Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
One of the main shortcomings observed in the previous programming period were related to gap
assessments 84 . Financial instruments are a special category of spending and their successful design
and implementation hinges on a correct assessment of market gaps and needs. The amended
regulations stipulate that financial instruments should be designed on the basis of an ex ante
assessment that has identified market failures or sub-optimal investment situations, respective
investment needs, possible private sector participation and resulting added value of the financial
instrument in question. Such an ex ante assessment should also avoid overlaps and inconsistencies
between funding instruments implemented by different actors at different levels.
The EC has already outlined a number of proposals for the inclusion of innovative financial
instruments in the next MFF to be implemented through a set of common rules and guidance for
equity and debt instruments (referred to as the “EU equity and debt platforms”) 85 . These include 86 :
BOX 3.5.4.1: Investments in RD&I under Horizon 2020
Two financial instruments are planned:
(1) a debt instrument providing loans to single beneficiaries for investment in RD&I,
guarantees to financial intermediaries making loans to beneficiaries, combinations
of loans and guarantees and/or counter-guarantees for national or regional debtfinancing
schemes, and
(2) an equity instrument that would (i) invest in technology transfer and intellectual
property vehicles and in venture capital funds providing equity finance to early stage
RD&I-intensive SMEs, and (ii) support investments in RD&I sectors by targeting
thematically focused, multi-country “funds-of-funds” with a broad investor base,
including private institutional and strategic investors.
BOX 3.5.4.2: Competitiveness and SMEs
Two financial instruments to be funded by the Programme for the Competitiveness of
Enterprises and SMEs 2014-2020 (COSME) are being proposed:
(1) an equity facility for growth-phase investment, which will provide commercially
oriented reimbursable equity financing primarily in the form of VC through financial
intermediaries to SMEs. Two measures are envisaged:
- Direct investments in VC funds which operate across borders within the EU and
are focused on investing in growth-oriented enterprises not primarily based on
innovation or research.
- “Funds-of-funds” investing across borders in VC funds which subsequently
invest in enterprises, in particular in their international expansion phase.
(2) a loan facility, providing direct or other risk sharing arrangements with financial
intermediaries to cover loans for SMEs and provide cross-border lending or multicountry
lending with a high leverage effect.
84 This was one of the main recommendations put forward by the Court of Auditors’ report, also suggesting the inclusion of
a quantified analysis of the financing gap (European Court of Auditors (2012), Financial instruments for SMEs – audit report).
The same report also provides a good practice example of a gap assessment related to an initiative in Sweden (Ibid, pg. 18)
85 Various documents highlight the need for amendments to the Regulations, improved guidance and technical assistance to
be provided to Member States on the basis of experiences from the 2007-2013 Programming Period (European Court of
Auditors (2012), Financial instruments for SMEs – audit report; European Commission (2012), Financial Instruments in
Cohesion Policy; European Commission (2011), A framework for the next generation of innovative financial instruments – the
EU equity and debt platforms). This need for higher assurance will, however, come at the price of flexibility.
86 European Commission (2011), A framework for the next generation of innovative financial instruments – the EU equity
and debt platforms, pgs. 11-12
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