Evaluation of the Economic Development Operative Programme Jeremie programmes

Agenda 1.Introduction 2.Progress and allocation of funds a)Credit products b)Guarantee products c)Venture capital funds 3.Characteristics of the projects 4.Key conclusions and recommendations

1. Introduction – FIN-EN project (1) “Sharing methodologies on Financial Engineering for enterprises” – sharing experience on the use of financial instruments, whithin Interreg IV C Duration: – Involved partners: IT (lead partner), DE, DK, FR, GR, HU, LV, LT, PT, SI, ES, UK, EAPB (European Association of Public Banks)

The project consists of 3 components: −Management and coordination −Communication and dissemination −Sharing experiences and analysis of best practices – 3 thematic working groups: TWG1: Programming TWG2: Execution TWG3: Monitoring and reporting (led by EDP MA) Further project tasks (led by EDP MA) Mapping of project partners’ financial instruments in place: −Database development −Summarising report 1. Introduction – FIN-EN project (2)

1. Introduction – Jeremie programmes The financial instruments played an important role when planning the EDOP: 23.9% of the funds allocated to them The first projects were contracted at the beginning of the period in January 2008 within the microcredit component For the execution of the programme an extended intermediary network is involved (118 accredited intermediaries by the end of 2012) With the progress of the programme combined products were introduced where financial instruments and grant-type funding are accessed through one single application

2. a) Credit products Source: NFÜ ( ) Budget (Bill. HUF) Contr. (Bill. HUF)

2. a) Credit products – Microcredit (1) Type of intermediary Refinanced transact. (no.) Amount refinanced (Bill. HUF) Average am. ref. (Bill. HUF) Average interest Credit institutions (banks and savings co-operatives) % Other financial undertakings 2, % Local Foundations for Enterprise Promotion 1, % Source: MV Zrt. ( )

2. a) Credit products – Microcredit (2) The programme’s advancement boosted after February 2011 due to The raise of the maximum level of contractable credits 100% refinancing (later decreased to 75% for credit institutions) Monthly contracts of Microcredit / Small Credit / New Széchenyi Credit Source: MV Zrt. ( )

2. a) Credit products – CMC After alterations in the calls for proposal in January 2012 the number of contracting increased significantly Financial undertakings and local FEPs owe a similar share of contracted credits Due to the application scheme close monitoring is necessary Financial instruments accessed through combined products improve the business culture and financial thinking of micro enterprises Source: MV Zrt. ( ) Monthly contracts of Combined Microcredit

*20% of contracted guarantee is considered as eligible expense 2. b) Guarantee products (1) Source: NFÜ ( ) Budget (Bill. HUF) Contr. (Bill. HUF) (2.5*)

2. b) Guarantee products (2) Budget (Bill. HUF) Trans. (nr.) Total guarantee (Bill. HUF) Jeremie- guarantee (Bill. HUF) Eligible expense Average interest % Low number of transactions and weak intermediary activity The budget has been decreased on several occasions (partly due to progress and eligibility criteria) Parallel and well-known guarantee products are available on the market The combined product’s (CCG) system of single contact points is a promising initiative Number of transactions (banks) Source: MV Zrt. ( ) Source: NFÜ ( )

2. c) Venture Capital Funds (1) Source: NFÜ ( ) Budget (Bill. HUF) Contr. (Bill. HUF)

2. c) Venture Capital Funds (2) Three calls for proposal resulted in the set up of 22 venture capital funds (4 seed capital funds) A min. of 30% of sources have to originate from outside investors ensuring business approach A significant amount of venture capital funding is still available for enterprises Distribution of Venture Capital Funds’ Jeremie-funding Availability of venture capital Source: NFÜ ( )

 3. Characteristics of the projects Most of the funding supported enterprises with commercial and scientific- engineering activity On a regional comparison Central-Hungary stands out Source: MV Zrt. ( ) Distribution of Jeremie-funding among industry sectors Distribution of Jeremie- funding among regions

4. Key conclusions and recommendations  Alignment of Jeremie-products and state supported financial instruments Further fine-tuning of the institutional system, rules of procedures and monitoring Consequent and transparent communication with intermediaries and beneficiaries Initiation of new combined products, considering to include related grants and financial instruments whithin one priority axis Simplification and extension of the guarantee programme

Contact: Andrea Nestor Director KPMG Advisory Ltd kpmg.hu