Financial Instruments

The legislative and policy framework for 2014-2020 encourages further expansion and strengthening the use of financial instruments in the new programming period as a more efficient and sustainable alternative to complement traditional grant-based financing.

SERN is involved as a partner in the ‘Financial Instruments for Innovation’ (Innova-FI) project. The Interreg Europe project aims to improve the design and implementation of Financial Instruments as a delivery mode of Structural Funds, so that they best meet and serve the financing needs of innovative and RTDI-driven businesses in all the stages of their start-up and growth. More information here.

What are innovative financial instruments?

Innovative financial instruments are a range of activities such as :

  • participation in equity (risk capital) funds
  • guarantees to local banks lending to a large number of final beneficiaries, for instance small and medium-sized enterprises (SMEs)
  • risk-sharing with financial institutions to boost investment in large infrastructure projects (e.g. the Europe 2020 project bonds initiative or the connecting europe facility financial instruments).

The aim is to boost the real economy through increasing the access to finance for enterprises and industry producing goods and services. Spending through innovative financial instruments is another way of spending EU budget than giving grants or subsidies.

Innovative financial instruments support economic growth

Innovative financial instruments can attract funding from other public or private investors in areas of EU strong interest but which are perceived as risky by investors. Examples include sectors with high economic growth or innovative business activities.

The fact that the EU invests risk capital in a certain fund or covers part of the risk associated with a certain type of projects can reassure other investors and encourage them to invest alongside the EU. Moreover, innovative financial instruments have important non-financial effects such as promotion of best practices.

 

European Commission – European Commission. (2018). Innovative financial instruments. [online] Available at: https://ec.europa.eu/info/business-economy-euro/growth-and-investment/financing-investment/innovative-financial-instruments_en.