Regional Policy

EUROPEAN COMMISSION

JEREMIE, by George KolivasREGIO-B.4 – Financial Engineering

• JEREMIE stands for : ‘Joint European REsources for MIcro to medium Enterprises’

• ‘ Joint resources’: JEREMIE combines resources from OPs( ERDF or SF) + EIB+ other IFIs, banks & financial intermediaries, investors

• Not an organisation but a series of coherent actions

Regional Policy

EUROPEAN COMMISSION

Why JEREMIE?

• Enhanced Access to finance for SMEs in the regions is needed

• Renewed Lisbon Strategy and CSG stress the need to enhance:

-market driven

- sustainable

- financial products and instruments for SMEs

Regional Policy

EUROPEAN COMMISSION

Main Actors of JEREMIE -1

• Commission: DG REGIO • EIF + EIB (EIB as loan capital provider)• Other IFIs, like the EBRD for 8 new

MS, the Council of Europe Dev. Bank (CEB)

• Other specialized financial intermediaries, I.E. KfW (DE), Caisse des dépots (FR),etc

• Banks, investors

Regional Policy

EUROPEAN COMMISSION

Main Actors of JEREMIE -2

• MS, Regions and managing authorities

• National and regional banks and financial intermediaries, investors

• SMEs, including - Micro credit (up to 25.000 EUR) beneficiaries

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EUROPEAN COMMISSION

JEREMIE PHASES -1

Phase 1 : Preparation• Evaluations (2006-2007)• Programming

Phase 2: Systems• MA selects Holding Fund• MA contributes to Holding Fund• HF selects Financial Intermediaries• HF contributes to fin. intermediaries

Regional Policy

EUROPEAN COMMISSION

JEREMIE PHASES

Phase 3: Implementation

• Financing:

- SMEs

- micro-credit beneficiaries

• Closing OPs

• Recycling OP resources

Regional Policy

EUROPEAN COMMISSION

Phase 1: Evaluation

Evaluation consists in: • gap analysis of potential supply

and demand for financial products for SMEs in the regions

• identifying and recommending appropriate market driven instruments to fill the gap -proposed action plan

Regional Policy

EUROPEAN COMMISSION

Evaluation - 1

• Is carried out by the EIF in close cooperation with the regions, in 2006 and 2007

• EIF is assisted by Commission -DG REGIO services: – DG REGIO: B1+ Operational Desks + Evaluation Unit

Regional Policy

EUROPEAN COMMISSION

Evaluation - 2

Evaluations, including Interim reports

produced in 2006, will be freely

available to:• MS, Regions-managing

authorities –Interested holding funds

and financial intermediaries• Associations of SMEs,

Chambers of commerce, etc

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EUROPEAN COMMISSION

Who Finances the Evaluation?

• ERDF- Commission technical assistance credits will cover

75% of the cost

• EIF will cover 25% of the cost

• Total Budget for 2006: 3.5 million €

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EUROPEAN COMMISSION

Phase 1: Programming• interim evaluations reports available

in 2006

• Competent national authorities use conclusions and proposed action plan of evaluations ( interim reports) when they elaborate programmes

• DG REGIO negotiates programmes based on evaluations – interim reports

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EUROPEAN COMMISSION

SYSTEMS: Selecting Holding Fund-option 1

• Member States or managing authorities wishing so, can award directly the holding fund tasks to the EIF

• A funding agreement must be negotiated and signed in this respect between MA and EIF

Regional Policy

EUROPEAN COMMISSION

SYSTEMS: Selecting Holding Fund-option 2

• Tendering by MS or MA for the selection of holding fund

• MS or MA sign a funding agreement with holding fund

• EIF willing to respond to tenders, alone or with IFIs/local financial institutions

Regional Policy

EUROPEAN COMMISSION

SYSTEMS: OP contributes to Holding Fund

• OP contributes to the H F for ALL types of financial products

• Such contributions are eligible for interim ERDF payments ( art 78 - new gen. reg)

• Such contributions, when reimbursed by the ERDF, are IRREVERSIBLE for the period 2007-2015

• Supplementary contributions from the OP to the HF recommended for the whole period 2007-2015

Regional Policy

EUROPEAN COMMISSION

SYSTEMS: JEREMIE policy mix

The MS or MA with the Holding Fund:

• define and review the JEREMIE strategy and policy mix :

- financial products offerred,- targeted SME etc• monitor implementation

ofJEREMIE

Regional Policy

EUROPEAN COMMISSION

SYSTEMS: Selecting Financial Intermediaries

• Holding Fund proceeds to Call for expression of interest addressed to financial intermediaries.

• Holding Fund evaluates, selects and accredits financial interm.

• Accreditation subject to periodic review

• Holding Fund provides equity, loans or guarantees to selected fin. intermediaries

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EUROPEAN COMMISSION

SYSTEMS: Types of Finan. Intermediaries -1

• Venture capital funds, including:

-Start ups and Seed capital funds

-Business angels

-Technology and innovation funds

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EUROPEAN COMMISSION

Types of Financial Intermediaries - 2

• Guarantee funds

• Loan and mezzanine funds

• Micro credit providers

• Fin. intermediaries offering any combination of the above financial products and services

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EUROPEAN COMMISSION

Phase 3: What kind of support for SMEs?

• Maximum publicity for JEREMIE products for SMEs to be ensured by:

- OP, - Holding Fund - Financial Intermediaries)• Financial interm. evaluate proposals by

SMEs and support them with:• Equity and Venture capital• Mezzanine financing• Guarantees• Loans• Advice and assistance

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EUROPEAN COMMISSION

Phase 3: Supporting Micro Credit Operations

• Banks reluctant to consider such "social economy" operations

• Specialized Micro Credit Providers fill the gap

• Credit up to 25.000 EUR to: –micro enterprises – First time entrepreneurs –Young or old entrepreneurs – Women –Minorities, unemployed, etc

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EUROPEAN COMMISSION

Phase 3: Monitoring implementation of JEREMIE

• Holding Fund , in close cooperation with OP, monitors JEREMIE implementation by Financial intermediaries and reports to the MA

• Following effective demand for each type of financial product, MA channels funds from the OP to the HF

• HF following demand and efficient management, supports FI during the whole period 2007-2015

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EUROPEAN COMMISSION

Phase 3:Closure of OPs end 2015

At the closure of OPs at the end of 2015, ERDF grants transferred to Holding Funds must have been used at least once, paid out of Financial Intermediaries, to:• finance SMEs( equity,VC, loans, guarantees)• finance micro credit beneficiaries, • cover guarantees offered by Guarantee Funds• finance eligible management costs

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EUROPEAN COMMISSION

Recycling JEREMIE resources• Contributions from OPs

invested in SMEs under JEREMIE,

• when repaid to funds or holding funds, belong to the MS or MA

• Such Repaid resources must be invested again in favour of SMEs

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EUROPEAN COMMISSION

JEREMIE FLOW CHART

Operational Operational ProgrammeProgramme

SMEsSMEsFINANCIALINTERMEDIARIES

FINANCIALINTERMEDIARIESHOLDING FUNDHOLDING FUND

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EUROPEAN COMMISSION

JEREMIE Added Value-1•ERDF Programmes planned timely on the basis of the gap analysis

•Only two selection procedures for the 9 years period 2007- 15

•Strategy and policy mix based on the gap analysis •on going monitoring •Updating - adjusting policy mix

• One professional Holding Fund selected by the Program to :

• promote all financial products, • to accredit and select financial

intermediaries

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EUROPEAN COMMISSION

OPTIMUM FLEXIBILITY and SIMPLIFICATION

•One professional Holding Fund to

- manage ALL financial products, based on gap analysis and demand

-select-accredit and contribute funds to financial intermediaries

- monitor implementation by financial intermediaries and report to MA

JEREMIE Added Value-2

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EUROPEAN COMMISSION

JEREMIE Added Value-3

• Recycling OP resources contributed to JERREMIE = sustainability.

• Leveraging OP resources with private capital contributed by

- IFIs and other Banks, - financial intermediaries,- other investors.