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“Current Experience under the EAFRD”

General information on the use and uptake of FIs and findings of the NRN joint task force on access to rural

finance

Coordination Committee Workshop Financial Engineering

26th October 2012



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This presentation

• The EAFRD Financial Instruments

• The ENRD Rural Entrepreneurship Thematic

Initiative: Rural Finance

• The challenge - bringing supply and demand together

• Preparing for the future - scope for action



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Financial instruments – current budget and expenditure

0 20 40 60 80 100 120 140 160 180

LT

LV

RO

BG

IT

EL

EAFRD (foreseen commitment) EAFRD (actually paid)

In million €

Total EAFRD commitment: € 618 million

Total EAFRD payments: € 370.5 million



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Financial instruments – who benefits?

Supported groups at present:

– Farmers (all agricultural sectors)

– Farmers in rural areas developing non-agricultural

businesses (all sizes)

– Food industry enterprises (all sizes)

– Rural tourism enterprises (all sizes)

– Other non-agricultural micro-businesses operating in

rural areas



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Scope of NRN Rural Finance task force



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NRN Rural Finance task force – actions & outcomes

Final report on RF theme (February 2012)

14th NRN meeting (Greece, February 2012): presenting the

findings

Seminar in Latvia: raising awareness, sharing experiences

(June 2012)

Coordination Committee FI workshop (October 2012)

13th EU Rural Review: further analysis, raising awareness,

building common understanding

Continuous updating of Rural Entrepreneurship Gateway -

Rural Finance



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Final report on the ENRD Rural Entrepreneurship Thematic Initiative: Rural

Finance

extensive literature review

analysis of trends in SME and rural finance

analysis of supply and demand patterns

three surveys

survey of Managing Authorities on FI in the RDP / activated

survey on other financial instruments operating in EU MS

survey of financing institutions (commercial banks)

recommendations for next steps



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A reminder!

(Eurostat 2011)



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Information gap

No territory specific classification in relevant surveys:

SMEs are not classified by area of operation or registered

headquarters, e.g. predominantly rural, peripheral, urban, etc.

SMEs are classified in surveys by size and activity:

some surveys exclude SMEs whose activities relate to

agriculture, forestry or fisheries



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The challenge…



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The perspectives of Managing Authorities on FIs (ENRD Survey outcomes)

Responses to why FIs have not been adopted

– lack of knowledge and information

– the need for additional resources

– complicated rules, uncertainty of control implications on

sanctions applied, higher risk of financial corrections

– availability of rural finance from the financial markets



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The perspectives of commercial banks on rural finance

(ENRD Survey outcomes)

Responses from 6 banks in 4 MSs (Hungary, Latvia, Malta, UK)

Results

• no special criteria for rural SMEs

• rural risk equal or only slightly higher

• EAFRD funding a positive factor

• strong preference for manufacturing

• tightening of credit (collateral, guarantees)

• balance sheet, credit history, quality of business are important



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Conclusions from final RF report

Main findings:

– an information gap exists relating to rural specific access to

finance - surveys/rural SMEs specific data at EU-27 level a

necessity

– business support services, self-assessment tools,

networking and training is important for improving access to

finance and building trust

– a great diversity of SME funding schemes exist to learn

from and share experiences of and amongst NRNs and MAs



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Some practical examples • Adopting international equity and venture capital valuation guidelines

(Finland)

• Municipalities ‘team up’ with a commercial bank for micro-credit in an

underdeveloped area (Latvia)

• Pooling local resources for a cooperative credit union (Latvia)

• Advice and help with networking among supported beneficiaries (Germany)

• Decoupling from financial markets declared as a goal of the Fund

(Germany)

• Guarantees amounting to 80% of the credit borrowed to support people

living in underprivileged areas (France)

• Involving banks as financial intermediaries in a micro-credit scheme

(Portugal)

• Providing advanced, web-based support tools to potential beneficiaries to

help credit worthiness assessment (Italy)

• Targeting a niche market (rural women entrepreneurs) (Latvia)

• Setting up local investment companies for the development of local

economies (Sweden)



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Scope for action



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Thank you for your attention.

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