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Luxembourg, 8 June 2011

European Court of Auditors publishes special report on the effectiveness of the Small and Medium Enterprise Guarantee facility

Small and medium sized enterprises (SMEs) represent 99 % of all enterprises and provide 75 million jobs in the European Union. According to the Observatory of European SMEs, access to finance is a problem for SMEs in Europe. The public sector has an important role to play in supporting the SME sector, in particular the provision of suitable financing. The SME Guarantee (SMEG) facility is a financial instrument managed by the European Investment Fund on behalf of the European Commission and provides guarantees or counter guarantees to financial intermediaries for loans granted by financial institutions to SMEs aimed at increasing the supply of debt financing.

The European Court of Auditor’s (ECA) has published the results of its audit on the effectiveness of the Small and Medium Enterprise Guarantee facility, in terms of the effectiveness of its design and planning, the management of its operations and the achievement of its objectives.

The ECA found that the objectives of the current SMEG facility were more precise than under the previous programmes in terms of expected outputs. The framework for the management of the daily operations was considered appropriate, but no scoring standards and no minimum requirements were set for the selection of financial intermediaries. Reporting requirements were satisfactory while being limited to monitoring output rather than results and impacts of the measure. ECA concluded that at least a third of the loans were granted to SMEs that could have obtained the required financing without public support and only 12% were given to SMEs for innovative investments. Furthermore, the EU added value of the facility was not clearly demonstrated.

Based on its findings, the ECA made a number of recommendations, such as that, in the future, the Commission should set more specific quantifiable targets in order to facilitate monitoring of the achievement of the objectives of the financial instrument. Progress should be measured towards achieving these targets during the lifetime of the instrument, allowing remedial action to be taken as necessary. In addition, a scoring system should be put in place to make the applications comparable. Appropriate measures should be taken to make sure that EU funds can be allocated more effectively to those SMEs with viable projects that would otherwise not have had been financed.

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