Enhancing smE financing in acp countries - ACP Business Climate

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Possible investment facility (if) alternatives and roadmap for sme support
Finally the TA design should draw on best practices, such as
the efficient features of the SME Business Advisory Services
run by EBRD across 20 countries, e.g.:
• SMEs are to pay for part of TA costs (around 50%) to
prevent wastage;
• Management units outsource all TA, not to undercut the
local consultancy profession (including local accountants
and auditors);
• Units are headed by qualified, independent businessmen,
not bureaucrats;
• Only SMEs with growth/profit potential and clear TA
needs are selected;
• Some TA is also open to participating banks and local
consultants (training);
• Other donors than the EC may join in the scheme’s
funding and oversight.
The main alternatives summed up below are all preferred to
the status quo, and become more effective when they may
be combined.
Option Features Pros Cons
Statu quo (limited
No grant needed
amount and focus)
TA via SME
associations
TA via bank
associations
TA via EU/EIB PMUs
Some TA from
banks, donors,
States & equity/
guarantee funds
TA allocation
management
under
representative SME
association
TA allocation under
bank association
TA allocation by
EU Programme
Management Units
run by EIB
SME ownership and
readiness to pay
High SME financing
impact
Funding secured
and open to other
donors
Little efficiency
and SME financing
impact
Moderate impact
on SME financing
Relative conflict of
interests for banks
Moderate SME and
bank ownership
8.4. Relative IF Devolvement
The distribution of the IF’s credit lines to national banks
could be delegated to regional banks as apexes, in order
to finance SMEs in more ACP countries.
The terms of reference of the present study provide for drawing
from the stakeholders’ meetings “…recommendations about
possible devolvement of management of the Investment
Facility upon regional organisations…” including the “…
possibility of a roadmap prepared for taking forward the
discussion on devolving the management of the Investment
Facility”.
The IF financing of SMEs is already devolved to the extent
that it falls below the €5M threshold and is therefore fully
channelled through ACP intermediaries. Since project
approvals less returns to date match the IF capital, only
staggered future returns remain available under the current
Protocol for gradually applying further devolution and other
policy changes to new projects. Subject to this limitation,
the following opportunities for relative devolvement appear
worth considering.
First, IF’s credit lines are estimated to have reached SMEs
in only some 12 ACP countries, based on the amounts of
individual allocations. The EIB could use regional banks
as apexes to distribute credit lines to banks among more
countries, including smaller states. It could further promote
reliable regional relays 49 where they are lacking (e.g., the
Pacific). It could then largely unload the appraisal and
monitoring of banks onto such apexes 50 . At present, the
EIB appears to make no use of multi-country apex lending,
whether through regional development banks or even
through existing regional networks of single commercial
banks.
Second and as noted above, the IF’s credit guarantees are
hampered by a strict guarantee to capital gearing and
cumbersome monitoring requirements. The EIB could
associate with reliable ACP guarantee institutions to benefit
from their closer monitoring and higher gearing.
49 The Cotonou agreement (Art. 76) provides in principle for “grants for … institutional capacity-building… ”.
50 The Cotonou agreement (Art. 64) specifies that: “Where the financing is undertaken through an on-lending body based and/or operating in the ACP States, it shall be the responsibility of that
body to select and appraise individual projects and to administer the funds placed at its disposal… ”.
Enhancing SME financing in ACP countries
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