Repayable contributions are a form of aid that seek to provide financial support to cultural companies so that they can move forward with their projects
The Problem: One of the biggest restrictions for the cultural companies to launch new projects is the high level of risk perceived by the financial players. Many CCI projects are launched underfinanced and therefore the implicit risk of failure increases, especially at early stage. This feeds the aversion of the financial institutions thus creating a vicious circle that should be cut.
Public Action: Repayable contributions (RCs) are a combination of repayable grants and loans to finance the launch of cultural projects with market expectations. It is a project-based financial scheme where the beneficiaries are SMEs.
The grant is awarded to mitigate the "intangible" risk of the project, which can only be justified with a very challenging creative proposal that the financial markets would probably neglect. Evaluation criteria are related to cultural policy objectives such as: cultural interest, language, authorship, local expenses, etc.
The project viability is reinforced with a repayable loan, that enhances the financial capacity of the company. Beneficiaries have to provide guarantees on the loan's return, but these are limited to the project results. No interest rate is charged.
Overfinancing is avoided since the maximum amount given to a project cannot exceed 75% of the project's costs and it is also limited to its cash peak request.
Grants must be returned proportionally to the level of profits obtained in the project, so this subsidy is not financing profits.
RCs are managed by the Catalan Institute for Cultural Companies (ICEC) of the Government of Catalonia with an annual budget of 9M€ to finance some 150 projects. 30% of the budget is awarded in grants and the rest in loans.
The maximum amount of financing depends on the nature of each project.
Evidence of success
From 241 projects closed between 2009 and 2016, awarded with 20.1 M€, 95 returned the total amount received, thus these projects have obtained a reasonable profit.
83% of the total amount invested by ICEC was paid back. All of the 14.6 M€ in loans was reimbursed and 40% of the amount awarded in grants was returned (2.2 M€).
The RCs scheme might also attract private investment to the projects, with multiplying effects.
Potential for learning or transfer
RCs are a hybrid scheme that works at two different levels. One, quite disruptive, helps to mitigate the risk associated with cultural projects by awarding a grant that can be either returned or not, depending on the project's results. On the other hand, it provides “classical refundable” financing, but no interest rate is charged.
Revolving fund mechanism. Annual budget of 9M€. 83% of the total amount invested in 241 projects since 2009 was reimbursed and reinvested by ICEC. The RCs reimbursements feed back into ICEC’s budget again.
Change in the beneficiaries' mentality, from a subsidized culture to a repayable financial scheme, where the applicant's performance records count.
This mentality change affects also the public institutions that learn to behave as financial partners to the CC enterprises and this adds a multiplier effect attracting additional private resources to the projects.
Higher market success rate in cultural project launches.
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