Recommendations from R/MIER/SME/02146 dated 18 February 2003
Recommendation Expected Output(s) Decision taken at the Facility Steering
Committee
1 A review of the needs for finance of the SMEs should be developed by Commission Services (with the possible participation of the IFIs). It should focus on the identification of regional differences between the countries and the segments of SMEs that have difficulties to be reached should be taken into account. It should be accompanied by indicators that would serve as base for an historical comparison in the next stages of the project. A starting point could be the indicators developed in the Annex 8.
Improve the objective and quantifiable measurement of the needs and its improvements. Identify the real needs.
EBRD and KfW will provide studies on access to finance of SMEs for Bulgaria, and Romania (EBRD) and Turkey (KFW) before the end of 2003.
2 The wider objective of the programme should improve in precision, as well as the intermediate objectives that are nearly self-fulfilling at this stage.
Any further SMEF programme should adapt its wider objective to the evolution of the needs of the financial intermediaries, and focus on the sustainable development of the SME lending capacity.
More precision in the design for an increased efficiency of the programme
No further follow up is required. The revised objectives will be included in the new CAs to be signed with the Sponsors. New indicators of achievement have been added and the Sponsors have to monitor them.
3 Sustainability should be clearly identified by the Commission Services for each selection of a new PB. It should be a clear focus in the agreements between the Commission Services and the IFIs, which could include the need to demonstrate how institutional building is integrated in the process.
Those projects which show good prospect for sustainability because institutional development has taken place, should be analyzed and their replication considered.
Improved sustainability Following discussions at the Technical
Meeting it was agreed that all Sponsors will address “Project specific” additionality, sustainability and impact in future proposals to allow an evaluation of results.
4 The Commission Services and the IFI should reflect on the concept of additionality in the SMEF concept and envisage a tighter interpretation, which has and impact of the definition of the target PBs.
Following discussions at the Technical Meeting it was agreed that all Sponsors will address “Project specific” additionality, sustainability and impact in future proposals to allow an evaluation of results.
5 For new PBs, the additionality should be clearly demonstrated. in particular for PBs with foreign active shareholder. Priority should be given to niche players and regional banks, where the additionality and the effectiveness is likely to be higher. For other players, criteria such as the existence of a group strategy towards SME, the training systems and resources in place could be taken into account.
For the existing projects, the IFIs that do not propose TC should be asked to
Improved conditions on additionality
Recommendation Expected Output(s) Decision taken at the Facility Steering Committee
demonstrate, after a reasonable period of time (e.g. after one third of the elapsed time for the loan), which are the impact and sustainability on the activities of the PBs. 6 Efficiency of the programme with TC component can be improved by the financial
participation of the PB.
A greater role of the PB in the selection and the monitoring of the TC could improve its general efficiency. Clear deliverable and milestones should be a minimal monitoring tool by the project manager.
Additional specialized and dedicated resource need to be mobilized by the EBRD, specifically on the management of the consultants.
Increased efficiency
EBRD did not find this proposal acceptable for new clients. If the PBs see the positive results of TA they may consider co-financing as an option at a later stage when requesting a second credit line. It was agreed to continue discussions on this issue at the next technical meeting.
7 The ERC only makes sense when it covers specific risks on a one to one basis rather than general traded portfolio risks.
8 Projects are more at risk than other, and a base of knowledge could be developed to make a good usage of the lessons learned from the weakest and strongest projects. Consideration should be undertaken for the PeKaO (Poland) and SZRB (Slovakia) with a view to establishing corrective actions or suspend the projects.
Increased efficiency
9 There should be uniform reporting from IFIs (the EBRD gives much more detailed information), with minimum requirements for semi-annual reports: number of loans, number of SMEs, and what is in the EBRD report. The first part should be on the results, the second on the main achievement in the period, third on the main difficulties and pending problems and risks, fourth part on the pipeline, fifth part other specifics (i.e. the special comments on regional coverage of the EBRD semi-annual report 2002). It should also include tracking of actions agreed to be taken on new problems, actions on previous problems reported and current status.
Easier management for the Commission Services
10 Commission Services and IFIs should agree on simple transparent conditions what is offered to the PB, and what are the negotiation rules. PBs should have an overview of terms and conditions offered by all participating IFIs and then chose the most appropriate package.
Avert reputation risk on the image of the Facility
11 The creation of a multi-bank school for credit to SME (at regional level) could be an effective way to insure the sustainability of the transfer of skills of bankers. This should be co-financed by the banks and an EU grant (on the principle that people value more something they pay than something they are offered). Modalities of the implementation could involve a banking training centre for SME lending in one bank shared by the others, or proposed by the national Bankers associations, or the specialized banking trainers.
Recommendation Expected Output(s) Decision taken at the Facility Steering Committee
12 The use of the ERC should be confined to those PBs where the ERC enhances the overall credit risk of the PB and should not be extended to those PBs that are able to manage their exposures on a pooled basis from existing market sources.
Improvement of the efficiency of the incentives
13 The EW should be given clearer objectives: either to freeze the further efforts to sell more the window to other potential fund managers or to offer a more flexible solution to them (e.g. relax the max investment size, resolve the domicile issue etc). Its additionality needs closer examination
The EW is drifting without a firm management direction. A strategic review should be undertaken by the stakeholders and clear objectives set for the EW. The main choices are :
a) to suspend further efforts to establish new IFs and redirecting the committed funds to other programmes. A decision should also be made on what action to be taken in respect of the slow rates of investment by the 3 existing funds; or
b) to promote the EW more aggressively with the intention of establishing new funds and introducing corrective actions to ensure an acceleration in the rate of investments made by the existing funds.
Improved possibility to achieve immediate objectives