Occitanie is France’s largest – and youngest – administrative region. It is also rich with Very Small Businesses (VSBs) and Small and Medium-sized Enterprises (SMEs), especially in the agricultural, agri-food and forestry sectors. However, many VSBs and SMEs lack the necessary financial backing and resources to develop their businesses. To further boost economic development, the Region set up the EU-funded FOSTER TPE-PME project to facilitate access to financial support including loans, equity investments and bank guarantees.
Growing Occitanie’s small businesses
- 09 May 2018
The FOSTER TPE-PME fund of funds answers the needs of business owners seeking concrete and well-adapted solutions. It provides a way of establishing a real public-private financing ecosystem for businesses and agricultural and forestry holdings.
Two unique characteristics of the FOSTER TPE-PME project (hereinafter FOSTER) make it stand out from similar funds. First, it is based on a risk sharing set-up between the private and public sectors. Second, a large part of the committed funds is self-regenerating in that every business that receives financial support gradually pays it back through loan repayments, forfaiting guarantees or divestment. FOSTER shares a part of the risk with the businesses it funds, thus reducing their costs and personal guarantees and letting them focus on developing innovative products and solutions.
With EUR 143 million in leverage, FOSTER aims to provide EUR 1 billion in funding to nearly 6 000 VSBs and SMEs by 2020. After just nine months of activity, the project has already supported 527 companies with a total of EUR 83 million.
A unique focus
The EU has been encouraging its Member States to use structural funds as financial instruments to stimulate local economic development and boost employment levels, and the FOSTER project is doing exactly that. What’s more, the project is the first of its kind to specifically focus on the development of a region’s agricultural, agri-food and forestry sectors.
This unique focus led the project to apply to the EU Regional Development Fund and the Agricultural Fund for Rural Development, in combination with various regional resources. In total, it has allocated EUR 143 million in public resources to use as leverage with private financial institutions. The resulting four FOSTER fund of funds are managed by the European Investment Fund (EIF).
Including regional financial institutions
So far, the project has attracted several major regional financial players. As of early 2018, the EIF had signed operational agreements with six financial intermediaries, securing an additional EUR 810 million in funding. For example, Créalia has set up a lending system with a risk sharing loan facility for innovative SMEs. Furthermore, the Banque Populaire du Sud, Banque Populaire Occitane, Caisse d’Epargne of Languedoc-Roussillon and Caisse d’Epargne Midi-Pyrénées have all taken up the role of bank guarantee facility for loans with substantially reduced collateral conditions for VSBs and SMEs. In particular, Banque Populaire du Sud and Banque Populaire Occitane agreed to make EUR 121 million available through a first loss portfolio guarantee agreement, targeting final recipients in the agricultural sector. The private equity company Irdi-Soridec Gestion was selected to act as the financial intermediary for implementing the equity investments for SMEs with a high potential for growth in the eastern part of the region.
The selection of financial intermediaries is currently in progress for the equity instrument, as well as for the risk sharing loan facility that will eventually support innovative businesses in the western part of the region.
FOSTER not only meets the financial needs of small businesses, it also ensures their long-term development by securing their regional attractiveness and competitiveness, while boosting employment levels.
Total investment and EU funding
Total investment for the project “FOSTER TPE-PME” is EUR 143 000 000, with the EU’s European Regional Development Fund and European Agricultural Fund for Rural Development contributing EUR 82 547 500 through the “Languedoc Roussillon” and “Midi Pyrénées et Garonne” Regional Programmes and Rural Development Programmes for the 2014-2020 programming period.