framework 
geographically  defined  "facilities  ".  The  financing  comes  essentially  from  the  regional 
programmes  defined  under  the  different  instruments,  in  accordance  with  the  priorities  and 
objectives  defined  in  the  programming  documents,  in  dialogue  with  partner  countries  and 
relevant  regional  organisations.  Where  relevant  and  appropriate,  financing  could  also  come 
from  specific  national/regional  programmes,  in  support  of  priorities  and  objectives  in  these 
countries/regions  as  defined  in  the  relevant  programming  documents.  Should  there  be  an 
interest  from  EU  Members  States  or  other  donors  to  contribute  to  blending  operations,  this 
will  be  done  through  dedicated  fund(s).    There  is  one  single  governance  structure  for  each 
blending  framework,  governing  Commission  funds  as  well  as  EU  Members  States  or  other 
donor’s contributions through dedicated funds.  Decision making is organised in a two-level 
structure. Opinions on projects proposals are formulated at the Board level. Such opinions are 
prepared  by  a  technical  level  assessment.  Boards,  chaired  by  the  Commission,  include  the 
EEAS,  the  EU  MS  as  voting  members,  and  Financial  Institutions  as  observers.  They  are 
responsible for formulating opinions on individual blending operations, providing guidance to 

218  EDF  (European  Development  Fund),  ENI  (European  Neighbourhood  Instrument),  DCI  (Development 
Cooperation Instrument) and IPA (Instrument for Pre-accession Assistance)   

205 

 
 
                                                 
participating  institutions,  monitoring  and  reviewing  the  project  pipeline,  examining  project 
related  results  and  monitoring  the  portfolio  of  approved  projects,  as  well  as  drawing  on  the 
specific expertise of the Financial Institutions as appropriate, ensuring division of labour. The 
technical assessment of project proposals includes regular technical meetings chaired by the 
Commission  (involving  relevant  DGs  as  appropriate)  with  the  participation  of  EEAS  and 
Financial Institutions that  discuss the pipeline and assess the projects to be submitted to the 
Boards. 

Implementation arrangements 
Individual  projects  financed  under  IFCA  and  AIF  are  implemented  through  indirect 
management mode. This means that the Commission delegates budget implementation tasks 
to eligible Financial Institutions which have successfully undergone an ex-ante assessment 
in accordance with Article 61(1) of Regulation (EU, Euratom) No 966/2012.  
Budget  implementation  tasks consist of the launch of public procurement and grant award 
procedures and of concluding and managing the resulting contracts as well as execution of 
payments.  The  entrusted  Member  State  agency  or  international  organisation  shall  also 
monitor and evaluate the project and report on it. 
In addition, budget-implementation tasks may be sub-delegated by the entrusted entity to the 
partner  country  in  accordance  with  4(7)  of  Regulation  (EU)  No  236/2014.  The  entrusted 
budget-implementation  tasks  shall  be  carried  out  according  to  the  rules  assessed  and 
approved by the Lead Financial Institution. 
Climate Change Window  
Addressing climate change issues, both mitigation and adaptation, will require a huge amount 
of funds. According to the Commission Communication of September 2009219 "Stepping-up 
international climate finance," the financial needs for developing countries could reach about 
$  100  billion  per  year  by  2020.  Hence,  this  Window  is  applicable  to  all  the  EU  Blending 
Facilities. 

Added value 
EU added value of IFCA and AIF can occur at different levels e.g:  

i.  at the strategy and policy level, IFCA and AIF provide policy leverage, enhance the 
supply of public goods, increase EU visibility, assist in managing debt sustainability 
thresholds and contribute to aid effectiveness;  

ii.  at the financial level, IFCA and  AIF provide financial leverage,  help  mitigate risks 
and  lower  borrowing  costs  and  provide  flexibility  to  tailor  assistance  to  financing 
needs;  

iii.  at  the  operational  level,  IFCA  and  AIF  stimulate  financial  discipline,  efficient 
administration  and  monitoring,  enable  the  acceleration  of  projects,  improve  project 
quality and increase donor coordination. 

In addition, the expected results for both facilities are increased investments in the following 
sectors contributing to: 

1) better energy infrastructure, notably:  

 improved  transit  connections  between  Asian  countries,  thus  increasing  security  of 

energy supply for Asian countries; 

 improved safety and security of energy infrastructure; 
 improved energy efficiency and energy savings; 

219 SEC(2009) 1172 

206 

 
                                                 
 increased production and use of renewable energy (wind, solar energy). 

2) Increased protection of the environment and better focus and control of climate changes 

impacts, notably:  

 introduction of integrated water management, including necessary related infrastructure; 
 reduction  of  air,  soil  and  water  pollution  including  monitoring  infrastructure  when 

needed; 

 increased forest protection including by strengthening forest governance; 
 promotion of climate change related investments, i.e. renewable energy, energy saving 

and cleaner production and other environment friendly techniques; 

 promotion  of  integrated  waste  management  (household,  municipal  and  industrial) 

including necessary related infrastructures. 

3) Creation and growth of SMEs and improvement of the employment situations:  

 better access to financing for SMEs (availability of a larger range of financial products 
than  currently  available)  at  the  different  stages  of  enterprise  creation,  restructuring, 
modernisation, etc.; 

 creation of technological poles, enterprise incubators, etc. 

4) Improved social services and infrastructures:  

 better access to health care and improved health services installations in urban and rural 

areas; 

 better education facilities, increased access to education in urban and rural areas; 
 improve vocational training facilities.  

And in addition for the AIF:  
5) better transport infrastructure, notably in the area of climate  change relevant  and "green" 

investments: 

 better (faster, cheaper and safer, environmental friendly) transport infrastructure within 

beneficiary countries and between them; 

 better interconnection between Asian countries; 
 faster and cheaper movement of people and goods within Asia. 

(c)  The financial institutions involved in implementation; 

The  main  entrusted  entities  to  which  the  Commission  delegates  the  implementation  of  the 
projects  financed  under  IFCA  and  AIF  are  multilateral  and  national  European  financial 
institutions.  They  are  eligible  to  ensure  the  role  as  a  Lead  financial  institution  to  propose 
lending operations that could benefit from AIF and IFCA support.  

 Multilateral  finance  institutions  such  as  the  European  Investment  Bank  (EIB)  and  the 
European Bank for Reconstruction and Development (EBRD) are eligible for both Facilities. 
Regional  financial  institutions  active  in  Asia,  like  Asian  Development  Bank,  may  be 
associated  in  projects  supported  by  AIF.  For  IFCA,  the  Nordic  Investment  Bank  (NIB)  is 
also eligible. Eligibility of other multilateral finance institutions will be examined on a case-
by-case basis. 

National  European  development  finance  institutions  such  as  the  Agence  Française  de 
Développement  (AFD),  the  Kreditanstalt  für  Wiederaufbau  (KfW),  SIMEST  (Società 
Italiana  per  le  Imprese  all'Estero)  and  the  Spanish  Agency  for  International  Development 
Cooperation (AECID) are already eligible under the AIF and IFCA. 

207 

 
C - Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate Budgetary Commitments as 31/12/2014: 

IFCA:        EUR 85 567 000 

AIF:          EUR 86 000 000 

  TOTAL:     EUR 171 567 000 

Aggregate Budgetary Payments as 31/12/2014 EUR 

IFCA:        EUR 27 485 020 

AIF:          EUR 17 945 500 

TOTAL:    EUR 45 430 520 

(e)  The performance of the financial instrument, including investments realised; 

IFCA 
Through IFCA the Commission has until the end of 2014 approved funding for 15 projects 
amounting to EUR 82 million of EU contribution. These have mobilised another EUR 342 
million from European financial institutions and reached a total investment volume of EUR 
465  million,  including  also  other  public  and  private  investments.  Four  of  the  projects  are 
implemented  in  Kazakhstan,  three  in  the  Kyrgyz  Republic,  two  in  Tajikistan,  one  in 
Turkmenistan, one in Uzbekistan and four have a regional implementing dimension.      
In 2014, the Operational Board of IFCA gave a positive opinion on four projects totalling to 
EUR  18  million.  The  overall  investment  cost  of  these  projects  reached  EUR  25  million, 
mobilising another EUR 39 million from eligible European Finance Institutions.  

AIF 
AIF  has  until  the  end  of  2014  committed  a  total  of  62  million  for  13  projects  thereby 
mobilising  EUR  1  043  billion  from  European  financial  institutions.  The  total  investment 
costs of these projects amount to EUR 2 046 billion. The countries where these projects are 
implemented  are  Bangladesh  (four),  Pakistan  (two),  Indonesia  (one),  Nepal  (one), 
Cambodia (one), Vietnam (one), Philippines (one) and Sri Lanka (one). In addition to these, 
one project is of regional character.    
In  2014,  the  Operational  Board  of  AIF  gave  a  positive  opinion  on  contributions  to  five 
projects totalling EUR 26 million. The total investment cost of these projects reached more 
than  EUR  1  157  billion,  mobilising  EUR  684  million  from  eligible  European  Finance 
Institutions. 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

  NA for IFCA and AIF  

(g)  The balance of the fiduciary account; 

NA for IFCA and AIF  

208 

 
  
MIFA Debt Fund (“Microfinance Initiative for Asia” funded under both IFCA and AIF) 

Balance on the fiduciary account (current account) 

MIFA (in EUR) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 

Equity investment (see also point i)220 

Other  assets (if applicable) 

= Total assets 

(h)  Revenues and repayments; 

NA for IFCA and AIF 

 2 002 247  

Not Applicable 

7 745 343  

 9 747 590  

(i)  The value of equity investments, with respect to previous years; 

MIFA Debt Fund (“Microfinance Initiative for Asia” funded under both IFCA and AIF) 

Equity investments in USD 

31.12.2014 

31.12.2013 

C2 shares 

C3 shares 

6 616 717 

2 786 904 

6 605 836 

2 650 471 

(j)   The accumulated figures on impairments / on called guarantees for guarantee 
instruments; 

NA for IFCA and AIF 

(k)  The target leverage effect, and the achieved leverage effect; 

For 2007-2014: 

IFCA 
The achieved leverage effect based on historical leverage experience during the period 2010-
2013 (since the Facility was only created in 2010) for the IFCA was 5,6 (total project cost = 
EUR 465 million/IFCA contributions = EUR 82 million). 

220  Furthermore,  non-current  assets  (such  as  shares  and  other  variable-income  securities)  are  already  reported 
under point (i) ‘the value of equity investments’. 

209 

 
 
 
 
 
 
 
 
                                                 
AIF   
The achieved leverage effect based on historical leverage experience during the period 2011-
2013 (since the Facility was created only in 2011) for the AIF was 32,98 (total project cost = 
EUR 2 046 million/AIF contributions = EUR 62 million). 

For 2014-2020:  

IFCA 
The  target  leverage  effect  as  indicated  in  the  ex-ante  evaluation  of  IFCA  is  4  to  5  over  the 
lifetime of the IFCA (2014-2020), based on the leverage attained since its creation.  
On the basis of the target leverage of the instrument, it is estimated that the total amount of 
EUR  140  million  foreseen  for  the  concerned  period,  investments/loan  volumes  mobilised 
would  range  from  EUR  560  million  to  700  million  for  the  entire  duration  of  the  Facility. 
Thus, the investment leverage ratio used is equal to the value of investment (total project cost) 
divided by the total amount of the EU blending facility contribution relating to the investment 
leverage 

AIF 
The target leverage effect as indicated in the ex-ante evaluation is 4 to 5 over the lifetime of 
the AIF (2014-2020), based on the leverage attained since its creation.  
On the basis of the target leverage of the instrument, it is estimated that the total amount of 
EUR  350  million  foreseen  for  the  concerned  period,  investments/loan  volumes  mobilised 
would range from EUR 1,4 billion to 1,75 billion for the entire duration of the Facility. Thus, 
the  investment  leverage  ratio  used  is  equal  to  the  value  of  investment  (total  project  cost) 
divided by the total amount of the EU blending facility contribution relating to the investment 
leverage. 

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

or 

by 

IFCA 
IFCA's  main  purpose  is  to  promote  additional  investments  and  key  infrastructures  with  a 
priority focus in the first implementation period on energy, environment, support to SMEs and 
social infrastructure. Projects in the transport sector are only eligible for IFCA funding if the 
sector is considered as a priority by the strategic board of the facility.  Operations financed by 
Financial Institutions in consortia pooling their loan resources with IFCA support allows an 
increase in risk and credit ceilings to the benefit of the Central Asian countries and promote 
the financing of categories of investments, which at present cannot be financed either by the 
market 
individually. 
The  leverage  effect  of  IFCA  has  already  and  will  continue  to  generate  a  considerable 
multiplying  factor  of  financial  non-refundable  contributions.  The  loans  provided  by  the 
Financial Institutions and grants made available by other donors increase the resources to be 
directed towards the Central Asian recipient countries. 
IFCA also strongly supports investments aiming at mitigating or reducing the negative impact 
of  Climate  Change.  The  commitment  of  Central  Asia  towards  Climate  Change  investments 
was  confirmed  during  the  meeting  of  the  EU  Central  Asia  Environment  Platform  held  in 
Bishkek  in  February  2013.  In  this  context,  Central  Asian  countries  have  committed  to 
strengthen  their  institutional  frameworks  and  technical  capacity  to  manage  climate-related 
risks  and  opportunities  mainly  by  promoting  sustainable  use  of  water  and  development  of 

development 

Institutions 

Finance 

the 

210 

 
renewable energy sources. IFCA is therefore an appropriate instrument to co-finance some of 
these  investments  and  to  develop  a  range  of  Climate  Change  oriented  operations  in  Central 
Asia. 
The  Facility  intervenes  in  cases  where  the  market  fails  to  offer  adequate  financing,  which 
otherwise would hinder the realization of projects with the potential to reduce unemployment 
and  poverty  and  to  advance  the  economy  in  a  sustainable  way.  SMEs,  for  example,  are  a 
seedbed  for  economic  development,  but  can  often  not  develop  due  to  a  lack  of  financing 
options.  Infrastructure  projects  with  a  large  impact  on  the  population  are  frequently 
abandoned  for  the  same  reason.  The  IFCA,  in  collaboration  with  eligible  Financial 
Institutions, provides financial assistance in these cases, thereby supporting poverty reduction 
and sustainable development. 
The Commission has until the end of 2014 supported a total investment volume of EUR 465 
million, including also other public and private investments. 

AIF  
AIF’s main purpose is to promote additional investments and key infrastructure with a priority 
focus on climate change relevant and "green" investments in areas of environment, energy as 
well as in SME's and social infrastructure. Projects in the transport sector have become one of 
the priorities for AIF funding since 2014. The leverage effect of the AIF since its creation has 
been  considerable.  The  multiplying  factor  of  the  amount  of  financial  non-refundable 
contributions provided has been important, constituting together with the resources from the 
financial  institutions  significant  resources,  directed  towards  the  Asian  recipient  countries. 
Operations  financed  by  financial  institutions  pooling  their  loan  resources  in  consortia  with 
AIF  support  has  allowed  an  increase  in  risk  and  credit  ceilings  to  the  benefit  of  Asian 
countries and promote the financing of categories of investments which at present cannot be 
financed  either  by  the  market  or  by  the  development  finance  Institutions  separately. 
AIF has until the end of 2014 supported the total investment costs of projects amounting to 
EUR 2 046 billion. 

Climate Change Window:  
Addressing climate change issues, both mitigation and adaptation, will require a huge amount 
of funds. According to the Commission Communication of September 2009221 "Stepping-up 
international climate finance," the financial needs for developing countries could reach about 
$ 100 billion per year by 2020. 
For the EU to meet its commitments, specific "climate change windows" (CCWs) have been 
created in the EU regional blending mechanisms. These "windows" indicate the financing and 
enable tracking of all climate change related projects funded by the EU and other European 
Finance  Institutions  through  these  facilities.  Their  main  purpose  is  to  promote  additional 
investments in projects which have climate change as their principal objective. According to 
the  OECD-DAC  categories,  these  projects  should  be  earmarked  as  Rio  Marker  2.  They  can 
target  either  mitigation  or  adaptation  or  both  and  should  contribute  to  the  objective  of 
stabilisation  of  greenhouse  gas  (GHG)  concentrations  in  the  atmosphere.  Operations  could 
address 
facilities. 
AIF will therefore also include a Climate Change Window to support the implementation of 
projects  helping  partner  countries  to  tackle  climate  change  through  mitigation  and/or 
adaptation measures. The AIF CCW will be managed in a streamlined way and will have in 
general  the  same  rules  and  the  same  financing  and  implementation  modalities  as  the  AIF. 

line  with 

relevant 

fields 

ones 

the 

the 

all 

of 

in 

221 SEC(2009) 1172 

211 

 
                                                 
Depending  on  the  pipeline  of  operations,  it  may  be  endowed  in  the  future  by  additional 
financing. 

E -  Other key points and issues 

 Main issues for implementation: for both Facilities 

o A  stable  political  and  security  climate  at  the  regional  level  in  general  and  at  the 
country  level  in  particular  is  needed  to  promote  and  secure  investments.  Partner 
countries  must  be  ready  to  increase  the  level  of  investments  through  their  own 
resources  as  well  as  through  loans.  The  pipeline  of  operations  must  be  of  sufficient 
quality  and  volume  and  supply  sufficient  EU  additionality.Strong  commitment  is 
needed  from  recipients  (for  IFCA).  Finance  Institutions'  capability  to  provide 
sufficient  loan  amounts  also  depends  on  the  availability/accessibility  of  financial 
guarantees/grant resources in countries with a concessionality requirement (for AIF). 
o The financial allocation to the regional investment facilities will substantially increase 
during  the  ongoing  programming  period.  For  IFCA,  an  amount  of  140  million  is 
foreseen  whereas  the  expected  allocation  for  AIF  amounts  to  350  million.  To  these 
amounts,  funds  from  the  National  Indicative  Programmes  may  be  added.  The 
management  of  such  an  increase  represents  a  significant  challenge  for  the 
Commission. 

o One of the priorities for the current programming period, in line with the Agenda for 
Change,  is  a  higher  share  of  EU  aid  to  be  channelled  through  facilities  for  blending 
grants and loans. A greater use of financial instruments such as guarantees, equity and 
other  risk-sharing  instruments  is  one  way  to  use  the  catalytic  effect  of  blending  in 
crowding in more private financing.  

o The  Facilities  will  continue  to  operate  by  providing  support  for  loans  to  partner 
countries  from  EIB,  and  from  other  multilateral  and  national  development  financial 
institutions.  By  financing  technical  assistance  and  providing  complementary  grants, 
the  Facility  will  encourage  the  recipient  governments  and  institutions  to  make 
essential investments, which would otherwise be postponed due to lack of resources. 
o AIF will also provide better access to finance for Small and Medium Enterprises, and 
include  investments  in  the  transport  sector,  as  well  as  contributing  to  the  ASEAN 
Connectivity Master Plan 

o For  AIF,  the  2015  indicative  pipeline  of  operations  includes  17  projects  for  a  total 
amount  of  approximatively  EUR  2,7    billion  with  an  indicative  potential  for  AIF 
budget  contribution  of  EUR  94,5  million.  Increased 
involvement  of  Asian 
Development Bank and other partners in the region could expand this pipeline further.  
o Concerning IFCA, the 2015 indicative pipeline of operations includes 19 projects for a 
total  amount  of  EUR  1  067  billion  with  an  indicative  potential  for  IFCA  budget 
contribution of almost EUR 62 million.  

o Projects to be funded under the 2014-2020 programming are subject to the availability 

of funds and subsequent commitment in 2014-2015. 

o EUBEC Platform:  in 2012, the EUBEC Platform was launched to further increase the 
effectiveness  of  blending.  The  Platform  is  led  by  a  Policy  Group  which  makes 
recommendations  based on work carried  out  in technical  groups. It is chaired by the 
Commission and involves representatives from MS, the European Parliament (EP) and 
the EEAS. In the technical groups the Commission works together with experts from 
EFIs  and  MS.  In  2014  the  Platform  continued  the  work  on  reviewing  notably  the 
governance of the existing blending mechanisms (see above in section A(b)) in order 
to improve the effectiveness of blending operations in meeting their policy objectives 
of  poverty  reduction  and  socio-economic  development  as  well  as  the  efficiency  of 

212 

 
their  management.  The  Platform  also  carried  on  its  work  on  further  development  of 
financial  instruments,  harmonisation  of  contracting,  monitoring  and  reporting, 
mobilization  of  private  sector  resources  as  well  as  mainstreaming  Climate  Change 
financing through blending. The overall results of the technical groups were presented 
to  the  Policy  Group  in  July  and  December  2014.  A  report  on  the  activities  of  the 
EUBEC Platform was submitted to the Council and the EP end of 2014.  

 Main risks:  

o the  European  Court  of  Auditors  published  a  special  report222  on  the  EU  blending 
facilities  in  October  2014.  The  Court  concluded  that  blending  had  been  generally 
effective.  The  investments  facilities  are  well  set  up  but  the  potential  benefits  of 
blending  were  not  fully  realized  due  to  Commission  management  shortcomings.  All 
the projects examined by the Court were judged to be relevant. However, the auditors 
considered that the approval process was not sufficiently thorough and the justification 
for awarding grants for blending during the appraisal process was not always evident. 
the 
The  recommendations  covered 
documentation  on  additionality  of  the  grant  and  its  level,  produce  guidelines,  ensure 
more  pro-active  role  of  EU  Delegations,  simplify  the  decision  making  process, 
improve Commission’s monitoring of the projects and ensure appropriate visibility for 
EU funding.  

the  following  aspects:  need 

improve 

to 

 General outlook: 

o many  of  these  recommendations  have  already  been  dealt  with  by  the  EUBEC 
Platform,  including  the  development  of  a  harmonized  and  improved  project 
application  form  and  its  guidelines  as  well  as  the  development  of  a  results 
measurement framework with standard indicators. 

6.3. Latin America Investment Facility (LAIF) 

A - Summary 

Policy DG in charge:   

Implementing DG in charge:   

DG DEVCO 

DG DEVCO 

Operating Body in charge: 

Eligible Financial Institutions 

Initial Overall Budget Envelope: 

EUR 10 850 000 

Current Overall Budget: 

EUR 210 400 000 

Envisaged  overall  budget  for  the 
period 2014-2020:  

EUR 350 000 000 

222  European  Court  of  Auditors’  special  report  no.  16/2014.  The  effectiveness  of  blending  regional  investment 
facility grants with financial institution loans to support EU external policies 

213 

 
                                                 
In  general  terms,  the  LAIF  has  proven  to  be  an  effective  instrument  within  the  European 
External Policy in particular by leveraging significant financial resources through grants. For 
the period 2009-2014 approximately EUR 204 million223 in LAIF grants have leveraged EUR 
2,9  billion  in  loans  from  European  Financial  Institutions  (EFIs)  for  total  investment  costs 
amounting to EUR 6,6 billion. 
Building on the success of the several regional facilities so far, blending, including LAIF will 
be an increasingly important tool for the EU in the current Multiannual Financial Framework 
(2014-2020). 

B - Description 

The breakdown of the current overall budget is as follows: 

Decision No 

Initial 
Decision 

Top up 

C(2009) 10106 

10,85 

C(2010) 4256 

C(2011) 4655  

24 

40 

C(2012) 7462 

55 (for 2012) 

C (2012) 7462 

45 (for 2013) 

2 + 2.5 +1,05 

C (2014) 9128 

30  (for 2015) 

TOTAL 

204,85 

5,55 

In comparison to the 2013 overall budget (EUR 179,35 million), there has been an increase 
of EUR 31,05 million during 2014.  
 LAIF has been recreated in 2014 for the Multi-annual Financial Framework (MFF), with an 
initial  financing  decision  of  EUR  30  million.  A  total  grant  amount  of  EUR  350  million  is 
foreseen for the current MFF.    

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  1905/2006  of  the  European  Parliament  and  of  the  Council  of  18 
December  2006  establishing  a  financing  instrument  for  development  cooperation,  (OJ  L 
378, 27.12.2006, p. 41). 
Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 
2014 establishing a financing instrument for  development  cooperation  for  the  period  2014-
2020  (OJ  L  77,  15.04.2014,  p.  44),  Regulation  (EU)  No  236/2014  of  the  European 
Parliament and of the Council of 11 March 2014 laying down common rules and procedures 
for  the  implementation  of  the  Union's  instruments  for  financing  external  action  (OJ  L  77, 
15.04.2014, p. 95):  
Based  on  the  first  results  from  the  Neighbourhood  Investment  Facility  (NIF),  the 
Commission  proposed  to  set  up  investment  facilities  targeting  countries  under  the 
Development Cooperation Instrument (DCI) Regulation, initially in Central Asia, Asia, and 

223 On the basis of 27 projects, including 2 cancelled projects. 

214 

 
 
 
 
 
 
                                                 
Latin America. The LAIF was set up in 2009. The facility has been modelled based on the 
NIF  and  has  the  same  types  of  objectives  and  scope  as  those  defined  in  the  NIF  General 
Framework agreed in March 2008. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  LAIF  was  officially  launched  by  the  Commission  and  the  Spanish  Presidency  of  the 
European Union during the VI EU-Latin America and the Caribbean (EU-LAC) Summit in 
2010.  
The  LAIF's  main  purpose  is  to  promote  additional  investments  and  infrastructures  in  the 
transport,  energy,  and  environment  sectors  and  to  support  social  sector  such  as  health  and 
education, and private sector development in the Latin American countries. The Facility will 
support  the  growth  of  SMEs,  by  making  available  a  range  of  financial  instruments  in  Latin 
America. LAIF interventions should focus indicatively on the following sectors: 

 

 

Improving  interconnectivity  between  and  within  Latin  American  countries,  in 
particular  establishing  better  energy  and  transport  infrastructure,  including  energy 
efficiency,  renewable  energy  systems  and  the  sustainability  of  transport  and 
communication.  
Increasing  the  protection  of  the  environment  and  supporting  climate  change 
adaptation and mitigation actions. 

  Promoting  equitable  and  sustainable  socio-economic  development  through  the 
improvement  of  social  services  infrastructure  and  support  for  small  and  medium-
sized enterprises (SME).  

Financing  and implementing large infrastructure projects requires considerable amounts  of 
finance. The aim of LAIF is to create a partnership, pooling together grant resources from 
the  Commission  and  using  them  to  leverage  loans  from  European  and  Latin  American 
Finance Institutions as well as own contributions from partners countries in Latin America. 
The  LAIF  has  also  included,  since  the  beginning  of  2011,  a  Climate  Change  Window  to 
support  the  implementation  of  projects  helping  partner  countries  tackle  climate  change 
through  mitigation  and/or  adaptation  measures.  An  endowment  of  EUR  17,3  million  was 
approved  by  Commission  Implementing  Decision  in  2011  (C  (2011)  9538)224  under  DCI-
ENV shared with the NIF, although it was finally entirely used under the LAIF. 
The  final  recipients  will  be  the  Latin  American  countries  foreseen  in  the  DCI  Regulation 
(CE) No 1905/2006 and the DCI Regulation (EU) No 233/2014. Other final recipients will 
be the private sector and in particular SMEs for categories of operations dedicated to private 
sector  development.  Eligible  finance  institutions  will  be  stakeholders  of  the  Financial 
Instrument’s operations. 
Main technical characteristics 
The types of operations to be financed under the LAIF can be the following: 

 
 
 
 

investment co-financing in public infrastructure projects, 
loan guarantee cost financing, 
interest rate subsidy, 
technical assistance, 

224 SEC/2012/30 () 

215 

 
                                                 
 
 

risk capital operations. 

Implementation arrangements at Blending framework level   
In order to improve the effectiveness of blending operations (including the one for LAIF) in 
meeting  their  policy  objectives  of  poverty  reduction  and  socio-economic  development  as 
well as the efficiency of their management including a reduction of transaction costs, it was 
agreed in the context of the The Platform for Blending in External Cooperation (EUBEC) to 
organise four blending "frameworks" according to the financing instruments (EDF – ENI – 
DCI  –  IPA225).  At  the  same  time,  in  order  to  be  able  to  address  the  different  regional 
strategic  priorities,  to  increase  policy  leverage  and  effectively  use  blending  operations  for 
policy  dialogue,  and  for  reporting  purposes,  it  was  agreed  to  designate  under  each 
framework geographically defined "facilities ". 
The  financing  comes  esentially  from  the  regional  programmes  defined  under  the  different 
instruments,  in  accordance  with  the  priorities  and  objectives  defined  in  the  programming 
documents,  in  dialogue  with  partner  countries  and  relevant  regional  organisations.  Where 
relevant  and  appropriate,  financing  could  also  come  from  specific  national/regional 
programmes, in support of priorities and objectives in these countries/regions as defined in 
the relevant programming documents. Should there be an interest from EU Members States 
or  other  donors  to  contribute  to  blending  operations,  this  will  be  done  through  dedicated 
fund(s).  
There  is  one  single  governance  structure  for  each  blending  framework,  governing 
Commission  funds  as  well  as  EU  Members  States  or  other  donor’s  contributions  through 
dedicated funds.  
Decision  making  is  organised  in  a  two-level  structure.  Opinions  on  projects  proposals  are 
formulated at the Board level. Such opinions are prepared by a technical level assessment. 
Boards, chaired by the Commission, include the EEAS, the EU MS as voting members, and 
Financial  Institutions  as  observers.  They  are  responsible  for  formulating  opinions  on 
individual blending operations, providing guidance to participating institutions, monitoring 
and  reviewing  the  project  pipeline,  examining  project  related  results  and  monitoring  the 
portfolio of approved projects, as well as drawing on the specific expertise of the Financial 
Institutions as appropriate, ensuring division of labour. 
The technical assessment of project proposals includes regular technical meetings chaired by 
the Commission (involving relevant DGs as appropriate) with the participation of EEAS and 
Financial Institutions that are discussed the pipeline and assess the projects to be submitted 
to the Boards. 
Implementation arrangements at individual project level  
Individual  projects  financed  under  LAIF  are  implemented  through  indirect  management 
mode.  This  means  that  the  Commission  delegates  budget  implementation  tasks  to  eligible 
Financial  Institutions  which  have  successfully  undergone  an  ex-ante  assessment  in 
accordance with Article 61(1) of Regulation (EU, Euratom) No 966/2012.  
Budget  implementation  tasks consist of the launch of public procurement and grant award 
procedures and of concluding and managing the resulting contracts as well as execution of 
payments.  The  entrusted  Member  State  agency  or  international  organisation  shall  also 
monitor and evaluate the project and report on it. 
In addition, budget-implementation tasks may be sub-delegated by the entrusted entity to the 
partner  country  in  accordance  with  4(7)  of  Regulation  (EU)  No  236/2014.  The  entrusted 

225  EDF  (European  Development  Fund),  ENI  (European  Neighbourhood  Instrument),  DCI  (Development 
Cooperation Instrument) and IPA (Instrument for Pre-accession Assistance)   

216 

 
                                                 
budget-implementation  tasks  shall  be  carried  out  according  to  the  rules  assessed  and 
approved by the Lead Financial Institution. 
Until 2014, possible management modes were centralised management (direct and indirect), 
joint management, and partially decentralised management. 
Added value 
The added value of LAIF can occur at different levels e.g.:  

i.at the strategy and policy level, LAIF provides policy leverage, enhances the supply of 
public goods, increases EU visibility, assists in managing debt sustainability thresholds, 
and contributes to aid effectiveness;  

ii.at the financial level LAIF, provides financial leverage, helps mitigate risks and lower 

borrowing costs and provides flexibility to tailor assistance to financing needs;  

iii.at  the  operational  level,  LAIF  stimulates  financial  discipline,  efficient  administration 
and  monitoring,  enables  the  acceleration  of  projects,  improves  project  quality  and 
increases donor coordination. 

The  expected  results  of  the  LAIF  would  be  increased  investment  in  the  following  sectors 
contributing to: 

1)  better transport infrastructure, 
2)  improved energy infrastructure, 
3)  increased protection of the environment, 
4)  improved social services and infrastructures, 
5)  creation and growth of SMEs and improvement of the employment situations. 

The supported operations will be ODA226 eligible, will stimulate investment in line with the 
strategic objectives of the Facility, and will further strengthen the Union policy orientations in 
the Latin American region. 
The  LAIF  contribution  to  an  operation  will  be  allocated  according  to  the  quality  of  the 
proposal,  the  sector  of  intervention  and  its  visibility,  and  the  leverage  effect  that  the  LAIF 
contribution will have. 
Moreover, in order to ensure the EU added value, the following criteria will be considered for 
giving preference to an operation which support the EU strategy in the region: 

 investments  addressing  environmental  threats  or  climate  change  mitigation    and 

adaptation, with cross border effects (land, river and sea); 

 investments focusing on renewable energy, energy efficiency and on  promoting the 

use of clean energy technologies; 

 investments  in  sustainable  social  infrastructure  with  a  particular  focus  on  social 
inclusiveness and on less developed areas, helping to reduce disparities in access to 
social infrastructure within and between the countries; 

 operations  supporting  the  access  to  finance,  including  for  higher  risk  activities,  in 

particular for the micro, small and medium enterprises; 

 operations in which two or more countries from the region are cooperating; 
 investments identified in national, sub-regional or regional priority plans; 
 investments in sectors with limited borrowing capacity. 

Special  attention  will  be  paid  to  a  balanced  involvement  of  the  different  sub-regions  and 
countries  in  LAIF,  while  ensuring  support  for  quality  operation  proposals  and  keeping  in 
mind the absorption capacity of individual countries and regions. 

226 ODA (Official Development Assistance) 

217 

 
                                                 
(c)  The financial institutions involved in implementation; 

The  main  entrusted  entities  to  which  the  Commission  delegates  the  implementation  of  the 
projects  financed  under  LAIF  are  multilateral  and  national  European  financial  institutions. 
They  are  eligible  to  ensure  the  role  as  a  Lead  financial  institution  to  propose  lending 
operations that could benefit from LAIF support.  
Multilateral  finance  institutions  such  as  the  European  Investment  Bank  (EIB)  and  the 
European  Bank  for  Reconstruction  and  Development  (EBRD)  are  eligible  for  the  Facility. 
European  bilateral  development  finance  institutions  such  as  the  Agence  Française  de 
Développement  (AFD),  the  Kreditanstalt  für  Wiederaufbau  (KfW),  SIMEST  (Società 
Italiana  per  le  Imprese  all'Estero)  and  the  Spanish  Agency  for  International  Development 
Cooperation (AECID) are already eligible under the LAIF. 
The  Commission's  regional  Latin  American  partners  are  Latin  American  Development 
Banks:  currently,  the  Central  American  Bank  for  Economic  Integration  (CABEI);  (CAF) 
Development Bank of Latin America, and the Inter-American Development Bank (IDB).  

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

Aggregate Budgetary Commitments as 31/12/2014: 

LAIF:                                                                                    EUR 210 400 000 

Aggregate Budgetary Payments as 31/12/2014 EUR    

LAIF:                                                                                     EUR 91 017 000  

In addition: 
Climate Change Window: 
Aggregate Budgetary Commitments as at 31/12/2014 
Aggregate Budgetary Payments as at 31/12/2014 

EUR 17 300 000 
EUR 15 800 000 

(e)  The performance of the financial instrument, including investments realised; 

The LAIF has served its purpose well during its first four years of operation. By adding a 
grant element to loan funding from leading European development  finance institutions and 
Latin American development banks, LAIF has helped to secure and mobilise funds for major 
infrastructure  projects  at  national  and  regional  level  in  Latin  America.  It  has  helped 
consolidate the position of the European Union and its member states as leading supporters 
of  economic  growth  and  social  progress  in  the  region.    A  key  factor  in  the  success  of  the 
LAIF  has  been  the  participation  of  the  regional  Latin  American  development  finance 
institutions  which  has  boosted  partnership  and  cooperation  between  them  and  European 
finance institutions. 
As  laid  down  in  LAIF’s  strategic  orientations,  its  key  priorities  are  to  improve 
interconnectivity  between  and  within  the  Latin  American  countries,  in  particular  by 
establishing better energy and transport infrastructure, increasing environmental protection, 
combatting  climate  change  and  supporting  the  development  of  small  and  medium-sized 
enterprises. 
LAIF  contributes  to  achieving  the  objectives  of  the  EU’s  Development  Cooperation 
Instrument and its Regional Strategy for Latin America. 

218 

 
 
   
 
   
The total Union budget of the LAIF by the end of 2014 is EUR 210 400 000, as it includes 
approximatively EUR 160 000 000 from the Union budget Regional Latin America, EUR 50 
000  000  earmarked  for  Nicaragua.  The  allocation    of  EUR  17  000  000  for  the  Climate 
Change Window, initially planned to be shared with the NIF, was finally entirely used for 
LAIF projects.  
Unitl  the  end  of  2014,  27  projects  have  been  approved,  which  represent  a  total  LAIF 
contribution of EUR 204 million. The total amount of investments supported was EUR 6,6 
billion,  out  of  which  the  eligible  European  Finance  Institutions  mobilised  more  than  EUR 
2,9 billion. 227 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6;  

NA 

(g)  The balance of the fiduciary account; 

NA 

(h)  Revenues and repayments; 

NA 

(i)  The value of equity investments, with respect to previous years; 

NA 

(j)  The  accumulated  figures  on  impairments/  on  called  guarantees  for  guarantee 
instruments; 

NA 

(k)  The target leverage effect, and the achieved leverage effect; 

For 2007-2013 instruments:  
The achieved leverage effect based on historical leverage experience during the period 2010-
2013 for the LAIF was 28,2 (total project cost = EUR 5,5 billion/LAIF contributions = EUR 
190 million). 

For 2014-2020 instruments:  
The target leverage effect as indicated in the ex-ante evaluation is at least for 4 to 5 over the 
lifetime of the LAIF (2014-2020) as included also in the financing decision of the LAIF. 
On the basis of the target leverage of the instrument, it is estimated that the total amount of 
EUR  350  million  foreseen  for  the  concerned  period,  investments/loan  volumes  mobilised 
would range from EUR 1,4 billion to 1,75 billion for the entire duration of the Facility. Thus, 
the  investment  leverage  ratio  used  is  equal  to  the  value  of  investment  (total  project  cost) 
divided by the total amount of the EU blending facility contribution relating to the investment 
leverage.   

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

227 Based on 27 projects, including 2 cancelled projects. 

219 

 
                                                 
 
The  LAIF  has  proven  to  be  an  effective  instrument  within  European  External  Policy  and 
achieved its goal of leveraging significant financial resources through grants. 
LAIF  projects  are  overall  relevant  to  LAIF  strategic  objectives,  which  are:  to  promote 
additional  investments  and  infrastructures  in  the  transport,  energy,  and  environment  sectors 
and to support social sector such as health and education, and private sector development in 
the  Latin  American  countries.  It  also  supports  the  growth  of  SMEs,  by  making  available  a 
range of financial instruments in the region. There is a relatively balanced geographical and 
sectorial distribution of projects. 
The LAIF has significantly contributed to the development of partnerships and increased co-
ordination  between  the  financial  institutions  and  the  Commission,  as  well  as  amongst  the 
financial institutions themselves. So far, it mobilized the total amount of investments of EUR 
6,6 billion. 
Building  on  the  success  of  the  several  regional  facilities  so  far,  blending  will  be  an 
increasingly important tool for the EU in the current Multiannual Financial Framework (2014-
2020). 

E -  Other key points and issues 

 Main issues for the implementation:  

o attention must be paid to the aspects of the regional interconnectivity, as well as to the 

crosscutting objectives including the policy dialogue. 

o As stated in the context of the current Multiannual Indicative Programme and priorities 
for  2014-2020,  and  based  on  the  experience  on  the  LAIF,  blending  will  be  a  major 
mechanism of implementation, in particular to support investments complementing the 
objectives  of  each  priority  area,  and  clearly  linked  to  the  overall  EU  objectives  and 
policy priorities in the region. 

o The financial allocation to the regional investment facilities will substantially increase 
during  the  ongoing  programming  period.  For  LAIF  an  amount  of  350  million  is 
foreseen two which funds from the National Indicative Programmes may be added. The 
management of such an increase represents a significant challenge for the Commission. 
o The  pipeline  of  potential  projects  for  2015  -  2016  shows  a  balanced  distribution  of 

projects both geographically and in sectors. 

o Twelve percent of the total requests in the 2015 – 2016 preliminary pipeline are regional 
projects.  Regarding  geographical  distribution,  projects  are  foreseen  in  Brazil  (3), 
Bolivia  (1),  Ecuador  (4),  Nicaragua  (2),  El  Salvador  (2),  Peru  (3)  and  Honduras  (3). 
Regarding sectors covered in the preliminary pipeline, energy projects represent around 
37%  followed  by  Transport  26%,  Water  and  Sanitation  5,6%,  social  and  economic 
infrastructure 5,6%, climate change 5,1%, private sector 4,7%,  Total amount indicated 
for LAIF support is EUR 179 700 000.  The average size of the operations is circa EUR 
10,5 million. 

o EUBEC Platform: in 2012, the EUBEC Platform  was launched  to  further  increase the 
effectiveness  of  blending.  The  Platform  is  led  by  a  Policy  Group  which  makes 
recommendations  based  on  work  carried  out  in  technical  groups.  It  is  chaired  by  the 
Commission and involves representatives from MS, the European Parliament (EP) and 
the  EEAS.  In  the  technical  groups  the  Commission  works  together  with  experts  from 
EFIs  and  MS.  In  2014  the  Platform  continued  the  work  on  reviewing  notably  the 
governance of the existing blending mechanisms (see above in section A(b)) in order to 
improve  the  effectiveness  of  blending  operations  in  meeting  their  policy  objectives  of 
poverty  reduction  and  socio-economic  development  as  well  as  the  efficiency  of  their 
management. The Platform also carried on its work on further development of financial 

220 

 
instruments,  harmonisation  of  contracting,  monitoring  and  reporting,  mobilization  of 
private  sector  resources  as  well  as  mainstreaming  Climate  Change  financing  through 
blending. The overall results of the technical groups were presented to the Policy Group 
in  July  and  December  2014.  A  report  on  the  activities  of  the  EUBEC  Platform  was 
submitted to the Council and the EP end of 2014.  

 Main risks:  

o  the  European  Court  of  Auditors  published  a  special  report228  on  the  EU  blending 
facilities  in  October  2014.  The  Court  concluded  that  blending  had  been  generally 
effective. The investments facilities are well set up but the potential benefits of blending 
were not fully realized due to Commission management shortcomings. All the projects 
examined  by  the  Court  were  judged  to  be  relevant.  However,  the  auditors  considered 
that  the  approval  process  was  not  sufficiently  thorough  and  the  justification  for 
awarding grants for blending during the appraisal process was not always evident. The 
recommendations covered the following aspects: need to improve the documentation on 
additionality of the grant and its level, produce guidelines, ensure more pro-active role 
of  EU  Delegations,  simplify  the  decision  making  process,  improve  Commission’s 
monitoring of the projects and ensure appropriate visibility for EU funding. 

 General outlook: 

o  many  of  the  recommendations  above  have  already  been  dealt  with  by  the  EUBEC 
Platform, including the development of a harmonized and improved project application 
form and its guidelines as well as the development of a results measurement framework 
with standard indicators applicable to projects under all the blending facilities. 

6.4. Support  to  the  Facility  for  Euro-Mediterranean  Investment  Partnership 

(FEMIP)  

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

Implementing Body in charge: 

DG NEAR 

DG NEAR 

EIB 

Initial Overall Budget Envelope: 

EUR 32 million* 

Current Overall Budget: 

EUR 224 million** 

*Appropriations per the Basic Act 
**Under the ENPI Regulation 

In line with its objectives and scope, the Support to FEMIP has provided capital to the ENP 
South  partner  countries  and  invested  directly  or  indirectly  in  private  sector,  i.e.  enabled  the 
creation,  restructuring  or  growth  of  enterprises.  It  has  strengthened  the  role  of  the  local 

228  European  Court  of  Auditors’  special  report  no.  16/2014.  The  effectiveness  of  blending  regional  investment 
facility grants with financial institution loans to support EU external policies 

221 

 
                                                 
financial  sector  by  supporting  the  creation  of  new  institutions  or  the  establishment  of  new 
activities for the benefit of the private sector. 

With  EUR  33  million  allocated  in  technical  assistance,  the  Support  to  FEMIP  supported 
FEMIP investment activities in several southern Mediterranean countries, assisting promoters 
during different stages of the project cycle and encouraging the modernisation and opening-up 
of the partner countries’ economies. Technical assistance funds were used inter alia to prepare 
environmental  investments  in  the  region  under  the  Mediterranean  Hot  Spot  Investment 
Programme  (MeHSIP),  to  prepare  various  transport  projects  in  Tunisia,  to  assist  the 
Palestinian water authorities in the preparation of a seawater desalination project, to support 
the transformation process of the Arab Centre for Agricultural Development (microfinance), 
to  participate  in  the  rehabilitation  programme  of  17  Moroccan  hospitals  and  to  promote  the 
use of space technology applications under the Space for Med Acceleration Program. Several 
sectors have benefited so far from the Technical assistance with significant contribution to the 
transport and water distribution sector. 

As  far  as  risk  capital  operations  are  concerned,  the  Support  to  FEMIP  has  played  a  strong 
catalytic  role  for  other  borrowers  and  investors.  The  Support  to  FEMIP  helped  to  foster 
private  sector  activity  in  various  sectors  and  assisted  SMEs  operating  in  any  of  the  eligible 
sectors: agribusiness sector, financial sector, ICT sector and in particular the industry and the 
healthcare sectors, these latter currently being the most highly represented sectors. The overall 
investment amount supported by 2014 amounted to 6 714 million. 

The  Support  to  FEMIP  has  also  generated  employment  opportunities.  It  is  estimated  that 
thanks  to  the  risk  capital  investments  in  equity  funds,  aggregate  direct  jobs  of  historical 
companies  supported  have  increased  by  more  than  1,2  times  over  the  EIB  holding  period. 
This is equivalent to an average growth annual rate of circa 5% over the EIB holding period. 
It is further estimated that a notable share of the portfolio companies (more than 68%) have 
witnessed an increase of their employment figures over the EIB holding period. 

As regard the overall performance, the European Court of Auditors carried out a Follow-up 
audit of the recommendations made in its Special Report No 1/2009 “Banking measures in the 
Mediterranean  context  of  the  MEDA  programme  and  the  previous  protocols”  in  2013  and 
further to this follow-up audit, the Court informed the Commission that all recommendations 
have been assessed as fully implemented. In particular, the Commission is currently working 
on the last recommendation, i.e. the final evaluation of the Facility.  

B -  Description 

(a)  Identification of the financial instrument and the basic act; 

The  current  act  for  the  FEMIP  is  the  European  Neighbourhood  and  Partnership 
Instrument229  (ENPI  for  2007-2013)  for  which  the  legal  basis  is  Regulation  (EC)  No 
1638/2006 of the European Parliament and of the Council of 24 October 2006 laying down 
general provisions establishing a European Neighbourhood and Partnership Instrument.230 

229 The previous act (not included in this report) was the MEDA (Mesures D’Accompagnement) programme ended 
in  2006.  The  2013  annual  accounts  include  FEMIP  MEDA  loans  (EUR  115  000  000),  investments                   
(EUR 93 000 000) and fiduciary accounts (EUR 356 000 000 including reflow account).   
230 (OJ L 31/1, 9.11.2006) 

222 

 
                                                 
(b)  Description of  the financial instrument,  implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The  objective  of  the  support  to  FEMIP  is  to  provide  capital  to  the  private  sector  of 
Mediterranean  partner  countries  pari  passu  with  other  commercial  investors  in  the  region,in 
the form of risk capital, technical assistance and microfinance. 
a) Risk capital is invested directly or indirectly in order to (i) support the private sector, i.e. 
enable the creation, restructuring or growth of enterprises (ii) strengthen the role of the local 
financial  sector  by  supporting  the  creation  of  new  institutions  or  the  establishment  of  new 
activities for the benefit of the private sector. The Risk Capital operations consist of private 
equity and microfinance operations. 
b)  Technical  assistance  is  mobilised  to  strengthen  FEMIP  operations  in  the  Mediterranean 
region, with a special focus on private sector development. 
The EIB must obtain the Commission’s prior agreement for each Operation that it intends to 
carry out.  

Geographical coverage and final recipients 
Support  to  FEMIP  covers  the  nine  Southern  Mediterranean  States.231  The  recipients  of  the 
Risk  Capital  Facility  are  the  private  sector  in  general  and  SMEs  as  well  as  financial 
intermediaries.  The  recipients  of  technical  assistance  are  private  enterprises,  public 
institutions and the financial intermediaries. 

Implementation arrangements 
This  action  with  the  objective  of  financing  Risk  Capital  and  Technical  Assistance  and 
micro-finance.  Operations will be implemented in indirect centralised management with the 
European Investment Bank. The E I B is entrusted to carry out the implementation of these  
Operations.  

Duration and impact on the budget 
There has been an annual budgetary commitment of EUR 32 million against budget line 19 08 
01 01. The final date for signature under the 2013 envelope was 31st December 2014. 

Added value 
Support  to  FEMIP  provided  a  much-needed  capital  supply  in  a  region  where  risk  capital 
operations are the exception. Access to finance in the region is very limited and is one of the 
most  serious  hindrances  to  development  facing  especially  small  and  medium  sized 
enterprises in the region. EIB's capacity to supply capital targeted at reducing this problem is 
therefore  a  direct  response  to  this  development  cooperation  challenge.  Similarly,  the 
technical assistance share of the Support to FEMIP instrument helped improve the quality of 
project  preparation  in  the  region  and  improve  the  standards  of  project  implementation,  in 
direct support of development cooperation objectives for the region. 

(c)  The financial institutions involved in implementation; 

The  Commission  has  delegated  some  of  its  management  and  budgetary  implementation 
responsibilities  to  the  EIB  with  a  view  to  the  execution  of  Operations  covered  by  the 
Support to FEMIP.  

231 Note: At this stage, the support to Syria is suspended. 

223 

 
                                                 
 
C -  Implementation 

(d) The aggregate budgetary commitments and payments from the budget; 

Aggregate Budgetary Commitments as of 31/12/2014 
Aggregated Budgetary Payments      as of 31/12/2014 

           EUR 224 000 000 
           EUR 224 000 000 

(e)  The performance of the financial instrument, including investments realised; 

 EUR 33,08 million was allocated to 20 technical assistance operations (ongoing and 
completed),  including  regional  studies,  helping  promoters  in  the  day-to-day 
management of their projects.  

 EUR  180,3  million  was  allocated  to  28  risk  capital  operations  and  additional  EUR 

37,5 million were cancelled and returned to the Commission. 

 EUR 10,62 million have not been used to finance projects, mostly as a consequence 
of the instable situation in the region following the events of the "Arab Spring" and 
the difficulty to arrive to the project signature stage during that period. 

 Investments in 2014 
o 2014 was the last year for contracting funds under the ENPI risk capital mandate. All 
the remaining funds (EUR 15 million) were deployed, with 4 new operations signed. 
The number of investments was limited due to the mandate being fully utilised. 

o By  type  of  investment,  on  the  private  equity  side,  commitments  were  made  in  one 
multi-sector fund and one direct operation (EUR 10,5 million in aggregate). The first 
is  a  regional  fund  providing  growth  capital  to  generalist  small  and  medium  sized 
companies based in Morocco, Algeria, Tunisia and Egypt and the second is an equity 
participation in a Lebanese bank with the objective of financing its expansion plans, 
including increased access to finance for SMEs.  

 On  the  microfinance  side,  the  EIB  has  supported  two  MFIs  active  in  Jordan  and 
Morocco  (EUR  4  million  signed  in  aggregate),  with  a  view  to  contributing  to  the 
economic development and social goals of the FEMIP Mandates.  

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

The  amount  of  EUR  6,8  million  referred  to  below  has  been  and  will  be  reused  to  pay  for 
management fees of the instrument. Of this total, EUR 4,5 million have been used already 
and the remaining EUR 2,3 million are still under reserve for this purpose.232 If used in total, 
this  will  correspond  to  a  management  fee  of  around  3%,  fairly  reasonable  in  view  of  the 
complexity of the operations involved. 

(g)  The balance of the fiduciary account; 

ENPI RCO account in EUR as of 31/12/2014 
ENPI RCO account in USD as of 31/12/2014 
FEMIP Technical assistance in EUR as of 31/12/2014 
ENPI RCO capital reflow in EUR as of 31/12/2014   
ENPI RCO revenue reflow in EUR as of 31/12/2014 
TOTAL as of 31/12/2014 

EUR 53 711 105 
EUR 28 508 328 
EUR 18 273 852 
EUR 1 823 616 
EUR 442 421 
EUR 102759 322 

232 The remaining amount will be returned to the general budget as soon as the management fee will be entirely 
paid. 

224 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
(h)  Revenues and repayments; 

To  date,  EUR  6,8  million  has  been  received  from  investments  made  under  the  Support  to 
FEMIP envelope. 

(i)  The value of direct equity investments, with respect to previous years; 

Cost of Direct Equity Investment as of 31/12/2013   
Value of Equity Investment as of 31/12/2013 
Cost of Direct Equity Investment as of 31/12/2014   
Value of Equity Investment as of 31/12/2014 

EUR 2 000 000 
EUR   195 519 
EUR 8 237 280 
EUR 7 222 866 

Venture Capital Fund 

Cost as of 31/12/2013  
Cost as of 31/12/2014  
Value of Venture Capital funds as of 31-12-2013 
Value of Venture Capital Funds as of 31-12-2014 

EUR 33 444 277 
EUR 41 141 807 
EUR 30 834 074 
EUR 46 167 594233 

(j)  The  accumulated  figures  on  impairments  /  on  called  guarantees  for  guarantee 
instruments; 

For equity instruments:234 
Impairment as at 31/12/2013   
Impairment as at 31/12/2014   
Loans and receivables: 
Nominal loans and receivables as at 31/12/2013 
Nominal loans and receivables as at 31/12/2014 
(The increase is due to the loan disbursement(s)). 

EUR – 5 994 557 
EUR – 7 730 717 

EUR   6 358 860 
EUR 10 775 353 

(k)  The target leverage effect, and the achieved leverage effect; 

The  leverage  effect  for  the  risk  capital  operations  as  estimated  by  the  EIB  is  6,0  for  the 
period  2007-2014  and  26,8  for  2014.235  EIB  has  calculated  this  estimated  leverage  on  the 
basis of total amounts committed to equity funds, divided by amounts committed by EIB to 
these  funds.  The  leverage  effect  for  technical  assistance  for  the  period  2007-2014  as 
estimated by the EIB is 73 on the basis of EIB loan amounts committed to projects, divided 
by  amounts  committed  by  EIB  for  technical  assistance  operations  related  to  these 
investments  and  137  on  the  basis  of  total  project  costs  divided  by  technical  assistance 
amounts committed. 
For the period 2007-2014, the overall achieved leverage effect as estimated by EIB is 20 (if 
the technical assistance is calculated on the basis of EIB loan amounts), or 33 (if using total 
project costs). 

233 Direct equity operations include only direct investments while VC funds refer to participations in funds 
234 With reference to financial instruments classified as 'available for sale'. Such financial assets consist of venture 
capital fund + direct equity investment. 
235 There was only one investment in fund signed in 2014, EIB participated with EUR 5 million in the fund size of 
EUR 134,4  million; thus it results in 26,8 leverage. 

225 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

The  overall  objective  of  FEMIP  is  to  promote  sustainable  economic  growth  in  the  region 
through  investments  in  infrastructure  and  especially  in  private  sector  development.  With  36 
million of TA funding, the EIB has supported investments amounting to EUR 4 376 million. 
The  EIB  co-financing  of  these  investment  projects  amounted  to  EUR  2  338  million.  The 
"Support  for  FEMIP"  finances  both  technical  assistance,  risk  capital  operations  and  micro-
finance. The overall investment amount supported by 2014 amounted to 6 714 million. 
The  European  Investment  Bank  (EIB)  has  committed  EUR  143  million  under the European 
Neighbourhood  and  Partnership  Instrument  (ENPI)  (2007-2013)  for  risk  capital  operations. 
As far as private equity funds are concerned, the EIB had budgetary resources at work in over 
150  companies  across  the  Mediterranean  Partner  Countries,  which  employed  about  78  000 
persons,  of  whom  24%  are  women.  The  portfolio  also  includes  13  investments  in  11 
Microfinance Institutions (totalling around 1 000 000 active micro-borrowers). 
The Support to FEMIP has generated employment opportunities. It is estimated that thanks to 
the  risk  capital  investments  in  equity  funds,  aggregate  direct  jobs  of  historical  companies 
supported have increased by more than 1,2 times over the EIB holding period. 
The Union budget allocated a funding of EUR 32 million to the EIB each year  from 2007 to 
2013 (i.e. EUR 224 million in total). The annual budget has been consistently used, other than 
in 2011/12, when the political situation in the region led to approximately EUR 10,62 million 
not being used 

E -  Other key points and issues 

 Main issues for the implementation: 

o risk  capital  operations  depend  on  mobilising  third  party  resources,  particularly  when 
investing  in  funds.  The  political  instability  in  the  region  has  frequently  made  this 
difficult, particularly in Egypt, Tunisia, Lebanon, and Jordan, as commercial investors 
have been reluctant to commit. 

o It is crucial to link TA operations with concrete investments to be financed as a result 

of the TA work. 

o The  activities  targeting  Risk  Capital  Operations  in  the  region  implemented  by  the 
EIB need to be closely coordinated with the activities carried out by other donors in 
the region.  

 Main risks: 

o the  transposition  of  the  requirements  relies  on  the  Bank,  which  shall  apply  them 
irrespective  of  the  size  of  the  investment.  Possible  applicability  of  Commission 
requirements  to  small  investments  may  appear  more  challenging.  In  the  Financial 
Regulation, the selection of the FI’s has been regulated and the capacity of the bank to 
select the FI has been assessed as required. 

o As  regard  the  overall  performance,  the  European  Court  of  Auditors  carried  out  a 
Follow-up  audit  of  the  recommendations  made  in  its  Special  Report  No  1/2009 
“Banking  measures  in  the  Mediterranean  context  of  the  MEDA  programme  and  the 
previous protocols” in 2013 and further to this follow-up audit, the Court informed the 
Commission  that  all  recommendations  have  been  assessed  as  fully  implemented.  In 
particular,  the  Commission  is  currently  working  on  the  last  reccomendation,  i.e.  the 
final evaluation of the Facility.  

226 

 
 General outlook: 

o the requirement for risk capital in the region remains evident, as demonstrated by the 
low levels of SME access to finance and private equity in the region. Mediterranean 
Partner Countries (MPC) need more economic growth to improve living standards and 
create  jobs  as  well  as  to  stabilise  the  transition  towards  democracy  started  with  the 
Arab Spring. 

o According to the demographics, however, a large number of young people will enter 
the labour market in the coming years, which is likely to create a great pressure on 
the market and on the political environment.  
It  is  generally  assumed  that  governments  in  MPCs  need  to  implement  structural 
reforms to increase labour productivity. This includes public investment to improve 
the  quality  of  infrastructure,  better-quality  education,  labour  market  reforms  (in 
particular  increasing  female  labour  force  participation),  and  a  better  business 
environment,  which  should  encourage  exports  and  investment.  A  dynamic  private 
sector  could  provide  more  and  better  jobs  for  the  MPCs,  which  suffer  from  a 
persistent high unemployment. 

6.5. Global Energy Efficiency and Renewable Energy Fund (GEEREF)  

A -  Summary 

Policy DG in charge:   

Implementing DG in charge:   

Operating Body in charge: 

DG DEVCO 

DG DEVCO 

EIB and EIF 

Initial Overall Budget Envelope: 

EUR 25 million 

Current Overall Budget: 

EUR 81,1 million* 

* The EUR 81,1 million also include an amount for Technical Assistance of 5 million. In addition, 

EUR 20 million are financed under EDF.  

The GEEREF is an innovative financing vehicle aiming at promoting energy efficiency and 
renewable energy in developing countries and economies in transition. Structured as a Fund-
of-Funds,  GEEREF’s  strategy  is  to  invest  in  –  and  thus  help  develop  –  regional  private 
equity  funds whose investments will target  small  and  medium sized energy efficiency and 
renewable energy projects.GEEREF aims to improve the economic and social circumstances 
of  underserved  or  disadvantaged  populations,  encourage  sustainable  development,  and 
promote environmental protection by increasing access to low carbon, secure and affordable 
energy. Its objective is to contribute to the expansion of renewable energy, energy efficiency 
and  other  related  clean  energy  technologies  in  developing  countries  and  economies  in 
transition.  As  of  end  2014,  the  total  investment  supported  with  Union  contribution  in 
GEEREF was about EUR 1 billion. 

227 

 
 
B -  Description 

(a)  Identification of the financial instrument and the basic act; 

Regulation  (EC)  No  1905/2006  of  the  European  Parliament  and  of  the  Council  of  18 
December 2006 establishing a financing instrument for development cooperation236;  
Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 
2014 establishing a financing instrument for development cooperation for the period 2014-
2020;   
Regulation (EU) No 236/2014 of the European Parliament and of the Council of 11 March 
2014  laying  down  common  rules  and  procedures  for  the  implementation  of  the  Union's 
instruments for financing external action237;  
The  GEEREF  was  approved  in  the  annual  action  plans  (AAPs)  of  the  four-year  Thematic 
Programme  for Environment and  Sustainable Management  of Natural Resources  including 
Energy (ENRTP2007-2010)238;  
Legal  basis  for  the  Regional  Fund  Support  Facility  (RFSF):  preparatory  action  within  the 
meaning  of  Article  49(6)  of  Council  Regulation  (EC,  Euratom)  No  1605/2002  of  25  June 
2002  on  the  Financial  Regulation  applicable  to  the  general  budget  of  the  European 
Communities. 

(b)  Description of  the financial instrument, implementation arrangements  and the 
added value of the Union contribution; 

Policy objectives and scope 
The GEEREF is an innovative financing vehicle aiming at promoting energy efficiency and 
renewable energy in developing countries and economies in transition. Structured as a Fund-
of-Funds,  GEEREF’s  strategy  is  to  invest  in  –  and  thus  help  develop  –  regional  private 
equity  funds whose investments will target  small  and  medium sized energy efficiency  and 
renewable energy projects. 
GEEREF  aims  to  improve  the  economic  and  social  circumstances  of  underserved  or 
disadvantaged populations, encourage sustainable development, and promote environmental 
protection by increasing access to low carbon, secure and affordable energy. Its objective is 
to contribute to the expansion of renewable energy, energy efficiency and other related clean 
energy technologies in developing countries and economies in transition. 

Geographical coverage and final recipients 
The scope of GEEREF is to support regional sub-funds for Sub-Saharan Africa, Caribbean, 
and Pacific Island States, the countries of the European Neighbourhood Policy and Russia, 
Latin  America,  and  Asia  (including  Central  Asia  and  the  Middle  East).  There  is  a  special 
emphasis on serving the needs of the African Caribbean and Pacific (ACP) countries. 

Implementation arrangements 
The  GEEREF  is  managed  by  a  Board  of  Directors  comprising  delegates  appointed  by  its 
shareholders  and  advised  by  the  EIF  and  the  EIB.  DEVCO  has  appointed  one  Board 
member.  Additionally,  GEEREF  investment  decisions  are  taken  by  an  Investment 
Committee,  also  comprising  delegates  appointed  by  its  shareholders.  The  Commission  is 
represented in the Investment Committee by DG DEVCO. 

236 (OJ L 378/41, 27.12.2006) 
237 (O J L 77, 15.3.2014, p. 44) 
238 (OJ L 77, 15.3.2014, p. 95) 

228 

 
                                                 
The  Union  contribution  is  being  made  available  via  centralised  indirect  management 
(Financial Regulation No 1605/2020, article 54 (2) (b)) with implementing tasks delegated 
to  the  EIF.  In  2007  the  EIF  received  a  delegation  of  powers  from  the  Commission  to 
subscribe shares to the GEEREF, hold those funds in a separate trust account on behalf of 
the  Commission,  take  part  in  the  decision  making  organs  of  the  GEEREF  (except  in  the 
Investment  Committee),  monitor  the  progress  of  the  GEEREF  and  report  to  the 
Commission.  Those  tasks  have  been  detailed  in  an  agreement  concluded  between  the 
Commission and the EIF, which was subject to the provisions and the conditions provided 
for in the Financial Regulation for indirect centralised management based on existing cases. 

Added value/Expected results 
The  Fund  contributes  to  the  expansion  of  renewable  energy,  energy  efficiency  and  other 
related clean energy technologies to markets and services by increasing access to financing. 
Based  on  a  first  financial  input  in  the  order  of  EUR  100  million  (EU  funds  plus  other 
investors input) an impact assessment239 showed that additional capital of at least EUR 300 
million  up  to  EUR  1  billion  could  be  mobilised  through  the  sub-fund  structure  and  at  the 
project/SME level.It is also expected that the GEEREF will lead to an increased engagement 
of the private sector in the energy efficiency and renewable energy business in the areas of 
investments.  The  provision  of  “patient  capital”  provided  on  a  long  term  and  subordinated 
return  basis  will  buy  down  the  cost  of  capital  for  renewable  energy  and  energy  efficiency 
projects/SMEs. This will improve the investment conditions for private equity co-investors 
or senior lenders, thereby making the project/SMEs eligible for funding from these sources. 
The latter will thus have access to resources previously outside their reach. 

(c)  The financial institutions involved in implementation; 

GEEREF  was  established  via  a  SICAV  registered  in  Luxembourg,  with  a  life  of  15  years 
from the initial closing date, 6 November 2008. 
In addition to the Commission, Norway and Germany have invested approximately 13 and 
23  million  EUR  respectively  in  GEEREF  and  were  actively  involved  in  its  creation.  The 
Commission, Norway and Germany have all subscribed to fist loss "junior shares", and are 
called A-shareholders. These public investors have purchased first-loss shares in the fund. 
In addition, six private investors have now committed EUR 66 million to the fund, while the 
EIB  has  also  invested  EUR  10  million.  The  EIB  and  the  private  investors  (called  “B 
Shareholders)  have  second-loss  shares  in  the  fund.  The  fundraising  campaign  is  in  its 
closing process.   

C -  Implementation 

(d)  The aggregate budgetary commitments and payments from the budget; 

 Aggregate Budgetary Commitments as at 31/12/2014:     EUR                  81 100 000  
 Aggregate Budgetary Payments        as at 31/12/2014:     EUR                  79 500 000 

(e)  The performance of the financial instrument, including investments realised; 

GEEREF  has  as  its  objective  to  invest  primarily  in  Regional  Funds  (as  defined  in  the 
Prospectus), that invest their assets in  projects and companies involved in  energy efficiency 
and  renewable  energy,  which  enhance  access  to  clean  energy  in  developing  countries  and 
economies in transition. 

239 http://ec.europa.eu/environment/archives/jrec/pdf/ia_2006_en.pdf 

229 

 
                                                 
GEEREF supports renewable energy and energy efficiency project developers and small and 
medium-sized enterprises (SMEs). To be eligible to receive GEEREF’s investments, private 
equity  funds  should  focus  on  projects  requiring  up  to  EUR  10  million  of  equity  investment 
and should fill a substantial gap in the market. Only financially sustainable projects that meet 
strict investment criteria qualify for GEEREF funding. 
Eight investments have been approved by the GEEREF Investment Committee, focussing on 
projects in Sub-Saharan Africa, Asia, Latin America and the Caribbean. The following have 
already commenced activities on the ground: 

 an investment of EUR 12,5 million in Berkeley Energy’s Renewable Energy Asia Fund 

(REAF) for India, Philippines, Bangladesh and Nepal. 

 An investment of approximately EUR 8 million in the Evolution One Fund, dedicated to 

clean energy investment in Southern Africa. 

 An  investment  of  approximately  EUR  13  million  in  Emerging  Energy  Latin  America 
Fund  II  (EELAF  II),  a  private  equity  fund  investing  primarily  in  renewable  energy 
infrastructure  and,  to  a  lesser  extent,  in  growth  stage  clean-tech  companies  in  Latin 
America and the Caribbean. 

 An investment of EUR 10 million in DI Frontier Market Energy & Carbon Fund, which 

focuses on clean energy investment in Sub Saharan Africa. 

 An investment of approximately EUR 9 million in “Armstrong S.E. Asia Clean Energy 
LP”, a new fund focussing on renewable energy and resource efficiency investments in 
Southeast Asia. 

 An investment of approximately EUR 10 million in the MGM Sustainable Energy Fund 
-  a  fund  focusing  primarily  on  energy  efficiency  projects  in  Central  America  and  the 
Caribbean. 

 Visum  Small  Hydropower  Energy  Fund  (EUR  9  million),  a  fund  dedicated  to  small 

hydropower projects focused on Ukraine. 

 New 2014: Solar Arise (EUR 10 million), an India-focused corporate vehicle targeting 
solar photovoltaic (PV) investments. This is GEEREF's first  invesntment in a corporate 
vehicle.  

In  total,  GEEREF  has  committed  to  investments  of  EUR  61,9  million  in  regional  private 
equity  funds,  of  which  over  EUR  27  million  has  been  disbursed.  These  funds  have 
subsequently invested in 29 recipient projects including solar, wind, waste/biogas and hydro 
power generation as well as energy efficiency. 

In parallel with GEEREF, a Technical Support Facility (the GEEREF Regional Fund Support 
Facility  -  RFSF)  has  been  established  to  support  the  creation,  the  operations  and  pipeline 
development of Regional Funds and/or stimulate the renewable energy and energy efficiency 
market  in  general.  RFSF  has  supported  the  development  of  eight  regional  private  equity 
funds, three of which have received GEEREF investments already. 

Amount of EU Contribution committed to financial 
intermediaries, 
and 
intermediaries;  

the  corresponding  number  of 

financial 

Amount  of  financing  expected  to  be  provided  by 
financial intermediaries to eligible final recipients , 
and expected number of eligible final recipients; 

230 

EUR 74,27 million 
1 

EUR 188 million 
Not available 

 
  
Total investment expected to be provided 

Approx. EUR 8 billion 

Amount of  financing already provided by financial 
intermediaries to eligible final recipients, 

EUR 61 965 650 million  

and  the  corresponding  number  of  eligible  final 
recipients;  

invested in 7 regional private equity 
funds and one corporate vehicle. 

Amount  of  investments  already  made  by  eligible 
final  recipients  due  to  the  received  financing,  if 
applicable. 

approximately one billion EUR 

Invested in 29 recipient projects 

(f)  An evaluation of the use of any amounts returned to the instrument as internal 
assigned revenue under paragraph 6; 

Not applicable 

(g)  The balance of the fiduciary account; 

                                                                                   In EUR 

Balance on the fiduciary account (current 
account) 

Term deposits/Bonds (if applicable) 

Term deposits < 3 months 

Term deposits > 3 month < 1 year 

Term deposits > 1 year 

Bonds current 

Bonds non-current 
Equity investment (see also point i)240 

Other  assets (if applicable) 

= Total assets 

 1 727 212* 

70 299 725* 

72 026 937* 

*Balance sheet concerning GEEREF, held by DG DEVCO   

(h)  Revenues and repayments (Art.140.6); 

NA 

(i)  The value of equity investments, with respect to previous years; 

EUR 70 299 725 

240  Furthermore,  non-current  assets  (such  as  shares  and  other  variable-income  securities)  are  already  reported 
under point (i) ‘the value of equity investments’. 

231 

 
 
 
 
 
 
 
 
 
 
                                                 
(j)   The  accumulated  figures  on  impairments/  on  called  guarantees  for  guarantee 
instruments; 

No impairment for GEEREF  

(k)  The target leverage effect, and the achieved leverage effect; 

The target leverage effect  
1.The  target  leverage  effect  of  European  Union  budgetary  contribution  of  EUR  81,1 
million at the GEEREF Fund of Funds level is between 2 and 2,5 being equal to a target 
GEEREF  fund  size  of  around  EUR  200  million.  Fundraising  activities  -  to  be  closed  in 
2015 - suggest that this target can be reached or even be slightly higher.  
2.Concerning  GEEREF  investments  at  regional  private  equity  fund  level,  an  average 
GEEREF  shareholding  is  estimated  to  be  around  16%.  This  would  bring  the  targeted 
leverage, in form of additional equity commitments from other investors, to about 6. The 
subsequent 
investments  at 
investee/project  level,  including  mobilisation  of  additional  equity  and  debt  from  other 
investors, is expected to reach about 7 times. Hence, combined target leverage compared to 
available funding on GEEREF Fund of Funds level could be around 42, and as high as 100 
in relation to the European Union budgetary contribution of 81,1 million. 

leverage  of  GEEREF-funded 

regional  equity 

target 

The achieved leverage effect  

1.Out of the total budgetary EU contribution of EUR 81,1 million, EUR 74,27 million are 
used  by  the  GEEREF  Fund  of  Funds  for  further  investments.  As  of  end  2014,  the  ‘A-
Shareholders’ contributions (EU contribution together with contributions from Norway and 
Germany of about EUR 36 million) have mobilised more than EUR 76 million from other 
investors    (so-called  GEEREF  B-Shareholders)  leading  to  a  total  GEEREF  fund  size  of 
EUR  188  million,  reaching  a  leverage  of  2,3  (EUR  188  million  divided  by  EUR 
81,1million).  

2.Out of the current total GEEREF fund size of EUR 188 million, EUR 61,9 million have 
been invested in seven equity fund investments and one corporate vehicle investment. This 
amount  invested  is  mobilising  additional  equity  capital  for  renewable  energy  and  energy 
efficiency projects in Africa, Asia, the Neighbourhood and Latin America in line with the 
targeted leverage of 6. Most of the GEEREF-funded regional equity fund investments are 
still at the beginning of their investment period, but have already attracted additional equity 
and debt from other investors to the 29 renewable energy and energy efficiency projects. 
Regarding  these  29  projects  the  invested  equity  contributions  achieved  a  leverage  of 
approximately  7  at  investee/project  level.  Hence,  the  achieved  leverage  based  on  the 
partially invested GEEREF funds reach the targeted leverage of 42 (6x7). As of end 2014, 
the total investment supported was about EUR 1 billion.241 

D -  Strategic importance/relevance 

(l)  The  contribution  of  the  financial  instrument  to  the  achievement  of  the 
objectives  of  the  programme concerned as measured by the  established indicators, 
including, where applicable, the geographical diversification; 

GEEREF  is  a  Public  Private  Partnership  that  has  been  initiated  by  the  Commission  to 
accelerate  the  transfer,  development,  use  and  enforcement  of  environmentally  sound 

241 The 1 billion is reflecting that the fundraising as well as the investment periods for GEEREF Fund of Funds 
and the GEEREF-funded investments are still on-going. Hence already available funding has only been partially 
invested so far. However, partially invested funds suggest that the overall targeted leverage can be reached.  

232 

 
                                                 
technologies  for  emerging  markets,  helping  to  bring  secure,  clean,  efficient  and  affordable 
energy to local people. 
It is set up as an innovative global risk capital fund that uses limited public money to mobilise 
private investment in small-scale energy efficiency and renewable energy projects. It is both a 
development tool and a contribution to global efforts to fight climate change. 
Not only should investments bring almost one gigawatt of clean energy capacity to recipient 
countries, providing sustainable energy services to 3 million people and saving up to 2 million 
tonnes  of  carbon  dioxide  emissions  but  they  will  enable  the  transfer  of  technologies  in 
targeted  regions.  This  makes  GEEREF  an  innovative  and  ground-breaking  financial 
instrument for sustainable development. 
At the Fund of Funds level, GEEREF targets a leverage rate between 2 and 2,5x – aiming to 
raise  a  total  of  approximately  EUR  200  million  based  on  an  original  European  Union 
budgetary  contribution  of  EUR  81,1  million.  The  actual  leverage  achieved  at  this  level  is 
currently  approximately  2,3  based  on  a  total  fund  size  of  EUR  188  million  and  a  total 
European Union budgetary contribution of EUR 81,1 million. 
GEEREF  has  as  its  objective  to  invest  primarily  in  Regional  Funds  (as  defined  in  the 
Prospectus), that invest their assets in  projects and companies involved in  energy efficiency 
and  renewable  energy,  which  enhance  access  to  clean  energy  in  developing  countries  and 
economies in transition. 
GEEREF supports renewable energy and energy efficiency project developers and small and 
medium-sized  enterprises  (SMEs)  for  energy  efficiency  and  renewable  energy  projects  and 
technologies,  such  as  small  hydropower,  biomass,  wind  farms,  as  well  as  solar  power 
technologies. 
To  be  eligible  to  receive  GEEREF’s  investments,  private  equity  funds  should  focus  on 
projects requiring up to EUR 10 million of equity investment and should fill a substantial gap 
in the market. Only financially sustainable projects that meet strict investment criteria qualify 
for GEEREF funding. As of end 2014, the total investment supported with Union contribution 
in GEEREF was about EUR 1 billion. 

E -  Other key points and issues 

 Main issues for the implementation: 

o  in  2014,  GEEREF  has  successfully  attracted  private  investors  for  EUR  61,9  million. 
Going  forward,  the  sustainability  and  efficiency  of  the  fund-of-funds  model  will  be 
proven  by  GEEREF’s  ability  to  attract  further  investment  from  the  private  sector.  Its 
fundraising efforts continue in 2015. 

o  GEEREF's  current  portfolio  contains  8  fund  investments.  It  will  be  essential  to  find 
further feasible and attractive private equity investments to commit the rest of its capital 
within its designated investment period, which is due to end in November 2017. 

o  GEEREF investee funds have so far only requested approximately 33% disbursement of 
GEEREF  commitments.  It  will  therefore  be  critical  for  them  to  continue  building  their 
project pipeline in order to effectively deploy GEEREF and other investors’ capital. 

 Main risks: 

o  no specific risk identified. 

 General outlook: 

o  the  need  for  investment  to  catalyse  renewable  energy  and  energy  efficiency  projects  in 

developing countries remains large and well documented. 

o  However, the ability to attract private investment into these sectors is entirely dependent 

on the investment climate and its stability in each developing country. 

233 

 
o  It  remains  challenging  to  find  suitable  commercial  opportunities  in  these  sectors  with 
risk/return  profiles  appropriate,  attractive  to  the  private  sector  and  in  line  with  EU  Tax 
Policy. 

234 

 
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Social  Enterprise  UK  (2011),  Fightback  Britain:  A  report  on  the  State  of  Social  Enterprise 

Survey 2011, 2011 

Solidar (2014), Promoting the Social Economy as a Driver for Inclusive Growth and Social 
Progress. Social Economy Framework Paper. Briefing #64, Conny Reuter,  March 2014. 
Available at: http://www.solidar.org/IMG/pdf/64_briefing_social_economy.pdf  

Spiess-Knafl, W. (2013), Imperfections in the social investment market and option on how to 

address them, Ex-Ante Evaluation for the European Commission. October 2013.  

UEAPME-European  Association  of  Craft,  Small  and  Medium-sized  Enterprises  (2014),  The 

EU Craft and SME Barometer 2014/H2, October 2014. 

UEAPME-European  Association  of  Craft,  Small  and  Medium-sized  Enterprises  (2015),  The 

EU Craft and SME Barometer 2015/H1, March 2015. 

Unquote"  and  SL  Capital  Partner  (2013),  Private  Equity  Barometer  Q3  2013,  November 

2013. 

238 

 
VI. LIST OF ACRONYMS 

  AAPs   

 Annual Action Plans 

  ACP 

 African Caribbean and Pacific Countries 

  AECID 

 Agencia Española de Cooperación Internacional para el Desarrollo 

  AFD 

  AIF 

 Agence Française de Développement 

 Asian Investment Facility 

  AIFMD 

 Alternative Investment Fund Managers Directive 

  ALM   

 Anti Money Laundering 

  AML/KYC 

 Anti Money Laundering/ Know Your Customer 

  AQR 

 Asset Quality Review 

  ASEAN 

 Association of South-East Asian Nations 

  BA 

  BMZ   

  CABEI 

 Business Angels 

 German Federal Ministry for Economic Cooperation and Development 

 Central American Bank for Economic Integration 

  CARDS 

Community Assistance for Reconstruction, Development and       

Stabilisation 

  CBS 

  CCS 

 Capacity Building Scheme under CIP 

 Cultural and Creative Sectors 

  CCW   

 Climate Change Window 

  CDC 

  CDP 

  CEF 

  CIP 

 Caisse des Dépôts et Consignations 

 Cassa Depositi e Prestiti 

 Connecting Europe Facility 

 Competitiveness and Innovation Programme (2007-2013) 

  COESIF 

Coordination Committee for European Structural and Investments   

Funds 

  COSME 

 Competitiveness of Enterprises and Small and Medium-sized   

                           Enterprises (2014-2020) 

  CPR 

  CRIS   

  DACH  

  DCI 

 Common Provision Regulation 

 Common Relex Information System 

 German speaking countries (Germany, Austria, Switzerland) 

 Development Cooperation Instrument 

  DG CLIMA 

 Directorate General for Climate Action 

  DG DEVCO   Directorate General for Development and Cooperation 

  DG EAC 

 Directorate General for Education and Culture 

239 

 
 
 
 
 
 
 
 
 
 
 
 
                         
 
 
 
  DG ECFIN 

 Directorate General for Economics and Financial Affairs 

  DG EMPL 

 Directorate General for Employment, Social Affairs and Inclusion  

  DG ENER 

 Directorate General for Energy 

  DG ENTR 

 Directorate General for Enterprise and Industry 

  DG ENV 

 Directorate General for the Environment 

  DG MOVE 

 Directorate General for Mobility and Transport 

  DG NEAR 

 Directorate General for Neighbourhood and Enlargement Negotiations 

  DG REGIO 

 Directorate General for Regional Policy 

  DG RTD 

 Directorate General for Research and Innovation 

  DIV 

  EA 

 Dedicated Investment Vehicle 

 Euro Area 

  EAFRD 

 European Agricultural Fund for Rural Development 

  EaSI 

 Employment and Social Innovation Programme 

  EBRD  

 European Bank for Reconstruction and Development 

  ECA 

  ECB 

  EDF 

  EE 

 European Court of Auditors 

 European Central Bank 

 European Development Fund 

 Energy Efficiency 

  EEE F  

 European Energy Efficiency Fund 

  EELAF II 

 Emerging Energy Latin America Fund II 

  EEPR  

 European Energy Programme for Recovery 

  EFC 

  EFG 

  EFIs 

 Economic Financial Committee 

 Equity Facility for Growth 

 European Financial Institutions 

  EFSE   

 European Fund for Southeast Europe 

  EFSI 

 European Fund for Strategic Investments 

  EFTA  

 European Free Trade Association 

  EIB/BEI 

 European Investment Bank  

  EIF 

  EIP 

  EIPC   

  EMN   

  EMN   

  ENEF  

  ENIF   

 European Investment Fund 

 Entrepreneurship and Innovation Programme 

 European Independent Purchasing Companies 

 European Microfinance Network 

 European Microfinance Network 

 Enterprise Expansion Fund 

 Enterprise Innovation Fund 

240 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  ENP 

 European Neighbourhood Policy 

  ENPI   

 European Neighbourhood and Partnership Instrument 

  ENRTP 

 Environment and the Sustainable Management of Natural Resources 

  EP 

 European Parliament 

  EPEC  

 European PPP Expertise Centre 

  EPMF-G 

 European Microfinance Guarantee Facility 

  EPPA   

  ERDF  

 European Promotional Product Association 

 European Regional Development Fund 

  ERP-EIF 

 European Recovery Programme-European Investment Fund 

  ESCOs 

 Energy Service Companies 

  ESF 

  ESI 

  ESIF 

 European Social Fund 

 Economic Sentiment indicator 

 EU Structural and Investment Funds 

  EUBEC 

 European Platform for Blending in External Cooperation 

  EURATOM 

 European Atomic Energy Community 

  EVCA  

  EVCF  

 European Private Equity and Venture Capital Association 

 European Venture Capital Fund 

  EVCFR 

 European Venture Capital Funds Regulation 

  FAFA  

 Financial and Administrative Framework Agreement 

  FCP-FIS 

 Fonds Commun de Placement-Fonds d’Investissement Spécialisé 

  FEMIP 

 Facility for Euro-Mediterranean Investment and Partnership 

  FIs 

  FMA   

  FMO   

  FP7 

  G-20 

 Financial Intermediaries 

 Fiduciary Management Agreement 

 Netherlands Development Finance Company 

 Framework Programme for Research and Technological Development 

 The Group of Twenty Finance Ministers and Central Bank Governors    

 from 20 major economies 

  GDP 

 Gross Domestic Product 

  GEEREF 

 Global Energy Efficiency and Renewable Energy Fund 

  GF 

  GGF 

 Guarantee Facility 

 Green for Growth Fund 

  GHG   

 Green House gasses 

  GIF 

  GP 

  HLG 

 Growth and Innovative Facility 

 General Partners 

 High Level Expert group 

241 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  IC 

  ICT 

  IDB 

  IFC 

 Investment Committee 

 Internet and Communication Technology 

 Inter-American Development Bank 

 International Finance Corporation 

  IFCA   

 Investment Facility for Central Asia 

  IFI 

  IPA 

 International Financial Intermediaries 

 Instrument for Pre-Accession Assistance 

  ITRE   

 EP Committee on Industry, Research and Energy  

  KfW 

  KYC 

 Kreditanstalt für Wiederaufbau Banking Group 

 Know Your Customer 

  LAIF   

 Latin America Investment Facility 

  LEF 

  LGF 

 Local Enterprise Facility 

 Loan Guarantee Facility 

  LGTT  

 Loan Guarantee Instrument for Trans-European Transport Network   

                           Projects 

  LIFE   

 Programme for the Environment and the Climate Action 

  LNG 

  LP 

 Liquefied Natural Gas 

 Limited Partners 

  MAWP 

 Multiannual Work-Programme 

  MB 

  MBO   

  MEDA 

  MFF 

  MFIs   

  MIFA  

  MIPD  

  MPC   

  MPGF  

  MS 

 Management Board 

 Management Buy Out 

 Euro - Mediterranean Partnership 

 Multiannual Financial Framework 

 Micro Finance Institutions 

 Microfinance Initiative for Asia 

 Multi-annual Indicative Planning Document 

 Mediterranean Partner Countries 

 MEDIA Production Guarantee Fund 

 Member State 

  MSME 

 Micro Small and Medium Enterprises 

  MTE   

  NCFF  

 Mid-Term Evaluation 

 Natural Capital Financing Facility 

  NEEAP 

 National Energy Efficiency Action Plans 

  NGO   

 Non-Governmental Organization 

  NIB 

 Nordic Investment Bank 

242 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  NIF 

  NPL 

  ODA 

 Neighbourhood Investment Facility 

 Non-Performing Loans 

 Official Development Aid 

  OECD  

 Organization for Economic Cooperation and Development 

  OECD/DAC   OECD's Development Assistance Committee 

  OFTO  

  PBCE  

  PBI 

  PCT 

  PF4EE 

  PFLP   

  PIs 

 Offshore Transmission Owners 

 Project Bond Credit Enhancement 

 Project Bond Initiative 

 Patent Cooperation Treaty 

 Private Finance for Energy Efficiency Instruments 

 Portfolio First Loss Piece 

 Partner Institutions 

  PISA   

 Programme for International Student Assessment 

  PMF 

  PPP 

  R&I 

  RAB 

  RCO 

  RDI 

  RE 

  RFSF   

  ROM   

  RRT 

 Programme Microfinance Mandate 

 Public Private Partnership 

 Research and Innovation 

 Regulatory Asset Base 

 Risk Capital Operations 

 Research Development and Innovation 

 Renewable Energies 

 Regional Fund Support Facility 

 Result Oriented Monitoring 

 Residual Risk Tranche 

  RSFF   

 Risk Sharing and Finance Facility 

  RSI 

  RSL 

 Risk Sharing Instrument 

 Recovery Support Loan Facility for Turkey 

  SAFE   

 Survey on Access to Finance of Small and Medium Enterprises in 

Europe 

  SB 

 Supervisory Board 

  Se4all   

 Sustainable Energy for All 

  SICAV-FIS  

 Société d’Investissement   Capital Variable- Fonds d’Investissement   

                         Spécialisé 

  SIMEST 

 Societ   Italiana per le Imprese all Estero 

  SME 

 Small and Medium Enterprise 

  SMEG  

 Small and Medium Enterprises Guarantee Facility 

243 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  SPV 

 Special Purpose Vehicle 

  SUDeP 

 Sustainable Urban Demonstration Projects 

  TA 

  TEN-E 

  TEN-T 

  TMT   

  TSOs   

  TT 

 Technical Assistance 

 Trans- European Network for Energy 

 Trans-European Network for Transport 

 Technology, Media and Telecommunications 

 Transmission System Operators 

 Technology Transfer 

  UEAPME 

 European Association of Craft, Small and Medium-Sized Enterprises 

  VC 

 Venture Capital 

  WB EDIF 

 Western Balkans Enterprise Development & Innovation Facility 

  WB 

 Western Balkans 

244