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Flagship fi-compass events spotlight opportunities for financial instruments in the European Social Fund

Two high level events were organised by fi-compass earlier this month to raise awareness about opportunities for financial instruments in the European Social Fund (ESF). Both events were based in Brussels with a conference on ‘Financial Instruments under the European Social Fund 2014-2020’ taking place on 2 February, which was followed the next day by the ‘Microfinance under the European Social Fund 2014-2020’ workshop.

These ESF events attracted a broad range of interest from managing authorities, audit bodies, policy makers, as well as stakeholders from the banking and consultancy sectors. Both events provided opportunities to explore the various programming and implementing options, the challenges of setting up financial instruments for ESF target groups, and potential pathways towards efficient and sustainable Social Impact Investment (SII) in the EU.

Andriana Sukova-Tosheva, Director at DG EMPL, European Commission, in her welcome speech underlined the importance of using all the financial instruments available to address the needs of disadvantaged and vulnerable people. She also urged stakeholders to “make use of fi-compass resources”, which were recently complemented by new advisory publications focused on the ESF:

Andrea Da Pozzo from DG EMPL, European Commission, explained the opportunities for financial instruments offered by the ESF framework in the 2014-2020 programming period. He went on to clarify the new legislative framework and its wider scope, as well as other key novelties introduced with the Common Provisions Regulation. Mr Da Pozzo addressed the current use of ESF financial instruments in terms of allocation and final recipients. He also presented the potential use of financial instruments and available budget under the various thematic objectives.

Social policy delivery

One of the key issues raised during the conference, and the focus of the first panel discussion, is the importance of the ex-ante assessment, which is used to demonstrate the added value of a financial instrument and its potential leverage effect. The market analysis component of the ex-ante assessment is designed to identify market failures and financial gaps. This topic was the focus of a presentation by Rūta Dapkutė-Stankevičienė from the Lithuanian Ministry of Finance. She described the gains from cross-referencing information and using multiple sources of data. Lithuania’s experience in using financial instruments for delivering social policy also underscored the importance of ex-ante considerations. These need to take account of the specific challenges faced by ESF target groups, including lack of collateral or business knowledge.

Other examples of ESF financial instruments strategy and design were shared by Italy and Portugal. The Italian case study drew attention to opportunities for young entrepreneurs from ESF financial instruments. It described the ‘SELFIEmployment’ scheme which is a revolving fund designed for tackling youth unemployment. SELFIEmployment combines mentoring advice with access to finance to help young people start up their own businesses. Support is available nationwide and the financial instrument’s ex-ante assessment shows that more than 4200 young entrepreneurs will benefit from this ESF financial instrument.

ESF experience from Portugal illustrated how financial instruments can be used to achieve social innovation goals. The Portuguese Social Innovation Fund aims to support investments in both existing social enterprises as well as new start-ups in this important sector. The initiative’s loans, equity and quasi-equity instruments were explained during the conference presentation, which also picked up on its approach to governance and State aid.

In all cases the delegates heard how the following key questions should be answered: which products will be provided (loans, guarantees or equity etc.) and what is the best implementation option? An important conclusion of this conference panel was that in order to help the disadvantaged and vulnerable groups that ESF addresses, managing authorities need to design and set up financial instruments where different actors offer and combine different tools and services to build an overall supportive system.

Furthermore, the conference focused on bridging the gap between SII and the ESF. Jader Cané from DG EMPL, European Commission, presented an SII overview and explained its correlation with the ESF. Karen Wilson from The Organisation for Economic Co-operation and Development (OECD) and Mario Calderini from Politecnico di Milano in Italy provided additional information and initial data on the use of impact investment techniques. They all emphasised that robust baseline data and monitoring tools on impact investment were essential to build a solid framework for ESF financial instruments.  

Such advice about ESF instruments at national and regional levels was complemented by an awareness raising session on EU-level instruments. These presentations by the European Commission and European Investment Fund featured the ‘EU Programme for Employment and Social Innovation’ (EaSI), the ‘Social Impact Accelerator’ and the ‘Erasmus+ guarantee facility’. Advantages of such funds were highlighted in terms of their relative ease in getting started. For example, Member States can benefit from the expertise that has already gone into designing the instruments and administrative savings were also noted as possible.

Conference conclusions from the first day’s ESF event indicated that new approaches are increasingly important for delivering social policy. Participants were shown how SII offers a conceptual framework designed to help managing authorities understand demand, supply, needs, and intermediaries. As SII grows and gains recognition, fi-compass is integrating these concepts into our advisory services, for instance, as part of the aforementioned ESF methodological handbook.

Microfinance matters

During the second day’s Microfinance Workshop, Stefan De Keersmaecker, Deputy Head of Unit, DG EMPL, European Commission, and Per-Erik Eriksson of the European Investment Fund described the ESF policy framework and how microfinance instruments fit within the ESF thematic objectives.

Andrea Da Pozzo and Shadin Viratham, both from DG EMPL, European Commission, presented on EU-level microfinance assistance. Together they gave an overview of the instruments supporting employment and social innovation. Participants also learned about EaSI products, presented by Riccardo Aguglia of the European Investment Fund, as well as the Technical Assistance strand of EaSI, presented by Christos Pouris of the European Investment Bank. Additionally, an overview was given by Pål Vik on the European Code of Good Conduct (CoGC) for Microcredit Provision. These presentations showed that the development of microfinance is already supported by established organisations (at EU, national and local levels) which are working together to build favourable conditions for microfinance and social entrepreneurship.

Microfinance case studies from the financial intermediary ADIE in France and the Marche Region’s managing authority in Italy explored different elements to consider when implementing ESF microfinance instruments. Both speakers advocated combining different support tools (for instance, financial instruments with non-financial services or grants) in order to support target groups in the most efficient way. Other participants at the Workshop reiterated the benefits from linking funding to business development services such as training and mentoring, and the new fi-compass microfinance factsheet explains how to engineer microfinance delivery together with other forms of assistance.

More feedback from the presentations prompted questions and comments by managing authorities about which source of finance to choose, how to select financial intermediaries, and what makes a “fertile” environment for ESF financial instruments. Workshop panel members concluded that one of the most important success factors was the managing authority’s capacity to build a positive and supportive operational framework. This is often aided by partnerships with various stakeholders such as those from public, private, and NGO sectors. Flexibility of ESF financial instruments was agreed as a vital ingredient for success because of the need to adapt to dynamic market conditions or changing economic circumstances.

Success factors

Discussions between the Workshop participants concluded that the opportunities from ESF financial instruments such as microfinance were being widely welcomed. Nevertheless, challenges still remain and progress can be enhanced by improving understanding about the full potential for ESF financial instruments to fight poverty and boost growth and employment.

Workshop panellists picked-up on this issue and reiterated the relevance of further awareness raising actions. Other key findings related to prospects for:

  • strengthened coordination of microfinance support at the EU level and the simplification of administration systems
  • greater flexibility for microfinance bodies in laws governing the EU finance sector
  • wise use of technical assistance which can help to boost the effectiveness of microfinance

With these events, fi-compass provided a platform for exchange of knowledge and experience, discussions and cooperation on financial instruments under the ESF. Marie Degrand-Guillaud from ADIE commented “sharing experiences during events like these is key for field players like us.” Together with other advisory products and services, they are an incentive for managing authorities to explore the benefits of implementing such instruments. 

See the fi-compass website’s past event pages for further details of the ESF Conference and Microfinance Workshop including PDF versions of all the presentation materials.

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