Maximizing Impact of Public Funding in CCS: Innovative Financial Instruments
Explore innovative private and public financial instruments to maximize the impact of public funding in the field of Creative and Cultural Industries. Learn about Cofidi.it, a financial intermediary supporting SMEs through guarantee issuance on loans, promoting economic stability as per Basel II regulations. Founded in 1996, Cofidi.it operates on mutual principles and fosters SME growth in Italy.
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Innovative private and public financial Innovative private and public financial instruments instruments & How to maximize the impact of & How to maximize the impact of public funding in CCS public funding in CCS 1st 1st Conference in the Conference in the field of Creative and Cultural Industries field of Creative and Cultural Industries 4 4 th th 5 5 th th October 2017 I Museum of Architecture and October 2017 I Museum of Architecture and Design Design MAO MAO - - Ljubljana Ljubljana
About Cofidi.it Cofidi.it About Cofidi.it Cofidi.it operates on the basis of the principles of operates on the basis of the principles of mutuality mutuality, as non , as non- -profit organization, in compliance with profit organization, in compliance with relevant legislation (Law n. 326/2003). relevant legislation (Law n. 326/2003). As As financial intermediary supervised by the financial intermediary supervised by the Bank of Italy Cofidi.it Cofidi.it supports SMEs in obtaining credit through the supports SMEs in obtaining credit through the issuance of a guarantee issuance of a guarantee on loans granted by banks and on loans granted by banks and safeguarding economic stability as regulated by Basel II. safeguarding economic stability as regulated by Basel II. Bank of Italy, ,
About Cofidi.it Cofidi.it About Cofidi.it Cofidi.it was founded in was founded in 1996 Confidi Confidi belonging to the belonging to the local network of SMEs and handcraft local network of SMEs and handcraft associations ( associations (CNA CNA Puglia System Puglia System) and the most relevant federation of mutual guarantee institutions in the most relevant federation of mutual guarantee institutions in Italy 1996 under the auspices of five Italian under the auspices of five Italian ) and adheres to " adheres to "Fedart Fedart Fidi Fidi", Italy ", Cofidi.it Cofidi.it , with its head office in , with its head office in BARI thanks to the contribute of its thanks to the contribute of its branches located in located in Apulia, Apulia, Basilicata, Calabria, Campania, Molise and Basilicata, Calabria, Campania, Molise and Abruzzo. Abruzzo. BARI Italy branches and Italy, offers , offers its services its services and financial agents financial agents mainly mainly Due Due to the support of its to the support of its brokers' network Central Italy, Rome and Lazio included, Central Italy, Rome and Lazio included, Cofidi.it its market share in its market share in other areas of central and northern Italy. other areas of central and northern Italy. brokers' network, mainly operating in , mainly operating in Cofidi.it is going to expand is going to expand
About Cofidi.it Cofidi.it About Cofidi.it Cofidi.it has recognized the has recognized the added value firms and the importance of implementing particular activities and firms and the importance of implementing particular activities and "ad hoc" services, in order to improve the SMEs borrowing capacity "ad hoc" services, in order to improve the SMEs borrowing capacity and compensate for the lack of a specific operational and political and compensate for the lack of a specific operational and political structure on a national scale. structure on a national scale. added value of cultural and creative of cultural and creative A A mission mission that comes from the presence of more than 300 member that comes from the presence of more than 300 member companies belonging to the CCS NACE codes, from the relationship companies belonging to the CCS NACE codes, from the relationship with with Art lab Art lab and and Fitzcarraldo Fitzcarraldo Foundation and from a direct involvement in " involvement in "Distretto Distretto Puglia Foundation and from a direct Puglia Creativa Creativa". ".
main theme theme main Innovative private and public financial instruments & How to maximize the impact of public funding in CCS
What does mean innovation innovation? ? What does mean concept concept status definition definition project project PEOPLE PEOPLE status
and funding funding ? and ? a provision of a provision of resources to finance to finance innovation innovative way . innovative way . resources in order innovation in in order in
Challenge Challenge for the for the CCS CCS Accessing Accessing the funds that they need the funds that they need to finance their activities, to grow, and to finance their activities, to grow, and to maintain and increase their to maintain and increase their competitiveness. competitiveness.
Challenge Challenge for the The intangible nature of their assets; The prototype profile of their activities and their output; Their intrinsic need to take risks in order to innovate. for the CCS CCS
Such Such risk understood and supported also by the understood and supported also by the financial financial sector risk- -taking needs taking needs to be to be sector
Cofidi.it Cofidi.it participated to the Open Call for Expression of Interest to select Financial Intermediaries under Cultural and Creative Sectors Guarantee Facility (CCSGF CCSGF).
The credit risk protection shall be provided through a Counter Guarantee Guarantee which shall be issued by EIF EIF acting on behalf of the European Commission Commission for the benefit of a Financial Intermediary . Counter- - European
How does the How does the instrument instrument work? work? The Counter-guarantee shall cover Losses incurred by the Financial Intermediary (the Guarantor) at a Counter guarantee Rate guarantee Rate (up to 70% of each Intermediary Transaction) subject to the Counter Counter- -guarantee Cap Rate Cap Rate (set by EIF at 10%, 18% or 25%). Losses covered by the Counter-guarantee, in respect of the Portfolio of eligible Intermediary Transactions, shall in aggregate not exceed the Cap Amount Cap Amount stipulated in the counter-guarantee agreement between EIF and the relevant Financial Intermediary. Counter- - guarantee
What types of activities activities are covered by are covered by What types of Cultural and Creative Sectors? Cultural and Creative Sectors? The 'cultural and creative sectors' means all sectors whose activities are based on cultural cultural values creative creative expressions expressions (architecture, archives, libraries and museums, artistic crafts, audiovisual (including film, television, video games and multimedia), tangible and intangible cultural heritage, design, festivals, music, literature, performing arts, publishing, radio and visual arts). values and/or artistic and artistic and (Sub-Annex 1_List of NACE Statistical Codes eligible under CCSGF)
Final Final Recipient Transaction Recipient Transaction Eligibility Criteria Criteria Eligibility The transactions shall be granted for one or more permitted purposes: investment in tangible and/or intangible assets; working capital; business transfers; The principal amount shall not exceed EUR 2 mln and shall have a minimum scheduled maturity of 12 months.
What are the main What are the main objectives financial instrument? financial instrument? general objective objective is is: : to to foster foster the safeguarding the safeguarding and promotion of European cultural and linguistic European cultural and linguistic diversity; Smart Smart growth, growth, developing developing of an economy based on knowledge and knowledge and innovation Sustainable growth Sustainable growth promoting a more resource promoting a more resource efficient, efficient, greener greener and more competitive and more competitive economy; Inclusive growth fostering a high Inclusive growth fostering a high- -employment economy delivering economy delivering economic, social economic, social and territorial cohesion. cohesion. objectives of the of the Thegeneral The and promotion of diversity; of an economy based on innovation; ; economy; employment and territorial
What are the main What are the main objectives financial instrument? financial instrument? specific objective objectives of the of the Thespecific The objective is is: : to strengthen to strengthen the financial of the cultural and creative of the cultural and creative sector the financial capacity capacity sector; ; to find a solution to the problems to find a solution to the problems of information information asymmetry. of asymmetry.
To respond respond to these issues, to these issues, it will be useful useful To it will be t to o provide provide guarantees guarantees to banks dealing with cultural and creative cultural and creative SMEs SMEs to to provide provide expertise/capacity building expertise/capacity building to the financial institutions (by defining a specific the financial institutions (by defining a specific methodology to calculate a tailor made rating methodology to calculate a tailor made rating system referred to cultural enterprises which have system referred to cultural enterprises which have its own budget structure and financial its own budget structure and financial needs) to to increase the number increase the number of financial institution which are willing to institution which are willing to work with cultural and creative work with cultural and creative SMEs to banks dealing with to needs) of financial SMEs
Reasons to invest invest in CCS Reasons to social and economic growth potential; the enabling role of CCS for innovation; Economies of scale; ; Cross border effect; ; in CCS
Reasons Reasons not to provide not to provide finance to the CCS the CCS Assets (IPRs) are intangible which makes it difficult to provide collateral for finance; the perception that the cultural and creative sectors are highly risky (high default risk) and not profitable; Large fixed costs of loans; a lack of reliable data in CCS businesses which is necessary to get credit funding; a lack of business and management skills; a lack of understanding of financial sources. finance to
financial counterparties counterparties? ? What What about about financial Traditional bank products do not match very well with the financing needs of CCS organizations; Project based financing requires specialist knowledge of legal structures which is often not belonging to general banks; A lack of specialist knowledge concerning competitiveness, market shares and trends; For public institutions: their general mandate (as assigned by government) does not include CCS specifically.
Capacity Building Capacity Building The CCS GF should, through the Capacity Building scheme, improve the capacity to assess the risks associated with SMEs and micro, small and medium-sized organisations in the cultural and creative sectors and with their projects, including through technical assistance, knowledge- building and networking measures.
Capacity Building Capacity Building The main parameters that financial institutions consider for a positive feedback on loan requests are: Reasons to invest Return on investment Loss given default Judging an application Cash-flow valuation Check if cash-flow valuation guarantees interest payments and loan payments Track record of applicant Collateral Private equity
Public and not Public and not- -for for- -profit institutions profit institutions Public institutions mainly concern bodies of government. On the one hand, these governmental bodies (European, national or regional) should supply grants, donations, or set up tax incentive schemes to stimulate private investment. On the other hand, Governments can also set up public financial intermediaries, such as public banks, to offer guarantees and loans.
Enjoy your project! Enjoy your project! Questions Questions and Comments and Comments Passarelli Roberto Passarelli Roberto robertopassarelli@cofidi.it robertopassarelli@cofidi.it www.cofidi.it www.cofidi.it
