INTERREGIONAL INNOVATIVE FINANCIAL TOOLS-IN.I.FIN.TO

Aim of the subproject
Component 2 of the MODELE program, (Model de Developement des systemes Locaux pour le soutien des Entreprises), aimed to study each of the participant’s territories, to enable the development of a social and economic environment in order to create new instruments of innovative financing. The objective was to improve the access to credit for SMEs through innovative financial tools for SME's support. The spotted tools were adopted, in compliance with European provisions, within the RFO, by all the participants of IN.I.FIN.TO using their own resources.
The participants of IN.I.FIN.TO. are:
            • Center for Entrepreneurial and Technological Development of Central Macedonia, (KETA- KEMAK) from Greece, as Lead participant.
            • Chamber of Commerce Industry Handcraft and Agriculture of Potenza from Italy
            • Mid-Pannon Regional Developing Company Limited by Shares from Hungary.
            • Chamber of Commerce and Industry of Navarra (Camara Navarra) from Spain.
            • Society for Economic Development of Canarias S.A, SODECAN from Spain.
SODECAN was introduced in IN.I.FIN.TO in March 2007, as legal successor of SOGARTE who originally participated in the subproject, but resigned in December 2006.
The sub-project is able to deal and confront the needs and problems depending on the determination of new innovative finance tools, compatible with European laws. Towards this direction, a case study identified the objectives of a sub-project which will satisfy the needs and problems that arose:
a) to improve the credit accession for SMEs
b) to enable a number of enterprises receive financial loan using bank guarantee or the micro-credit tool and
c) to find external financing in the form of a Business Angel or a pure Venture Capital. The subproject through several activities like identification of best practices, exchange of experiences and methodology development, ended forming individual Business Plans.
These Business Plans are able to provide the adequate user with all the necessary information and procedures towards the successful implementation of the examined actions in practice. Finally, these business plans and the common methodology contributed providing useful information for the improvement of the existing financing tools and for future financial innovation, both for the financial institutions and the SMEs.
The needs and problems of each region
The participating regions concluded to the following three needs and problems that had to be faced:
a) to improve the credit accession for SMEs
b) to enable a number of enterprises receive financial loan using bank guarantee or the micro-credit tool and
c) to find external financing in the form of a Business Angel or a pure Venture Capital.
            • Firstly, the credit accession can be faced by a Credit Guarantee Fund. The mission of a Credit Guarantee Fund is to facilitate the access of Small and Medium Enterprises to the financial system by providing guarantees and counter-guarantees and undertaking part of their financial and commercial risk. The fundamental principal is the allocation of risk between private and public sector. Based on this principal, the philosophy of such a fund will be in one hand the encouragement of all socio-economic groups to obtain the potential of Entrepreneurship and the elimination of the social consequences in case of a business failure and on the other the satisfaction of needs of the Small and Medium Enterprises at low cost.
            • Secondly, the lack of "easy taking" loans in many European countries can be confronted through the Micro credit tool. Micro credit is the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. In developing countries especially micro credit enables poor people to engage in self employment projects that generate income. Micro credit is the most important part of the microfinance field, which can comprise all other financial products such as micro-insurance, savings or other. The idea of micro credit was first developed for very poor countries where the traditional financial system could not be used by the majority of the population. In Europe there have been a number of attempts to establish microfinance credit banks. Regions like the sub-project’s Participants could efficiently use such financial tools, considering the fact that local economies and societies are largely dependant on SMEs.
            • Finally, the inexistence of Business Angels or efficient and effective Venture capital funds can be opposed by the formation of regional institutions with specific role. The purpose of the institution is to co-finance the formation of businesses at early development stages with high expected growth.
After assessing the current economic and social situation in all the participant regions, we have identified and described some case studies of best practices. Having looked at both theory and practice it has been concluded in solutions which will cope with the financing of SMEs as a systemic problem. Such a solution which tends to be both long term oriented and sustainable create the participation of a greater number of regional as well as in some cases extra regional stakeholders. Moreover, it is considered that also the following results have led to the identification of the objectives of the sub-project:
      􀂃 Firstly, the “culture of individualized behaviours” and refusal of collectiveness. The approach of majority of enterprises is that of solitary course that on occasion comes in contact with the government owned policies, while (except concrete incidents that were observed in periods of crises) have not been developed forms of collectiveness that would seek the confrontation of common problems of strategic character. A common example is that of the financial institutions which avoid taking the risk of financing by increasing the interest rates and making the growth through institutional financing an unobtainable dream. Apart from the negative repercussions, this leads also to the isolation of enterprises interested to invest through external financing and to the inability of the general financing process for most of the businesses. This creates obstacles to the local society and the public or private financial institutions that theoretically would support the local growth.
      􀂃 Secondly, the lack of information, vocational training processes and needs of specialities leads to the weakness of the existing institutions to correspond in real needs of local enterprises and to offer consequently an effective assistance to the objective of the investment.
The Objectives
The objectives of the sub-project can be identified from the satisfaction and the solution of three needs and problems that arose through the case studies: a) to improve the credit accession for SMEs b) to enable a number of enterprises receive financial loan using bank guarantee or the micro-credit tool and c) to find external financing in the form of a Business Angel or a pure Venture Capital. Thus, these objectives are:
            • Firstly, to form a business plan which will build through the identification of a Business Angel or the establishment of a regional Venture Capital, businesses with market leadership positions, differentiated products, services and sustainable cost advantages to achieve attractive risk adjusted returns for the potential investors.
            • Secondly, to succeed in building value throughout local enterprises and their growth, regarding to the geographic areas of concentration as well as the assets under management.
            • Thirdly, to form a business plan of a Regional Guarantee Fund and present its function, since enterprises have no knowledge of the Regional Guarantee Fund. Not only is this ignorance linked to the instrument itself, but it is also related to its procedures which are totally dealt with by the bank when it suggests its client to access to the Guarantee Fund. This ignorance about the Fund can be due to the bad work done by the mediators.
            • Fourthly, the support, through the usage of micro credits of thousands, under establishment or already operating, viable SMEs, of all sectors, in any stage of their business cycle (establishment, growth, maturity, internationalization, restructure, succession).
            • Fifthly, the support of enterprises, through the usage of the Regional Guarantee Fund, that have difficulty or weakness in accessing the financial sector.
Approach and methodology
The Sub-project had five (5) phases.
►Phase 1: Project Management, Coordination and Network Development
►Phase 2: Identification of Best Practices and Exchange of Experiences.
►Phase 3: Methodology Development.
►Phase 4: Business Plan Realisation.
►Phase 5: Dissemination of the Outcomes. In Phases 1,2,3,5 all regions participated in order to enhance and guarantee the inter-regional character of the project. In Phase 4 each partner had the ability to choose in which actions of the Phase will participate depending on the needs and problems of its region.
The sub-project methodology was:
A. Using and implementing the analysis from the studies, the general context was defined starting from the results of the studies implemented by MODELE participants related to the related thematic component.
B. Creation of the network. Definition of the themes and methodologies to be exchanged, Study visits - workshops: Follow-up
C. Exchange of experiences. Definition of the aspects to be exchanged and shared, study visits
D. Pilot actions, Implementation of the exchanged methodology.
E. Evaluation of the pilot actions
F. Diffusion of results. Dissemination - Sensibilization actions towards enterprises in the regions. Information workshop for stakeholders potentially involved in the implementation.
The main outputs for the actions of the sub-project are the three individual business plans: a) Business Angels / Regional Venture Capital Funds Business Plan, b) Regional Guarantee Fund Business Plan, c) Business Plan for the Regional Micro credits institutions tool. In addition, we have a common methodology for the development of innovative financial tools in all participating regions. Moreover, several other outcomes raised, such as: Financial and progress reports, agenda, minutes, signatures sheets, compilation of presentations made during the meetings, records of the identified Best Practices, several press releases, publications (leaflets), a number of workshops and steering meetings and the final conference. The main result will be the existence of the three business plans which will be able to provide the adequate user with all the necessary information, strategy and procedures towards the successful implementation of the examined actions in practice.
Durability of the operation's results
The actions of the subproject as have been described, are necessary for all the participating regions in order to ensure their future development concerning the financing sector. Therefore, the actual outcomes and deliverables will be efficient tools for the SMEs. This fact ensures the durability of the sub-project's actions in the future and in any case, all 3 actions of the sub-project are considered for financing through the Programming period 2007-2013 through JEREMIE Program. Moreover, all deliverable products will be available to all counties region authorities as well as other potential interested bodies (Venture Capitals, Incubators, Banks, Cooperative Banks, consultants e.t.c.) and these will be the bodies that will decide for the continuance and the application of all different actions. The outcome is a complete Business Plan for a) Regional development Fund b) Micro credits and c) Regional Venture Capital Fund which will be able to operate viably at the regional environment.
The overall objectives of the sub-project can be summarised in: a) to improve the credit accession for SMEs b) to enable a number of enterprises receive financial loan using bank guarantee or the micro-credit tool and c) to find external financing in the form of a Business Angel or a pure Venture Capital. .
There are a number of objectives which were achieved during the sub project in order to contribute to the overall sub-project: 1) the formation of a business plan which will build through the identification of a Business Angel or the establishment of a regional Venture Capital, businesses with market leadership positions, differentiated products and services and sustainable cost advantages to achieve attractive risk adjusted returns for the potential investors. 2) to succeed in building value throughout local enterprises and their growth, regarding to the geographic areas of concentration as well as the assets under management. 3) the formation of a business plan of a Regional Guarantee Fund and the presentation of its function, since enterprises have no knowledge of the Regional Guarantee Fund. 4) the support, through the usage of micro credits of thousands, under establishment or already operating, viable SMEs, of all sectors, in any stage of their business cycle 5) the support of enterprises, through the usage of the Regional Guarantee Fund, that have difficulty or weakness in accessing the financial sector
The Management process
A Monitoring Committee for the effective operation and the right application of directions and decisions of MODELE Consortium headed the Subproject. The main carrier that implements the Subproject (lead participant), co participated by the representatives of all the other participants, heads the Committee. The Monitoring Committee was responsible for the organization and coordination of all the activities of the subproject. The chief of the Monitoring Committee, Mr George Kokkas, was appointed by the lead participant, KETA-KEMAK. Monitoring Committee was the body responsible to act under the patronage of Prefecture - Regional Authorities of all participants countries and was consisted among the Prefecture Authorities by the representatives of Pilot Project Contractors. In addition a Science Advisory Council offered the necessary technical knowledge to the Monitoring Committee and practiced quality control for the deliverables, important decisions for project development, whenever it was asked for. The Council composed by Consulting Experts in legal and financing subjects as well as in every other scientific subject (innovation, technology or employment) and it was necessary for the efficient and effective implementation of the sub-project.
The basic administrative procedures carried out by the Lead participant, KETA- KEMAK. The lead participant was responsible for the regular and right realization of the subproject and for the development of methodologies and tools for every action. It has the responsibility of scientific and technical documentation for the results produced. It also informed systematically and collaborated with, the Science Advice Council and the Monitoring Committee regarding the planning, the progress and the intermediary, final results of the subproject. Finally KETA-KEMAK organized the subproject based on its progress and taking into account the amendments proposed by the Monitoring Committee. In addition, all partners reported their progress and expenses that took place, in forms that were designed and distributed by the Monitoring Committee, in order to form an internal auditing system.
All the activities took place in all participant regions and the impact was spreaded evenly. This is a prerequisite of MODELE in order to assure the inter-regional character of the project. All partners participated equally at the project. The structure of the project allowed them to have the same role value at the project, since the sub-project was executed in all participating regions. The lead partner was responsible for the general coordination and the collection of all the deliverables of the subproject. However, the rest of the participants were responsible for the completion of the project at their regions. It is obvious from the characteristics of the sub-project that all participants were committed to the overall project and not to individual tasks. The only case where the participant bodies were responsible for a specific task is the organisation of the meetings as hosts.
Participant's contribution to and benefit from IN.I.FIN.TO
A) Participant’s Profile
The aim of KETA-KEMAK is to improve the competitiveness of the enterprises in the region. It is staffed with experienced business consultants, many of them are economists. One of the missions of KETA-KEMAK is to intermediate between companies and financial institutions (such as banks, venture capitals) in order to support the companies to achieve good results from their cooperation. This know-how working with modern financial tools is a major contribution to the project. KETA-KEMAK will gain the methodology for inventing a financing organization for the funding of SME’s in the region. ΚΕΤΑ-ΚΕΜΑΚ (Lead Partner). The major experience of KETA-KEMAK comes from the project that executes as subcontractors of the Greek Ministry of Development for the growth of the business activity in the region of Central Macedonia. KETA-KEMAK has a network of specialised consultants in Central Macedonia that have as a mission the briefing of companies on business and financial issues and even more the provision of individualised support in enterprises for having access to existing or new financial tools.
Chamber of Commerce of Potenza is a public body that carries out operations to support the growth of SMEs. It is engaged in improvement of relationship between credit system and small enterprises. Some instruments concern the lowering of interests that SMEs pay to have a loan and the financing of local guarantee bodies. The benefit from the operation consist in improvement of access to the credit for SMEs, by means the application of innovative financial instruments. They could be introduced in the regional programming, particularly in the next planning period of structural funds 2007-2013. It has a vast experience in E.U. projects (Global Grant ERDF - Sepri, IC Equal – Herculia, IC Equal – BOA, IC Equal – Cors. Ict, IC Equal – Incipit sociale).
Mid Pannon has a 9-year experience in the field of SME financing via investments and lending. Furthermore, as a state and local government owned development body, has accumulated a wide range of knowledge in the field of regional and economic development. Mid Pannon will collect all the information from its region necessary for the identification of best practices and the formation of the Business Plans. Developing a new Business Angels methodology will improve the supply of funds for entrepreneurs. In addition, it could increase the number of new companies in the region. Mid Pannon participated in two Interreg projects: (1) in the Italian led I-Log Interreg project, as other partner, (2) SEEDREG individual project as partner, which is lead by the Hungarian Innostart. It has also Participation in Structural Funds: (1) preparation of several successful project proposals in the area of the SF co financed by Hungarian R OP and EC OP.(incubator house, logistic centre, SME clusters, tourism development), (2) provision of information in case of the EC OP financed cluster and SME cooperation grant scheme.
The Navarra Chamber works on enterprise advising and resolution of consultations on diverse aspects, like enterprise management, creation of companies, central formulas of distribution as of purchase and tax exemptions, effective legislation and associations among others. Navarra entrepreneurs can actually access to several funds, but these funds are not always useful to all entrepreneurs needs. The Chamber of Navarra presents a large experience in European project managing.
SODECAN is a Public Business whose fundamental objective is to contribute at the strengthening of the business weaving in the autonomous region Canary. Its activity centres in the endorsement and the expansion of existing companies or to the creation of other new companies and materializes with the contribution of financial resources, support to the management and other services to businesses, working in narrow relation with Associations and Chambers of Commerce. Its main shareholder is the Government of Canaries with the 56% of its capital. SODECAN can participate in the capital of a Company, well at the moment of its creation or in an enlargement of the same one. The participation, always minority, between the 5 and the 45%, has temporary character, in most cases, between the 4 and the 5 years, until the business or its project of expansion have itself consolidated. SODECAN can grant loans to middle and long time limit, to those businesses in which participates, in fully competitive conditions with the market.
B) IN.I.FIN.TO. Agenda
During the subproject the participants were involved in the following meetings:
                        􀂃 IN.I.FIN.TO. Kick-off meeting
Székesfehérvár, Hungary 13^thof December 2006.
            􀂃 IN.I.FIN.TO. subproject 2nd meeting:
Pamplona, Spain 23^rdand 24^{th of}February 2007.
                        􀂃 IN.I.FIN.TO. subproject 3^rdmeeting
Tenerife, Spain 14^thand 15^thof June 2007.
            􀂃 IN.I.FIN.TO. subproject 4^th(closing) meeting
Thessaloniki, Greece 8^thand 9^thof October 2007.
In the meetings the actions that took place were: Presentation of the work carried out so far, exchange of best practices, bilateral cooperations among the participants, discussion on the managing procedures, and determination of the actions to be done until the next meeting.
Conclusion, Programming 2007-2013 period
The subproject concluded with the creation by all participants of ten individuals business plans in the thematic fields previously described. The business plans are ready and they were presented in the final meeting of the participants in October 2007 at Thessaloniki, Greece. They will be realised during the 2007-2013 period. Innovation in the financial sector is a major tool for development since it allows the participant SMEs increase their growth rate and in accordance increase the country's growth rate influencing consequently both micro and macro economic level. A major task for the next programming period 2007-2013 is development and innovation at sectors where traditionally were not innovative. Therefore the implementation of the proposed subproject leads directly to the aims of the next programming period and they can be founded by JEREMIE.
The European Commission, European Investment Bank and European Investment Fund have launched a joint initiative to improve SMEs' access to finance in the framework of European Regions. The initiative, called Joint European Resources for Micro to Medium Enterprises, known by the acronym JEREMIE, will enable European Member States and Regions to use part of their structural funds to obtain a set of financial instruments that are specifically designed to support micro and small and medium enterprises.
One of the European Union's main instruments for supporting social and economic restructuring across the EU are the Structural and Cohesion Funds. They account for over one third of the European Union budget and are used to tackle regional disparities and support regional development through actions including developing infrastructure and telecommunications, developing human resources and supporting research and development.
The European Regional Development Fund (ERDF) is a structural fund for financing measures to promote development and structural adjustment of regions whose development is weak and the economic and social renovation of areas facing structural difficulties. JEREMIE will facilitate a process whereby EIF will enable the European Member States and Regions to use the part of funds from the ERDF that are allocated to SME access to finance, to obtain a set of financial products specifically engineered for Micro, Small and Medium Enterprises.
JEREMIE, under the EU cohesion policy, will reinforce the drive for growth and jobs. Identifying and ring-fencing the investment provided under cohesion policy for competitiveness, in particular through research and innovation, human capital, business services, will ensure that cohesion policy continues to boost competitiveness, in line with the objectives set at the Lisbon Summit. JEREMIE will be complementary to other SME finance initiatives at EU level, notably the Competitiveness and Innovation Framework Programme (CIP) that EIF will operate from 2007 on behalf of the European Commission's Directorate General for Enterprise (DG ENTR). JEREMIE will offer different financial instruments from those available under CIP.
Structural funds generally provide financial assistance in the form of grants. Under JEREMIE, it will be possible to transform part of the grants into financial products. SMEs will use the financial products and will then reimburse the amounts - once reimbursed, the funds will be rolled over and used again, instead of simply "granted" once. This means that for each euro coming form the budget, the sum of financing products could range from 2 to 10 euros. The multiplier effect will mean that the sum of the financing products available will be increased, bringing potential benefit to a higher number of SMEs than the grant system. JEREMIE's financial products will contribute to meet the financial needs of the demand side, namely SMEs, but also improving the supply side by providing wide range of services and products to local financial intermediaries such as technical assistance, loan guarantees, and first loss piece guarantees for securitization.

2005 TORUS web development