REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Final Report pursuant to Article 4 of Decision No 562/2014/EU of the European Parliament and the Council of 15 May 2014 on the participation of the European Union in the capital increase of the European Investment Fund
Date: 2018-12-12
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU financing, EU growth strategy, European Investment Bank, European Investment Fund, aid to undertakings, capital increase, investment loan, microfinance, small and medium-sized enterprises, venture capital

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.12.2018  COM(2018) 815 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Final Report  pursuant to Article 4 of Decision No 562/2014/EU of the European Parliament and the Council of 15 May 2014 on the participation of the European Union in the capital increase of the European Investment Fund   
 
 
1.  INTRODUCTION 

This  final  report  pursuant  to  Article  4  of  Decision  No  562/2014/EU1  assesses  how  the 
increase  in  the  capital  of  the  European  Investment  Fund  (EIF)  capital  has  reached  the 
objective of increasing the EIF support of actions which complement Member States' actions 
in  favour of enterprises,  particularly small and medium-sized enterprises (SMEs).  It  follows 
the interim report of 19 December 20162, which found that the capital increase, which at that 
point  has  not  yet  been  completely  finalised,  had  already  led  to  increased  financing  made 
available to SMEs and mid-caps. 

1.1 The EIF 

a) Capital structure and increases 

The  EIF  was  established  in  19943  by  the  European  Investment  Bank  (EIB),  the  European 
Community,  now  the  European  Union  (EU),  represented  by  the  European  Commission  (the 
Commission), and public and private financial institutions with an authorised capital of ECU 
(now EUR) 2 bn paid-in at 20%. In 2007 the authorised capital was increased to EUR 3 bn. 
The  Commission  used  the  EIF  dividends  received  from  2007  to  2010  for  payment  and 
covered the remainder from the EU budget, which allowed the EU's 30% shareholding to be 
maintained.  

A second capital increase approved by the EIF shareholders General Meeting on 27 May 2014 
brought the EIF’s authorised capital to EUR 4.5bn. A Commission proposal to use the EU's 
dividends for the subscription of new shares was not retained, but up to EUR 178 mn were set 
aside in the EU budget for the period 2014-2017 for the subscription of up to 450 new shares. 
Due  to  an  increase  in  the  value  of    the  shares,  this  amount  only  sufficed  to  subscribe  437 
additional shares for the EU4, resulting in a slight dilution of its share of the EIF. Currently, 
the EIB holds 2 642 (58.7%), the EU 1 337 (29.7%), and the 32 financial institutions a total of 
521 (11.6%) of the EIF’s shares. 

The main objectives of the 2014 capital increase were to: 

(1)  Develop  the  SME  loan  capital  markets  with  the  aim  of  diversifying  the  source  of 

(2) 

liquidity for SME banks and leasing companies; 
Improve  SMEs'  access  to  finance  by  responding  to  the  European  Council  request  to 
increase the unique credit enhancement capacity of the EIF; 

(3)  Support  the  growth  of  the  EIF  as  a  cornerstone  investor  in  the  venture  and  growth 

capital market; 

1  Decision  No  562/2014/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  on  the  participation  of  the 
European Union in the capital increase of the European Investment Fund (OJ L 156, 24.5.2014, p. 1). 
2  Report  from  the  Commission  to  the  European  Parliament  and  the  Council.  Interim  Report  on  the  participation  of  the 
European  Union  in  the  capital  increase  of  the  European  Investment  Fund  and  the  pertinent  increase  of  the  European 
Investment  Fund's  support  of  actions  in  favour  of  enterprises,  particularly  small  and  medium  sized  enterprises  pursuant  to 
Article 4 of Decision No 562/2014/EU of the European Parliament and the Council of 15 May 2014 on the participation of 
the European Union in the capital increase of the European Investment Fund, COM/2016/0795 final. 
3  Council  Decision  94/375/EC  of  6  June  1994  on  Community  membership  of  the  European  Investment  Fund  (OJ  L  173, 
7.7.1994, p. 12). 
4  The 437 new shares were purchased for EUR 177 895 462.23 (average price per share of EUR 408,199.52). 

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(4)  Enhance  the  EIF's  role  in  microfinance  and  social  impact  investment,  enabling 

breakthrough equity participations in new social enterprises and financial institutions; 

(5)  Enable risk-sharing in the EIF mandates through co-investment; 
(6)  Support  the  EIF's  AAA  rating  by  injecting  new  capital  and  by  demonstrating  its 

increased policy importance. 

b) Operational activities 

The EIF is the risk capital arm of the EIB Group, supporting the financing of Europe's SMEs. 
It  designs,  develops  and  deploys  venture  and  growth  capital,  guarantees  and  microfinance 
instruments  that  target  SMEs  and  mid-caps,  to  give  an  incentive  for  further  investments  in 
Europe  and  increase  the  leverage  effect  of  EU  budgetary  resources  and  Member  States' 
contributions,  in  cooperation  with  the  Commission.  In  doing  so,  it  relies  on  market-based 
financial instruments  (securitisation, diversified debt  funds, etc.).  It  fosters EU objectives to 
support innovation, research and development, entrepreneurship, growth and employment and 
inclusive finance by addressing those financial products to financial intermediaries.  

The EIF is active in the EU Member States, candidate and potential candidate countries, and 
in  the  European  Free  Trade  Association  countries.  It  currently  manages  more  than  122 
mandates  on  behalf  of  notably  the  Commission  and  the  EIB.  They  comprise  equity 
investments and guarantees or, to a limited extent, funded instruments. The EIF also manages 
mandates  from  Member  States  and  authorities  managing  resources  under  the  European 
Structural  and  Investment  Funds  (ESIF),  funds  of  funds,  corporates  and  private  and  public 
institutions, and co-invests its own resources in equity and debt business activities. 

c) Capital requirements and expected level of creditworthiness  

The  EIF’s  business  lines  involve  different  risks,  reflected  in  a  certain  level  of  economic 
capital allocation that needs to be set aside. The ceiling for commitments from own resources 
under guarantee operations is three times the amount of subscribed capital. On 8 March 2017, 
under the delegation given by the General Meeting, the EIF’s Board of Directors increased the 
ceiling  for  equity  participation operations with  EIF’s own resources from 50% to  70% own 
funds.  The  EIF's  risk  and  capital  management  has  helped  maintain  its  AAA-stable  credit 
rating, recently reconfirmed by the main credit rating agencies, who notably highlighted the 
2014 capital increase. The breadth of the EIF's products and their geographical and sectorial 
scope underpin a moderate and sustainable risk exposure. 

2.  

EIF 2014-2018 ACHIEVEMENTS UNDERPINNED BY THE CAPITAL INCREASE 

2.1 Overview as of the Second Quarter of 20185 

By 30 June 2018, the EIF had increased its volume of activity on average by more than 30% 
per  year6  compared  to  2013.  The  EIF  entered  into  1,120  transactions  with  an  investment 
volume of EUR 44 bn. Out of them, 771 transactions relied on the EIF's capital  base. They 
involved  EUR 12.1  bn  of  the  EIF's  own  resources,  of  which  more  than  EUR  10  bn  were 

5 Latest available data reported by the EIF. 
6 CAGR (Compounded Annual Growth Rate) based on 2017 year end volume. 

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invested  alongside  mandate  resources  managed  by  the  EIF.  EIF’s  activity  is  expected  to 
leverage EUR 154 bn of financing at the level of SMEs and mid-caps.  

The  resulting  strong  capitalisation  was  a  determining  factor  for  the  EIF’s  successful 
deployment of the European Fund for Strategic Investment (EFSI) and underpins the increase 
of EFSI (EFSI 2.0) decided in late 2017. The EIF drew on its own resources, mobilising up to 
EUR  500  mn,  to  advance  the  deployment  of  EFSI  before  the  adoption  of  the  EFSI  2.0 
legislation. Under EFSI 2.0, the EFSI guarantee has been increased to a total of EUR 26 bn 
(and  the  expected  mobilised  investment  from  EUR 315  bn  to  EUR 500  bn)  while  the 
investment period was extended until 2020. It will thus be necessary for the EIF to mobilise 
significant own resources alongside EFSI between 2018 and 2020.  

2.2 Equity (Venture and Growth Capital) 

The additional risk-taking capacity resulting from the capital increase has allowed the EIF to 
expand the outreach of its equity investments, both in terms of volumes invested and speed of 
deployment.  During  the  period  2014-2018,  EIF’s  equity  activity  has  leveraged  more  than 
EUR 64 bn of financing at the level of final recipients.  

a) EFSI/RCR operations underpinned by increased capital 

The EIB Risk  Capital  Resources  (RCR) enabled the EIF to  pursue its equity strategy in  the 
venture  capital  and  growth  segments  for  over  18  years  and  allowed  increased  investments 
through  hybrid  debt-equity  financing.  The  EIF  co-invests  its  own  resources  alongside 
mandate  resources.  In  July  2015,  the  EIB  increased  the  RCR  by  EUR 2.5 bn  (reaching 
EUR 9.5  bn)  under  the  EFSI  SME  window  for  private  equity  and  technology  transfer 
investments  in  SMEs  and  mid-caps.  At  the  end  of  2015,  EFSI-specific  commitments 
amounted  to  EUR  1.4  bn  in  45 funds.  The  resulting  financing  reached  EUR  8.1  bn  and  is 
expected to  result in EUR 14.6 bn of mobilised investment  at  the level  of final  recipients  (a 
leverage ratio of nearly 1:11). 

The Mezzanine Co-Investment Facility (MCIF) within the RCR mandate is a  EUR 101 mn 
hybrid  debt-equity  facility.  It  enabled  the  EIF  to  co-invest  in  target  companies  alongside 
mezzanine  funds.  By  June  2018,  commitments  under  MCIF  totalled  EUR  98  mn  (of  which 
EUR  5  mn  of  the  EIF's  own  resources),  promoting  a  broader  utilisation  of  co-investment 
solutions and addressing clearly identified fundraising shortfalls. In the period January 2014 - 
June  2018,  the  EIF  committed  into  underlying  funds  EUR 9.9 bn  under  the  RCR,  including 
EUR 437 mn of its own resources.  

b) EFSI SMEW Equity Product 

In July 2016 the EIF, the EIB and the Commission launched the EFSI SMEW Equity Product, 
whose overall investment capacity of EUR 2 071 mn targets equity investments across a wide 
spectrum  of  financing  needs  and  delivery  modalities  (co-investments,  technology  transfer, 
funds-of-funds,  social  impact,  etc.).  It  has  two  sub-windows,  the  growth/expansion  sub-
window  and early stage investments sub-window. A collaborative platform enables national 
promotional  banks  and  institutions  to  match  the total  budget  for  investment  under  the  EFSI 
SMEW Equity Product.  In the period July 2016  - June 2018, the EIF  committed EUR 1 bn 
under the EFSI SMEW Equity Product, including EUR 177 mn of its own resources.  

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c) EIF risk-sharing under EU mandates - the single EU equity financial instrument 

In the Single EU Equity Financial Instrument, EU budgetary resources are deployed alongside 
the EIF's own resources. It includes the COSME Equity Facility for Growth (COSME EFG) 
and the Horizon 2020 InnovFin SME Venture Capital instrument (InnovFin Equity), the latter 
also covering a pilot initiative for business angels.  

Under  COSME  EFG  the  EIF  invests  in  funds that  provide  equity  and  mezzanine  finance  to 
expansion  and  growth-stage  SMEs  with  high  growth  potential,  particularly  those  operating 
cross border. By June 2018, 13 investments under the EFG facility had been signed, resulting 
in  EUR  160  mn  of  aggregate  commitments,  of  which  EUR  8  mn  from  the  EIF's  own 
resources.  

Through InnovFin Equity, the EIF targets investments in technology transfer, business angels, 
venture capital funds and fund-of-funds that provide equity for early stage companies in pre-
seed, seed and start-up phases that may not yet have generated revenues. It leverages almost 
EUR 3 bn for enterprises in Member States and countries associated with the Horizon 2020 
programme.  

Under  EFSI,  a  structured  financial  product  was  created  for  early  stage  investments 
(sub-window 2).  This  product  combines  EUR 458  mn  of  the  EU’s  InnovFin  Equity  facility 
with a EUR 270 mn commitment benefitting from the EFSI EU Guarantee and a EUR 290 mn 
commitment  under  the  EIF's  own  resources  (the  aggregation  of  all  such  resources  being 
referred to as IFE Facility for Early Stage). By June 2018, the EIF committed a total amount 
of EUR 539 mn to 29 equity funds, including EUR 153 mn of the EIF's own resources.  

d) EIF risk-sharing under a combination of EU mandates and the EFSI Equity product  

In 2016, the EIF launched the Pan-European Venture Capital Fund(s)-of-Funds (VC FoF) to 
invest in private-sector led, market-driven pan-European venture capital fund-of-funds, using 
EIF’s own resources with the COSME Equity Facility for Growth, the EFSI SMEW Equity 
Product  Sub-windows  1  and  2,  also  known  as  the  IFE  Facility  for  Early  Stage  (as  a 
combination of the Horizon 2020 InnovFin Equity facility, EFSI Equity Instrument and EIF’s 
own resources). The EIF targets investments in eligible VC FoF for the aggregate amount of 
EUR 410 mn, of which EUR 67.5m of EIF own resources. As of October 2018, 2 agreements 
with VC FoF managers had been signed and negotiations were ongoing with 4 others. 

e) Development of social impact investment: Social Impact Accelerator (SIA) 

SIA  is  an  EIF  initiative  launched  in  2013  as  part  of  the  EIB  Group’s  impact  investment 
strategy, responding to the EU policy of establishing a sustainable funding market for social 
entrepreneurship in Europe. SIA is a fund-of-funds that seeks to create a portfolio of equity 
investments in social impact funds. It promotes social inclusion, provides alternative sources 
of  employment  for  marginalised  social  groups,  contributes  to  growth  and  ensures  the 
availability  of  a  broad  range  of  financing  options,  including  debt  or  hybrid  debt/equity 
instruments. 

SIA  benefits  from  EUR  180  mn  financing  under  the  EREM  Social  Impact  Finance 
Instrument, an EIB mandate. The total commitments to SIA reached EUR 243 mn at its final 
closure in July 2015, through additional investments from RCR (EUR 48 mn), the EIF’s own 

4 

 
resources  (EUR 11.5 mn)  and  other  four  investors  (EUR  1  mn  each):  the  Bulgarian 
Development  Bank,  the  Finnish  Innovation  Fund  Sitra,  Crédit  Coopératif  and  DB  Impact 
Investment Fund I (Deutsche Bank).  

f) Regional outreach 

The  EIF  has  expanded  its  regional  equity  outreach.  It  manages  now  42  regional  funds-of-
funds with aggregate commitments of EUR 6.3 bn. In 2016, the EIF and its regional partners 
set up two funds-of-funds, mainly targeting Estonia (EUR 60 mn) and Sweden (SEK 582 mn - 
approx.  EUR  60.5  mn)  combining  ESIF  and  EFSI  SMEW  resources.  During  2016,  the  EIF 
and its regional partners set up a fund-of-fund in Greece (EUR 260 mn) with RCR and ESIF 
resources  (expected  leverage  EUR  326  Mn),  as  well  as  other  funds-of-funds  in  the 
Netherlands  (EUR  200  mn),  in  Germany  (EUR  400  mn)  and  in  Turkey  (EUR 200 mn).  In 
2017,  EIF  and  its  regional  partners  set  up  eight  funds-of-funds,  mainly  targeting  Romania 
(EUR 84 mn), the Czech Republic (EUR 50 mn), Italy (EUR 41 mn),  Finland (EUR 30 mn) 
and Central Europe (EUR 106 mn).  

EIF  has  initiated  a  number  of  co-investment  programmes,  such  as  the  Scottish-European 
Growth Co-Investment Programme in which the EIF and Scottish Enterprise have contributed 
a financial allocation of GBP 50 mn each or the Dutch Growth Co-Investment Programme in 
which the EIF and Netherlands Investment Agency have contributed a financial allocation of 
EUR 50 mn.  

The  EIF  also  expanded  its  activities  under  the  European  Angels  Fund  (EAF)  initiative 
launched  in  2012.  Under  EAF,  the  EIF  coinvests  with  business  angels  and  other  non-
institutional  investors  in  innovative  companies  in  the  seed,  early  or  growth  stage.  The  EAF 
now covers Austria, Germany, Ireland, the Netherlands, Spain, Denmark and Finland. At the 
end of June 2018, the EAF initiative had a volume of EUR 392 mn, of which at least EUR 38 
mn to be committed under the EIF's own resources. 

g) AMUF 

In  2017,  the  EIF  launched  the  Asset  Management  Umbrella  Fund  (AMUF)  which  currently 
consists  in  three  compartments:  European  Growth  Capital,  European  Technology  Venture 
Capital and European Life Sciences Venture Capital.  

AMUF  increases  the  amount  of  risk  capital  available  for  the  investment  activity  in  Europe, 
crowding  in  new  institutional  investors  for  European  private  equity  and  venture  capital 
markets. The EIF has undertaken to invest about  2.5% of the total capital committed by the 
other  investors.  At  the  end  of  June  2018,  three  investors  have  committed  in  total  EUR 345 
mn. The fundraising subscription period expires in 2019 with a maximum fund target size of 
EUR 2 bn, of which the EIF is expected to commit up to EUR 50 mn of own resources.  

2.3.  Debt (Guarantees, Securitisation and Microfinance) 

Alongside  new  mandates  deployed  in  2014-2018  relying  exclusively  on  mandate  resources, 
an  important  number  of  debt-focused  mandates  were  launched  with  EIF  co-investments 
and/or  risk-sharing.  In  addition,  the  EIF  has  boosted  its  own-risk  activity  in  credit 
enhancement  operations.  The  leveraged  volume  of  SME  loans  given  by  the  financial 

5 

 
 
institutions participating in EIF’s debt products during the period 2014-2018 is estimated to 
reach EUR 85 bn. 

a) EIB risk enhancement mandate (EREM) 

The EREM was signed between the EIB and the EIF in March 2014 to support the impaired 
financing of European businesses through additional guarantees, debt and equity instruments. 
A total of up to EUR 6 bn was earmarked, of which EUR 4 bn from the EIB and up to EUR 2 
bn  from  the  EIF.  EREM’s  investment  period  will  be  completed  at  the  end  of  2018.  The 
EREM's products/windows reinforced existing activities or strengthened alternative financing 
tools to respond to new market needs: 

• 
ABS  Credit  Enhancement  (EREM  ABS  CE)  increased  capacity  in  mezzanine 
tranches of asset-backed securitisations, freeing up resources for originators to lend to SMEs 
and small mid-caps. Its activity has signed more than EUR 855 mn of which EUR 291 mn of 
EIF  own  resources.  The  leveraged  volume  of  additional  SME  lending  undertaken  by  the 
originators is estimated to reach EUR 5 bn;  

EREM Cooperative Banks & Smaller Institutions broadened the EIB Group's range 
• 
of  intermediaries,  in  particular  small  cooperative  banks  and  other  smaller  institutions 
particularly focused on smaller SMEs and start-ups. In turn, originators were expected to use 
the freed up resources for lending to SMEs. The EIF concluded 16 loan transactions, totalling 
EUR 153 mn, of which 7.7 mn of EIF own resources;  

• 
EREM  Loan  Funds  –  a  new  segment  that  the  EIF  tapped  into  to  widen  the 
availability of loan financing for SMEs and small mid-caps beyond traditional bank channels. 
Almost  EUR 57  mn  of  the  EIF's  own  resources  have  been  signed  in  26  transactions,  for  an 
aggregate invested volume of EUR 1 135 mn. 

EREM-SME  Initiative  requires  the  EIF  to  participate  with  its  own  resources 
• 
alongside  the  financing  made  available  by  the  EIB.  Up  to  EUR  159  mn  of  the  EIF's  own 
resources have been signed in 67 transactions, for an aggregate signed volume of EUR 4.3 bn.  

b) EIF capital contributions to the InnovFin SME Guarantee Facility (SMEG) 

Since  2014,  the  EIF  has  offered  uncapped  guarantees  or  counter-guarantees  to  financial 
intermediaries,  allowing  them  to  provide  debt  financing  on  favourable  terms  to  innovative 
SMEs and small mid-caps in Member States and Associated Countries. 

From 2014 to June 2018, EUR 1.8 bn from the EU budget and EUR 7.2 bn of EIF exposure 
were  signed,  thereby  making  approximately  EUR  18  bn  of  debt  finance  available  for 
innovative companies and mobilising around EUR 26 bn in investments. The EIF concluded 
177  guarantee  transactions,  totalling  EUR  9  bn, of  which  139    transactions  were  backed  by 
EFSI  for  EUR  7.6  bn  in  total  signatures.  In  the  context  of  EFSI  2.0  and  the  EFSI  SME 
window,  a  top-up  of  the  InnovFin  SMEG  facility  by  approximately  EUR  220  mn  is 
envisaged. EIF resources of up to EUR 1,760 mn will be combined with the EFSI 2.0 and an 
EU budget contribution so as to cover a total guarantee volume of up to EUR 2,200 mn over 
the period 2017-2022. 

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c) EIF support to the SME initiative 

The  SME  Initiative  of  the  Commission  and  the  EIB  group  stimulates  SME  financing  by 
providing partial risk cover for SME loan portfolios of originating financial institutions. ESIF 
provide the major part of EU funds which include a contribution from EU level instruments 
(COSME and/or Horizon 2020), with co-funding from EIB and EIF own resources. The EIF 
offers  selected  financial  intermediaries  an  uncapped  portfolio  guarantee  instrument  or  a 
securitisation  instrument.  The  ensuing  loss  protection  and  potential  capital  relief  allows 
financial intermediaries to provide SME loans, leasing and/or guarantees at favourable terms. 
The  SME  Initiative  covers  Spain,  Bulgaria,  Finland,  Malta,  Italy  and  Romania. 
Approximately EUR 1.2 bn of ESIF resources have been entrusted to the EIF, coupled with an 
expected  commitment  of  up  to  EUR  4.1  bn  from  the  EIB  and  EUR  215  mn  from  the  EIF's 
own resources.  

d) EIF support to the Agri Italy Platform 

The  AGRI  Italy  Platform  set  up  by  EIF  in  cooperation  with  the  Italian  regions  of  Calabria, 
Campania,  Emilia  Romagna,  Piemonte,  Puglia,  Veneto,  Umbria  and  Tuscany  is  a  new 
generation  of  a  multiregional  debt  financial  instrument  aiming  to  provide  better  access  to 
finance for final recipients in the agricultural and agro-industrial sectors. The EIF participates 
with its own resources alongside the financing made available by the Italian regions. A total 
of up to EUR 64 mn from EIF is currently earmarked for the Agri Italy Platform.  

e) Increased EIF own resources SME securitisation activities 

With  securitisation  transactions,  EIF  seeks  to  provide  credit  enhancement  which  allows 
originators  to  diversify  their  funding  sources  and  achieve  economic  and  regulatory  capital 
relief through credit risk transfer, thus enabling them to undertake further SME lending. Since 
2014, the EIF's efforts  to help  the revival of SME securitisation have resulted in  more than 
EUR 15 bn of signed guarantees. Geographical  coverage has expanded to 11 countries. The 
leveraged  volume  of  additional  SME  lending  undertaken  by  the  originators  is  estimated  to 
reach  EUR  28  bn.  In  total,  the  EIF’s  SME  securitisation  activity  has  mobilised  more  than 
EUR 3 bn of EIF own resources in the same period.  

The  EIF's  EREM  ABS  CE  supported  mezzanine  tranches  of  SME/small  mid-caps  based 
securitisation transactions, including both synthetic and true sale transactions. The EIF  used 
EUR 391 mn of its own resources to purchase more senior tranches under a product of direct 
investments in SME asset-backed securitisations and covered bonds transactions.  

3. 

KEY EIF ACTIVITY LOOKING FORWARD  

3.1 

Additional future activities 

The EIF continually seeks to cover new identified market gaps in the financing of European 
SMEs and mid-caps. 

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a)  Additional equity activities  

i)  Top-up of EFSI SMEW equity product  

Given  the  successful  deployment  of  the  EFSI  SMEW  equity  product,  a  top-up  of  the  EFSI 
SMEW equity product by EUR 1.37 bn, including EUR 1 bn for the Sub-window 1 and EUR 
0.37 bn for the IFE Facility for Early Stage, is foreseen, with the EIF investing up to 155 mn 
of its own resources into this product.  

ii)  Top-up of RCR under the EFSI SMEW  

In  addition  to  the  EFSI  SMEW  equity  product  top-up,  RCR  will    benefit  from  a  top-up  of 
EUR 1 579  mn  to  expand  the  EFSI  SMEW,  of  which  almost  EUR  79  mn  being  EIF’s  own 
resources. 

b) Additional debt activities 

Funded instruments for microfinance (EaSI) 

Under  the  EU  Programme  for  Employment  and  Social  Innovation  (EaSI),  the  Commission 
and  the  EIB  Group  plan  to  supplement  the  guarantee  mandate  with  a  facility  for  offering 
senior  and  subordinated  loans  to  microfinance  and  social  entrepreneurship  institutions  that 
will  in  turn  extend  financing  to  micro-enterprises  and  social  enterprises.  The  EIF's  own 
resources of up to EUR 28.5 mn are to be mobilised alongside EIB and EaSI resources for an 
expected aggregate volume of EUR 200 mn.  

3.2 

Impact on the EIF’s capital consumption 

a) Capital consumption 

i) Equity 

The EIF's own resources commitments in the area of equity participations are capped. As of 
June  2018;  there  are  EUR  1.4  bn  available.  The  overall  private  equity  net  commitments  of 
EUR 1.1 bn mn utilised 78% of the ceiling. 

ii) Guarantees 

As of the end of September 2013, the EIF's exposure from own risk guarantee operations was 
EUR  2.9  bn,  resulting  in  a  EUR  6.1  bn  headroom  for  such  transactions.  The  increased 
guarantee  business  volume  between  2014  and  the  end  of  June  2018  more  than  doubled  the 
EIF's exposure to EUR 8 bn against the ceiling of EUR13.5 bn.  

b) Optimisation of capital use  

The higher than anticipated increase in business volumes was made possible through a higher 
allocation of EIF capital. The EIF is actively managing its capital to accommodate the further 
expected growth until 2020. Different measures are put in place to reduce consumption of the 
EIF’s capital, including a more active portfolio management, in particular in the equity area. 

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c) Future capital needs 

The EIF estimates that by the end of 2020, the capital allocated to it will have been fully used 
and that a continuation and expansion of its contribution to the pursuit of EU policy objectives 
over the next MFF would require an further increase of its capital. It estimates that a capital 
increase of EUR 3~3.5 bn would be necessary if it were to deliver on targets of some EUR 
100 bn of investment  in  Europe over the next MFF. Such investmerns  could  mobilise more 
than EUR 1 trillion of investment in the real economy over the same period.  

4. 

CONCLUSION  

The 2014 capital increase made significantly more financing available to SMEs and mid-caps. 
The  capital  increase  created  additional  risk-taking  capacity,  allowing  a  higher  volume  and 
speed  of  deployment  of  equity  investment  into  SMEs,  whereby  the  EIF's  capital  was 
substantially  leveraged.  The  increase  boosted  the  EIF's  own-risk  activity  in  credit 
enhancement  operations,  in  particular  for  guarantees  and  securitisation,  mobilising  private 
financing and increasing access to finance for SMEs. The EU’s participation of EUR 178 mn 
in the 2014 capital increase was essential to strengthen the EIF and to put it into a position to 
achieve tangible results for Europe’s SMEs.  

Not  the  least,  it  enabled  the  EIF  to  achieve  remarkable  success  with  the  SME  Window  of 
EFSI in terms of additional volumes of financing to SMEs, which contributed signifincantly 
to EFSI overshooting by EUR 20 bn its initial target of EUR 315 bn investment mobilised by 
mid 2018.    

It is expected that the EIF will outperform the initial expectations leading to the 2014 capital 
increase. By the end of June 2018, EIF had thus committed almost 30% more resources (EUR 
44 bn), than anticipated in 2014 (EUR 34 bn) for the benefit of more than 547 000 SMEs and 
other final recipients, while sustaining more than 4 mn jobs. By end-2020, another EUR 26 bn 
are expected to be committed, raising the overall commitments to EUR 70 bn over 7 years and 
leveraging simultaneously EUR 250 to 300 bn of financing in the real economy. This means 
the initial expectations in 2014 (EUR 175 bn) will be exceeded by more that 40%.  

The EIF is  expected to  continue to  play a significant  role in  the  financing of enterprises, in 
particular  in  critical  areas  of  the  European  economy  (research  and  innovation,  SMEs, 
microfinance, etc.) throughout the period covered by the 2021-2027 MFF. The EIF estimates 
that a strengthening of the EIF’s capital base with EUR 3-3.5 bn would be necessary, starting 
in  2021.  There  are  however  several  uncertainties  related  to  any  capital  increase.  The  EIF's 
capital requirements will have to be reassessed in light of the financial products to be rolled 
out  by  the  EIF  in  the  implementation  of  InvestEU  and  possible  blending  operations  in  the 
2021-2027 multiannual financial framework. 

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