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[High Level Seminar] Financing the Real Economy: Challenges in Euro-Mediterranean Countries

  • Starts: May 24, 2016
  • Ends: May 26, 2016
  • Location: Marseille, France
  • By: Banque de France, WB and CMI
 
  • Eight years after the global financial crisis, policy makers around the Mediterranean are to various degrees still grappling with restoring adequate financing to the real economy. Employment, particularly for young graduates and women, has become the defining real economy issue around the Mediterranean. Given this challenge, central banks and ministries of finance have not shied away from experimenting with policies to enhance the contribution of the financial system to the generation of quality private sector growth and jobs creation. The seminar examined the many initiatives that authorities have designed to revive and sustain the financing of small and young enterprises, as well as the financing of infrastructure. Small and medium-sized enterprises typically supply the bulk of private sector employment and young companies often account for the bulk of new net jobs. These job engines bore the frontal shock from the global crisis as the financial system immediately retreated to less risky undertakings. Thereafter, fiscal consolidation agendas and tighter prudential policies often pushed the odds of cyclical recovery further into the future, in turn compromising the financing of long payoff infrastructure undertakings. Infrastructure projects help many SMEs secure financing and maintain jobs today; well-targeted infrastructure investments build eco-systems for tomorrow’s new companies, in addition to benefitting the population at large.

     

    High-level officials from central banks and ministries of finance from around the Mediterranean gathered over the last two days at the CMI to share policy experiences in supporting the financing of SMEs and infrastructure. Participants comprised Albania, Croatia, France, Italy, Jordan, Lebanon, Montenegro, Morocco, Spain, Tunisia, Turkey, the ECB, OECD, and European Commission. The conference series is a partnership between Banque de France, the World Bank’s Finance and Markets Global Practice, and CMI. Earlier conferences focused on the implications of global financial reforms for central banks (2013), work-out of non-performing assets and bank restructuring (2014), and the interplay of micro and macroprudential frameworks (2015).

     

    Participants took note of the wide range of policies being tried out to sustain and improve access to finance for SMEs: traditional countercyclical guarantees that crowd in bank lending; public-private direct co-financing; equity investments in start-ups and business angels; fund of funds co-financing; structured finance for start-ups and growth SMEs; unconventional central bank facilities; public-private financial restructuring of SMEs in targeted activities. Longer-term building blocks include simple and transparent securitization of SME loans; mini-bonds; credit information infrastructure; secured transaction frameworks; financial education of entrepreneurs and improvement in the SMEs ecosystem. Efforts are under way in Europe to build harmonized, highly granular databases on enterprise financing so as to help formulate and fine-tune such policies. However, for the time being, meaningful evaluation of the additionality of instruments supporting access to finance, and their broader impact in terms of growth and jobs is still challenging.

     

    One year into the European Investment Plan (“Juncker Plan”), the seminar was an opportunity to take stock of early promising results of using public funds to leverage private sources for the financing of infrastructure. The financial engineering part of the Plan is complemented by a platform matching project promoters and investors, an EU-wide pool of technical assistance resources to help promoters prepare projects for the platform, and national programs to lower regulatory barriers to doing business. In MENA countries, the financing of infrastructure remains driven by public and conventional instruments, although Turkey and Morocco are actively promoting new financing solutions, including PPPs. Some participants finally noted that microfinance, and financial inclusion generally, in reaching very small SMEs face high costs related to customer due diligence. 

     

    Photos

    Attendance during the event

    Attendance during the event.