Bank of Valletta JEREMIE Malta Mark Scicluna Bartoli Head EU Representative Office Operational Programme I Cohesion Policy 2007-2013 Investing in Competitiveness for a Better Quality of Life The financing provided hereunder benefits from an operational programme co-financed by the European Union Structural Funds pursuant to the Joint European Resources for Micro to Medium Enterprises initiative (JEREMIE) European Regional Development Fund ERDF Investing in your future
Table of Contents 1. Why use a Financial Instrument? 2. The roll out of JEREMIE in Malta 3. JERMIE Malta Bank of Valletta 4. JEREMIE Malta Lessons learnt 5. JEREMIE Malta An SME Case Study 1
1. Why use a Financial Instrument? Grants 10 million (EU Funds) Financial Instrument 60 million 50% Co-Financing Financial Intermediary Funds (x6) 10 million (SME Funds) 10 million Total Investment 20 million (EU Guarantee) Total Investment = 20 million Total Investment = 60 million
2. The roll out of JEREMIE in Malta 1. June 2007 - Financial Engineering was inserted in OP 2007 2014. 2. June 2008 A national ex-ante assessment was undertaken by the EIF to assess market failures in SME finance. 3. March 2010 The Maltese Government and the EIF sign the funding agreement to set up the JEREMIE Holding Fund. 4. May 2010 The Investment Board was set up to define the Terms and Conditions of the Expression of Interest (EOI). 5. Sept. Nov. 2010 A European EOI was issued by the EIF for Financial Intermediaries. 6. April 2011 - BOV was selected as the financial Intermediary. 7. March 2014 - BOV committed 93% of the 62million fund.
3. JERMIE Malta Implementation A 10.8million EU guarantee stimulated a 62.6million of new SME lending by Bank of Valletta. 10.8million guarantee Operational Programme I Cohesion Policy 2007-2013 Investing in Competitiveness for a Better Quality of Life The financing provided hereunder benefits from an operational programme co-financed by the European Union Structural Funds pursuant to the Joint European Resources for Micro to Medium Enterprises initiative (JEREMIE) European Regional Development Fund ERDF Investing in your future
3. BOV JEREMIE Implementation 6 th April 2011 31 st March 2015 End March 2014 36 months 709 Facilities Granted 58.1 million Sanctioned Facilities 619 SMEs involved 99 million Investment Amount
4. JEREMIE Malta Lessons Learnt 1. The will of the Managing Authority to run a pilot financial engineering instrument (FEI) in Malta. 2. The engagement of a specialist holding fund Manager to inject knowledge into the process of setting up a FEI. 3. Allocation of considerable resources by the Financial Intermediary to ensure the successful roll out of the FEI in the market. 4. A good knowledge by financial intermediary of the SME lending market and targetted industries. 5. An good understanding by the financial intermediary of EU rules (State Aid and ERDF) 6. A wide distribution of the portfolio into different sectors.
4. JEREMIE Malta Lessons Learnt JEREMIE - Sector Distibution Wholesale and retail trade Accomodation and food service activities Manufacturing Transportation and storage Human health and social work activities Others Professional, scientific and technical activities Arts, entertainment and recreation Administrative and support service activities Other Service Activities Information and communication 4% 4% 3% 3% 3% 32% 5% 5% 6% 15% 20%
5. JEREMIE Malta A Case Study Type of Company: Small Enterprise Scope of Business: Manufacturing Customer Credit History: Satisfactory The small enterprise approached the bank to finance an investment of Euros 80,000 in photovoltaic panels in line with Europe s 2020 targets to reduce its dependancy on energy and reduce its energy bill. Project Value: 80,000 SME Contribution (20%): 16,000 Bank Loan requested (80%): 64,000
5. JEREMIE Malta A Case Study Normal Bank lending - Given the enterprises good credit history, under normal lending criteria the Bank would have conisdered to grant a loan of Euros 64,000, subject to the following criteria: Interest Rate: 5.95% Security: Collateral value of Euro 64,000 Term: 10 years Depending upon the feed in tarrif agreed to by the enterprise, the proposed interest rate and collateral obligations may prove to be high when assessing the projects return on investment.
5. JEREMIE Malta A Case Study JEREMIE Lending - Following a detailed analysis of the projections taking into account the JEREMIE guarantee facility the Bank concluded that this small enterprise qualifies to be considered under JEREMIE and granted the following terms: Interest Rate: 4.8% Security: Collateral Value of Euro 16,000 Term: 10 years The JEREMIE Loan allowed the enterprise to finance the project at more favourable terms which made the return on investment of such a project feasible conisdering the absence of a grant.
5. JEREMIE Malta A Case Study Operational Programme I Cohesion Policy 2007-2013 Investing in Competitiveness for a Better Quality of Life The financing provided hereunder benefits from an operational programme co-financed by the European Union Structural Funds pursuant to the Joint European Resources for Micro to Medium Enterprises initiative (JEREMIE) European Regional Development Fund ERDF Investing in your future 1