The European Commission and the European Investment Bank (EIB) have today presented a model guarantee instrument for agriculture, the first new product developed in the framework of their Memorandum of Understanding (MoU) on co-operation in agriculture and rural development within the EU, signed in July 2014.
The model instrument aims to help ease access to finance for farmers and other rural businesses. Member States and regions can adapt and use the model to set up financial instruments funded by their rural development programmes (RDPs) under the European Agricultural Fund for Rural Development (EAFRD) – to secure loans for investments in farm performance, processing and marketing, business start-ups and many other areas.
The instrument is accompanied by a work programme – also unveiled today – setting out the finer detail of the Commission's and the EIB's co-operation under the MoU. This is complemented by the provision of advice by the EIB to help Member States and regions better understand and use financial instruments.
Speaking in Brussels at an event presenting the joint work to representatives of Member States and regions, Phil Hogan, European Commissioner for Agriculture and Rural Development, said:
"Financial instruments can help us to get even more value out of rural development policy, the second pillar of the Common Agricultural Policy. By getting credit flowing more freely, they can turn one euro of public money into two euros, three euros or even more of secured loans to help our farmers, particularly young farmers, and other rural entrepreneurs create growth and jobs. The joint work by the Commission and the EIB, set out in detail today, marks a huge step forward towards making that happen."
EIB Vice-President Wilhelm Molterer said:
"The need to invest in EU’s rural economies is huge while public support is constrained by scarce public financial resources. What we therefore need is a smart way of using public cash to attract private investors and unlock investment. Financial instruments supported by the EAFRD represent a real paradigm shift. Making use of these instruments is in the best interest of the recipients of EAFRD funds as they go further than simple grants."
According to the rules governing the EAFRD, Member States and regions may include financial instruments (such as guarantee funds, revolving funds and equity funds) in their seven-year RDPs when the usefulness of doing so is demonstrated ex ante. However, in the RDPs presented by the national and regional authorities so far, only modest provision has been made for using financial instruments, owing in part to a lack of familiarity with them.
An RDP which does not include financial instruments from the beginning may later be modified once the responsible Member State or region has convinced itself of the attractiveness of using these tools to increase the programme's impact.
The MoU work programme also covers the Commission's research on agriculture, agri-food and forestry, as well as the EIB's normal lending activities to projects in the farm sector or rural areas.