FI Campus 2019, the flagship event of fi-compass, took place on 4 and 5 December 2019 in Brussels. The event which took place for the third consecutive year attracted over 400 practitioners from managing authorities, financial intermediaries and other stakeholders involved in ESIF financial instruments. We took the opportunity to interview one of the key speakers of the event, none other than one of the Innova-FI partners! Ms Inga Beiliūnienė (INVEGA) after her speech, sat with us and answered our questions on Financial Instruments (FIs) and on the proposed new Common Provisions Regulation (CPR).
Q: What is your opinion on financial instruments and why use them in your Member State/region?
IB: Financial instruments for business are used in Lithuania since the end of 2001 when individual guarantees for loans were introduced. During 18 years the variety of financial instruments has expanded to individual and portfolio guarantees for loans, leasing, factoring, export credits, various types of equity funds (accelerator funds, co-investment funds, VC funds, etc.), microcredits, crowdlending, loans for those who are developing their business activities.
Financial instruments not only covers the existing business financing market gap and provides financing to the financially viable business projects but also generates so-called reflows (returns) that enables the launch of new financial instruments without additional or with the much lower need of new State resources.
Q: What is the status of implementation of FIs under the ERDF and CF in Lithuania? What is INVEGA role/ contribution to this operation?
IB: In Lithuania, we have business FIs financed from various resources – ERDF, ESF, CF as well as national budget (including reflows). JSC “Investment and Business Guarantees” (INVEGA) is a national promotional institution, which is either managing Fund of Funds (a pool of different FIs) or implementing separate financial instruments. INVEGA was established on 29 November 2001 as a State guarantee institution. It currently managers 4 Fund of Funds, 2 separate FIs and 4 types of so-called global grant measures (simple grant instruments, covering similar expenses – e. g. interest rate subsidies, compensation of salaries, consultation and training costs).
As a Fund of Funds manager INVEGA usually selects financial intermediaries for the implementation of different FIs (banks, leasing companies, factoring companies, crowdfunding platforms, fund managers). However, in some cases, INVEGA is implementing FIs by itself or together with its daughter company.
Q: Looking ahead to the next programming period, the proposed new Common Provisions Regulation (CPR), what do you think it should be improved for the next programming period?
The proposed CPR for the next programming period is already an improvement as compared to the CPR of current programming: fewer restrictions in general, more flexibility in case of ex-ante assessment, lower requirements for reporting should allow for easier and quicker implementation of FIs. However, there is still some room for improvement (I am talking here about Commission’s proposal), especially in case of combination of resources (FIs and grants, ESIF and InvestEU), threshold for management costs and fees in case of direct award, which is too low for smaller Fund of Funds and impossible in case of specific funds (e. g. guarantee, loans and most importantly – equity funds), no possibility for escrow account in case of equity instruments, which are always longer than the eligibility period. The Commission proposal in the latter case is better than nothing, however, it is still too risky for the Fund of Fund managers, which make commitments for the entire term of the equity fund.
Another issue from our point of view is that CPR (either current or future) limits the possibilities to implement pilot instruments (e. g. bonds) due to various restrictions (especially limited eligibility period) and too many various level audits with different views and understanding of the same provisions of the regulations as well as public procurement and State Aid rules.
Q: INVEGA is one of INNOVA_FI partners. Why did you accept this challenge and what are the expected outcomes for INVEGA / Lithuania of this participation?
IB: Yes, INVEGA is one of the INNOVA-FI partners. This is not the first time when INVEGA became a partner of an INTERREG project. I think, 'exchange of experience' is always useful and helps either improving existing or creating new FIs based on other partners’ good practice examples. Of course, FIs cannot be fully copied and implemented in another country due to the specific economic environment and/or market and even cultural conditions in separate countries. We believe that INNOVA-FI project will enable us to offer a wider variety of FIs that are dedicated for R&I development and thus increase the R&I activity of Lithuanian enterprises.