Europe’s 22 million SMEs provide 67% of all EU jobs and generate 58% of total EU value added, yet they still often face greater difficulty in accessing the finance they need than their larger competitors. The European Economy journal has brought together financial experts to debate how to address this problem in its latest issue: “Who takes the risks for funding SMEs?”
SMEs in general suffer from market failures that obstruct their access to finance. The real creditworthiness of SMEs may often be underestimated, for example, because of an “information gap” between lender and borrower or low levels of transparency. On top of such structural issues, SMEs have also been severely affected by the economic crisis. They face weak demand and heightened uncertainty, in some cases aggravated by structural undercapitalisation, at a time when the lending and risk-taking capacity of banks, their main source of external finance, has deteriorated.
In their contribution, EIB Economics Department Director, Debora Revoltella, and the EIF’s Head of Research and Market Analysis, Helmut Kraemer-Eis, discuss how banks’ risk taking capacity can be improved and how SMEs can be helped by alternative financing instruments. They explain how EIB Group activities support access to finance for SMEs throughout their “life-cycle”.
In 2014, the EIB Group supported SMEs with a record EUR 28bn in new operations, estimated to leverage at least EUR 63bn. Over 290 000 SMEs employing approximately 3.9 million people received support from the EIB Group in the course of the year. The Group provides an increasingly wide range of debt-financing, risk-sharing products (guarantees and securitisation) and private equity/venture capital instruments for SMEs. Collaboration with the EC has been intensified with the launch a new generation of financial instruments for SMEs and midcaps, including Horizon 2020 InnovFin - EU Finance for Innovators, the EU SME Initiative, and risk-sharing products under Competitiveness of Enterprises and SMEs (COSME). The Investment Plan for Europe is designed to unlock around EUR 75bn in risk finance for SMEs over the next three years.