EPRC is leading a new study on financial instruments and territorial cohesion. It aims to address the 'territorial gap' in financial instruments research, looking at the spatial incidence of FIs, their added value and the extent to which different territorial features and governance mechanisms help or hinder the use of FI in regional development policy. The study is being undertaken for ESPON by a consortium also comprising TU Delft in the Netherlands, Nordregio in Sweden and Red2Red Consultores in Spain.
Financial instruments (FIs) represent a small but increasing and high-profile proportion of ESIF programme resources - the uptake of FIs under ESIF programmes has roughly doubled since the 2007-13 programming period. Use of FIs has been concentrated within ERDF programmes, and has focused primarily on support to SMEs. The European Commission has encouraged the use of FIs in Cohesion policy on the basis that such instruments are more sustainable (because funds are recycled to be spent again in the same region), that they may generate better quality projects (because funds have to be repaid and commercial expertise in project appraisal can enhance project selection) and that they can be a more efficient use of public funds (because private finance can be leveraged in to supplement public spending). However, the overarching rationale for the use of FIs is that facilitating access to finance by using financial instruments can contribute to sustainable regional economic development.
For the 2014-20 period, provisions have been made in the ESIF regulations to encourage increased use of FIs across different Funds, under new Thematic Objectives and using new modes of implementation, including by contributing to EU-level FIs. Meanwhile, the landscape has become more complex for the implementation of FIs, as the EU has responded to the economic and financial crisis by enhancing access to finance through the European Fund for Strategic Investments (EFSI), part of the Investment Plan for Europe.
While much has been written about the implementation of FIs under Cohesion policy, often focusing on the challenges involved in their implementation, little of it has had an explicitly spatial dimension. In part, this owes to the relative novelty of FIs as a delivery mechanism, leading to a steep learning curve for Managing Authorities (MAs) in setting up FIs, so that debates have been dominated by issues of process rather than of substance. This study is an opportunity to address the ‘territorial gap’ in financial instrument research.