The Trust-based Partnership Model (TbPM) provides support for entrepreneurs to sustain and grow their businesses.
Scaling up existing support mechanisms and being able to act locally requires an efficient partnership model that combines financial and non-financial support with intelligent workload and risk sharing. The TbPM has been developed to provide a comprehensive support mechanism for small businesses that are in transition from sustaining to growing their business.
It is based on four pillars of distributed services, which mutually reinforce each other:
- A bank, which disburses the loans. It takes over all tasks, which can due to regulations only be handled by banks. Its role is similar to that of a ‘credit factory’. This creates a highly standardized workflow permitting high numbers of loans to be handed out;
- A guarantee fund, which bundles all risk-sharing arrangements. It tries to have public, private and not-for profit investors and to provide risk guarantee up to 100% to the bank;
- Non-financial institutions, which are affiliated to organisations that are regionally anchored or trusted by the target group. They hold the relationship with the client and provide support until loan repayment,
- A Quality Risk and Network Manager who assures the quality of service of the partners and of the whole system.
The TbPM creates a self-sustainable system which generates revenues so that each partner can deliver services. The core design principle is cost-effectiveness which means that partners take over roles they can deliver more (cost-) efficient than others.
The Trust-based Partnership model needs investments into the guarantee fund, grants to cover non-financial support. The investment into the guarantee fund determines the size of the program. ERDF and ESF can be used to co-finance such a program.
Evidence of success
In Germany over 60 non-financial institutions have participated in the program since 2004 and some 20.000 loans with a volume of 124 million Euros were disbursed. The Trust-based Partnership Model was used to serve different target groups such as start-ups, female and migrant entrepreneurs, small businesses in disadvantaged urban districts.
The implementation of such a support instrument requires a long-term. Policy changes and short-term contracts (3-5 years) could threaten the whole system. Dominance of one partner can hinder further development and may lead to a lower quality of services provided.
Potential for learning or transfer
The Trust-based Partnership Model was developed with the German market in mind. However, its maturity and success in reaching the intended target groups and objectives made it interesting for other countries as well. Currently, the Trust-based Partnership Model is implemented in Greece through the SEE-GR project to provide financial and non-financial services to social enterprises as well as underserved communities such as young people and migrants/refugees. The Trust-based Partnership Model offers a scalable solution to support specific target groups on their way from self-employment towards sustainable business creation.