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Support systems for new activities in rural areas

Part 2 - Individual services
Grants and finance

How to use this guide & Table of Contents


Grant management is actually an extremely
complex and skillful activity.
Speed, flexibility and the effectiveness of
LEADER groups in this area is what
distinguishes them from more remote agencies
and establishes their credibility with
the local population.


Common problems and bottlenecks Recommendations and guidelines (*)
  • In certain cases, grant giving can become the sole reason for being of LEADER groups. The group looks for a niche that is not covered by other agencies (based on size or geographical coverage) and simply concentrates on doling out grants to as many projects as possible.
  • In many rural areas, it may be a priority to develop methods of financial engineering that meet the specific problems of new activities:
    • formulae for applying seed, start-up and development capital for initiatives with no funds;
    • other methods of matching capital outlays to project income (leasing, factoring, etc.);
    • systems for mobilising local savings (1).

    low or no interest loans, which are sponsored by a local mentor.
    Some agencies have created risk capital funds with or without financial partners. Even if relatively modest, these funds can become levers for other investors and credit organisations.

  • Each group has to engineer a balance of funding projects with short-term quantifiable results and more risky, proactive services directed at priority groups and sectors (2).
  • As with other support services, such as animation and training, financial support must be coordinated and integrated into the rest of the support strategy. In other words, it is no use funding projects run by people who have been inadequately trained and have no idea or means of marketing their products.
  • Short-term quantifiable criteria, such as the immediate impact on job and private investment leverage, take overwhelming precedence over more complex variables such as the demonstration and multiplier effects on the local economy.
  • The initiatives most likely to produce short-term outputs are those with a certain amount of resources and experience. This means that there is a tendency to neglect projects proposed by disadvantaged groups of the population.
  • A contradiction can appear between dedicating a large amount of resources to animating projects among disadvantaged groups or project promoters with no funds of their own, and communities where there is no mechanism for dealing with their lack of personal capital with which to match grants.
  • The criteria for selecting projects and allocating grants have little in common with the strategic priorities of the business plan.

(*) The ways of using the Structural Funds in these various cases are explained in the Official Journal of the European Communities (OJ L 146 of 5 June 1997).

(1) In France, for example, the "Plates-formes d'Initiative Locales" - saving funds - lend to local people and projects at zero-interest.

(2) According to the BICs, they would have to turn down between 50 and 90% of potentially viable projects if they did not have access to some form of venture capital.

N.B.: The dossier "From strategy to action: project selection" (LEADER European Observatory / AEIDL, 1998) gives examples of financial support mechanisms in the context of LEADER.

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