The European Commission, European Investment Fund (EIF) and European Investment Bank (EIB) have launched the SME Initiative Securitisation Instrument (SISI) to support financing for small businesses.
The initiative will be available to financial institutions operating in the EU, which will be invited to respond to calls for expression of interest issued by EIF. Under the scheme, the credit risk of securitised loans will be partially transferred to SISI through guarantees and/or the purchase of asset-backed notes. This will then free up regulatory and economic capital for the originating financial institutions, which will be available for new financing to SMEs “at advantageous pricing terms”, according to a joint statement by the EIB, EIF and European Commission.
The transactions will be implemented by the EIF. SISI combines resources of the participating member states, which include European Structural and Investment Funds (ESIF), resources of the EU Framework Programme for Research and Innovation (Horizon 2020) and from the EU Programme for the Competitiveness of Enterprises and SMEs (COSME), as well as resources of the EIB and EIF, and potentially third-party investors.
“The pooling of resources and the collective efforts to promote the instrument will allow more effective risk-sharing and capital relief for the ultimate benefit of SMEs and small mid-caps: small mid-caps can also be eligible whenever Horizon 2020 resources are deployed,” the statement adds.
The scheme was created through amendments to the InnovFin and COSME delegation agreements, which were signed at the Innovative Enterprise Conference in The Hague on March 31, 2016.
SISI completes the EU’s existing SME Initiative, which has so far been deployed in Spain and Malta, and was recently signed in Bulgaria through the SME Initiative Uncapped Guarantee Instrument (SIUGI), which plans to provide uncapped guarantees to financial intermediaries on new portfolios of debt finance to eligible SMEs.
The Innovative Enterprise Conference was also the occasion for the EIB and the European Commission to present a new report on access to finance for key enabling technologies (KETs) companies. The report concluded that financial risk-sharing products supporting lending to companies will not be sufficient on their own, and that awareness raising and advisory activities are needed to make companies “investor-ready”.