On November 24, 2017, the Ministry of Economic Development and Technology and SID Bank signed a financing agreement establishing the first Fund of funds intended for the use of European cohesion funds.
The Ministry appointed SID banka as the manager of the Fund of funds, which will receive € 234.73 million from the European Cohesion Funds available to Slovenia for financing development and entrepreneurship in the Financial Perspectives 2014-2020 to 2023. Through the European Cohesion Policy funds, the financial intermediaries will have to provide additional funds in the amount of about EUR 112 million due to the required financial leverage and reuse of returned funds, which will make more than EUR 346 million available to businesses and other final beneficiaries.
The purpose of the fund thus created is to promote or finance sustainable economic growth and development, innovation investment and ongoing operations with debt and equity forms of financing in four areas:
research, development and innovation,
small and medium-sized enterprises,
energy efficiency and
SID - Slovenska izvojna in razvojna banka, within the framework of the Fund of Funds, offers financial products to Slovenian companies and municipalities through financial intermediaries (commercial banks, savings banks and public funds), which will contribute to the achievement of the objectives of the Operational Program for the implementation of the European Cohesion Policy in the period 2014-2020.
With the establishment of the Fund of Funds, an important step has been taken towards the transition from non-reimbursable to reimbursable funds using financial instruments. Reimbursements are much more effective than grants, mainly due to their greater financial leverage and multiplier effects as well as their revolving nature. By using financial instruments such as loans, guarantees, equity financing, and the like, which are reversible and require the investment of equity and effort by companies or intermediaries, a market valuation of the projects to be financed is built into the process. This in turn leads to better financial discipline and, along with greater multiplier effects, better allocation of development funds. At the same time, it also increases recipient accountability by reducing the potential for misuse of funds and the impact on competitive distortions that often result from the use of grants. These allow otherwise inefficient recipients to be artificially maintained in the market, thus gaining market share with the help of grants, which is certainly neither sustainable nor developmentally sound.
For end recipients, financial instruments allow for greater satisfaction of needs, namely from a capital standpoint, lower interest rates, longer maturities, reduced insurance requirements (or no insurance), and longer moratoria.
SID Bank is developing new financial instruments based on a preliminary assessment of the financing gap conducted by the Slovenian company PwC and supplemented by an analysis of the European Investment Bank. Market gaps were identified in the areas of financing small and medium-sized enterprises, research, development and innovation, energy efficiency and urban development, which is why the Fund of funds is introducing financial instruments for individual target groups in these four areas.
Within the Fund of Funds, SID Bank is expanding access to financing for developmentally important projects for small and medium-sized enterprises with a new financial instrument, portfolio guarantees...