Linas Armalys. What can be learned from the European Investment Fund? | Business

If we withdraw all the instruments provided by the EIF from the sector, it would be felt not only by small businesses, but also by the entire economy.

It is the number of companies financed, and not the billions of euros distributed, that is the EIF’s main indicator by which the fund evaluates its performance. The fund estimates that over three decades it has already enabled more than 2 million small and medium-sized enterprises throughout the European Union, including Lithuania and neighboring countries, to grow faster.

Our company alone provided more than 3,300 credits to the smallest businesses in Lithuania, Latvia and Poland under the portfolio guarantee agreements signed with the EIF, the total amount of which reached almost 45 million. euros.

Unlike the EIF, national agencies – ours is no exception – evaluate the performance of the business mostly in terms of billions of euros poured into the business. However, small businesses, which EIF estimates make up 91 percent of of the entire business of the European Union, is not the most efficient object of absorption of those billions. Large businesses, implementing mega-projects, absorb money much faster.

The uniqueness of EIF, compared to national agencies, is also the fact that the fund aims to create an ecosystem, involve market players in cooperation and direct them in the priority direction desired by the state (in the case of EIF, the European Union). It is the creation of the ecosystem, the involvement of private creditors that ensures that one invested euro directs an additional 9 euros from private investments in the desired direction. And any engagement and ecosystem building starts with communication.

An example of this is this EIF anniversary event, which once again provides an opportunity to understand “where the wind blows”, how private creditors can be useful in realizing the strategic goals of the European Union. Unfortunately, there is no such clarity regarding the goals of the national credit markets of Lithuania, Latvia or Poland. Most of the time, all national agencies have a great temptation to become either real or state quasi-banks, and they seek to realize the goals themselves. In this case, the existing market participants are far from being their priority partners.

The EIF’s influence on the direction of European financial instruments is significant. Participating in the EIF’s 30th anniversary event made it possible to understand which areas will be given the most attention in the near future: the European Union’s energy independence, the empowerment of socially vulnerable groups of society, as well as the green course, as the EIF sets itself the goal of enabling the European Union’s economy to transform and become sustainable.

EIF enables small businesses to access financing by offering financial products through partners including banks, alternative financiers, private equity funds and other financial institutions.

Targeted programs are needed to realize the set goals. Here, the EIF is also an example of how to involve market participants and create effective programs. Before they are created, meetings are held to communicate the goals and to hear what instruments market participants most lack in order to achieve them. After collecting all the information, targeted programs are created, each of which has criteria that are important to meet in order to join these programs.

It is also important that each creditor in the fund has its own contact person, implementing the “one-stop shop” principle. The manager ensures that the creditor assigned to him realizes the EIF goals in the most efficient way, and the creditor has a partner through whom he can get help and information on all matters of concern. It sounds simple, but this kind of partnership is still aspirational when working with national agencies.

As far as I remember, in Lithuania, a joint meeting of non-bank (and bank) creditors and state agencies took place during the pandemic, when we had to quickly solve the challenge of how to distribute millions of euros to thousands of companies facing difficulties. Non-bank creditors were the most active and most distributing such financing state partners in Lithuania. However, after the pandemic, the challenges of Lithuanian small business did not end. And EIF is an example of active communication and cooperation between state agencies and private creditors in solving these business challenges.