FINANCIAL INSTRUMENTS PERFORMANCE EVALUATION AND PROPOSALS FOR THE UTILIZATION OF FUNDS IN PODLASKIE VOIVODESHIP FINANCIAL INSTRUMENTS PERFORMANCE EVALUATION AND PROPOSALS FOR THE UTILIZATION OF FUNDS IN PODLASKIE VOIVODESHIP © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. CONTENTS Acknowledgements 5 Acronyms and Abbreviations 6 Introduction 7 Executive summary 8 PART I  EXPERIENCES FROM THE IMPLEMENTATION OF FINANCIAL INSTRUMENTS UNDER THE PODLASKIE VOIVODESHIP ROP FOR 2007–2013 AND DIRECTIONS FOR THE UTILIZATION OF FUNDS RETURNED UNDER THOSE FINANCIAL INSTRUMENTS 11 Analysis of the utilization of funds for financial engineering instruments under the PV ROP 2007–2013 12 Indications with respect to the strategy of investing the funds returned under the financial engineering instruments of the PV ROP 2007–2013 23 Background – financial instruments in the PV ROP 2014–2020 23 Findings and conclusions based on qualitative research with stakeholders of the financial instrumentsin the Podlaskie Voivodeship 25 Benchmarks – new financial products – experiences of selected voivodships (Pomorskie and Dolnośląskie) 28 Proposals of new financial products to be implemented based on funds repaid from the financial engineering instruments under the PV ROP 2007–2013 30 Indications (assumptions) with respect to the exit strategy from the financial engineering instruments under the PV ROP 2007–2013 34 PART II  MANAGEMENT MODEL FOR FUNDS RETURNED FROM THE FINANCIAL ENGINEERING INSTRUMENTS UNDER THE PV ROP 2007–2013 39 Options for the solution 40 Option A: the external management of funds(via the Regional Development Fund – a specialized institution of the Podlaskie Voivodeship self-government) 40 Option B – internal management of financial resources 45 Recommended solution 48 ATTACHMENT 1  List oF individualinterviews 52 ATTACHMENT 2  List of workshopmeetings 53 Notes 54 Sources 57 Legal documents 58 Internet sources 58 TABLES TABLE 1  Financial intermediaries operating financial engineering instruments in the Podlaskie Voivodeship, using funds from the PV ROP 2007–2013 12 TABLE 2  Intermediaries and value of support agreements in the area of financial engineering instrumentsin the Podlaskie Voivodeship (gross value – including fund administration and management costs) 13 TABLE 3  General level of the loan and guarantee activities of institutions serving as financial intermediaries under the PV ROP 2007–2013 13 TABLE 4  Loan products offered by financial intermediaries supported with funds from the PV ROP 2007–2013a 15 TABLE 5  Guarantee products offered by financial intermediaries supported with funds from the PV ROP 2007–2013a 16 TABLE 6  Historical utilization of the support funds—loans (as of June 30, 2018) 18 TABLE 7  Historical utilization of support funds – guarantees (as of June 30, 2018) 21 TABLE 8  Financial products in the PV ROP 2014–2020 23 TABLE 9  Financial instruments launched by the Pomorski Fundusz Rozwoju (PFR) 29 TABLE 10  Working capital loan 31 TABLE 11  Working capital loan for exporters 32 TABLE 12  Loan for the purchase of real estate 33 TABLE 13  End dates of the agreements with financial intermediaries under the PV ROP 2007–2013 34 TABLE 14  Regional development funds in Poland 40 TABLE 15  Summary of the advantages and disadvantages of each option 49 ACKNOWLEDGEMENTS This report was prepared by a core team comprised of Jan Szczucki and Maciej Gajewski, and co- ordinated by Paul Kriss, Marcel Ionescu-Heroiu, Grzegorz Wolszczak and Agnieszka Boratyńska. Peer review comments were received from Cevdet Unal. The team would like to thank Commissioner Corina Creț u for initiating the Initiative, Minister Jerzy Kwieciński from Poland’s Ministry of Investment and Economic Development for his invaluable support, and the European Commission’s team for their excelent engagement and support, especially Marc Lemaitre, Erich Unterwurzaher, Christopher Todd, Wolfgang Munch, Justyna Podralska and Andrzej Urbanik. The team would also like to thank Arup Banerji, David Sislen, Carlos Pinerua for the advice and guidance provided throughout the elaboration of this report. The team is also indebted to all counterparts for the support offered in the elaboration of this study, the timely feedback, the excellent collaboration throughout, and their passion for develop- ing their regions and institutions, especially: Piotr Zygadło, Anna Sulińska-Wójcik, Aleksandra Sztetyłło-Budzewska and Agnieszka Laskowska-Skup from the Ministry of Investment and Economic Development; Joanna Sarosiek, Wioletta Dąbrowska, Izabela Łokić oraz Aneta Kostro–Węglicka from Podlaskie Marshal Office.  5 ACRONYMS AND ABBREVIATIONS COSME Program for the Competitiveness of Enterprises and Small and Medium-sized Enterprises BGK State Development Bank of Poland BIZNEST Capital support instrument under Measure 3.1.2 of Smart Growth Operational Program 2014-2020 EaSI Employment and Social Innovation GUS Central Statistical Office of Poland JEREMIE Joint European Resources for Micro-to-Medium Enterprises EC European Commission KRS National Court Register of Poland KSFP National Association of Guarantee Funds KUKE Export Credit Insurance Corporation SMEs Small and medium-sized enterprises NFG National Guarantee Fund PZFP Polish Union of Loan Funds RFR Regional Development Fund, Podlaskie Regional Development Fund RIO Regional Chamber of Audit RPO Regional Operational Program(s) RPO WP 2007-2013 Podlaskie Regional Operational Program 2007-2013 RPO WP 2014-2020 Podlaskie Regional Operational Program 2014-2020 STARTER Capital support instrument under Measure 3.1.1 of Smart Growth Operational Program 2014-2020 PMO Podlaskie Marshal Office VC Venture capital 6 Financial instruments – performance evaluation and proposals for the utilization of funds INTRODUCTION This study was prepared within the framework of the European Commission (EC) Program “Catching-up regions initiative” (CuR), implemented since 2016 in selected regions of EU Mem- ber States1. The objective of the CuR Initiative is to identify factors that limit economic growth in develop- ing regions of Europe and, based on that, to provide them with advisory assistance in the form of customized activities. These region-specific activities correspond to each region’s selected developmental problems, and therefore contribute to the reduction of the identified limitations. The result is improved conditions for investment and economic growth. The scope of the formu- lated Action Plans is determined with the participation of the European Commission (EC), the regional authorities (in Poland, the Marshal Offices participating in the initiative), the national authorities (the Polish Ministry of Investment and Economic Development) and the World Bank that, at the same time, serves as the implementing agency for the Initiative. In the third round of the Initiative, implemented in 2018–2019, one of the areas of intervention indicated in the Action Plan for the Podlaskie Voivodeship were the issues related to establishing a regional mechanism to support micro, small and medium-sized enterprises in the scope of ac- cess to financing, as well as solutions, enabling implementation of the region’s developmental objectives using financial instruments (repayable). Detailed objective entrusted to the World Bank experts included indication of a method to utilize the funds from the Podlaskie Voivodeship Regional Operational Program 2007–2013 (PV ROP 2007–2013), which were allocated to the finan- cial instruments (then called financial engineering instruments), subject to repayment after the financial intermediaries implemented the projects. Therefore, the detailed scope of support in the voivodeship entailed development of guidelines for reuse of the financial resources, including indication of types of financial products to be offered in the region, identification of possible formal solutions in the area of the management of financial instruments financed by returned funds, as well as the selection of the optimum solution from among the adequate options. The basis for formulating the proposal included an analysis of the implementation of the financial engineering instruments used under the PV ROP 2007–2013. In formulating the proposed solu- tions, the experts took into account the context aspect, i.e. determinations in the scope of the financial instruments as included in the 2014-2020 perspective of programming support from the European Structural and Investment Funds. This study summarizes the work on financial instruments, included in the Action Plan for the Podlaskie Voivodeship, performed between July 2018 and January 2019. 7 EXECUTIVE SUMMARY This study was developed as a result of advisory services to the self-government authorities of the Podlaskie Voivodeship. The objective of the work performed was twofold: to evaluate the utiliza- tion (performance) of support funds allocated to the financial engineering instruments within the framework of the PV ROP 2007–2013, and; to develop guidance pertaining to an institutional model for managing the funds returned by the financial intermediaries, who previously implemented the financial engineering instruments based on the funds from the PV ROP 2007–2013. The conclu- sions presented below are based on the empirical research material which consists of the follow- ing: 17 individual in-depth interviews with entrepreneurs, people representing the environment of the regional small and medium-sized enterprises (SMEs), and representatives of the financial intermediaries; as well as two workshop meetings devoted to issues related to the establishment of new financial products and an institutional model for the management of the funds being re- turned from the financial engineering instruments of the previous financial perspective (PV ROP 2007–2013). Research also included literature about the topic, and information from reports on the implementation of the financial engineering instruments in the Podlaskie Voivodeship. As a result of the advisory work, guidelines (assumptions) were formulated with respect to both the exit strategy for the financial engineering instruments, as well as the proposals of new financial products that could be implemented based on the return of funds from the previous financial engineering instruments. The result of the performance evaluation of the implementation of these instruments (i.e. loans and guarantees)by the financial intermediaries in the Podlaskie Voivodeship is positive. Main indicators in the total/historic capital utilization and loss levels may be deemed satisfactory. The indicators are better in the case of all those financial intermediaries (loan funds) in the voivodeship who offered loans. The visibly poorer results of the guarantee funds stem from the somewhat unfavorable context for the guarantees made available in the regions, in parallel with the loans. This context, especially on the regional level, is shaped by the growing competition from the countrywide guarantee programs. This situation poses particular challenges for the community of Polish local and regional financial intermediaries that provide guarantees. This pertains to all of the local/regional guarantee funds currently operating in the country. This unfavorable context is the main reason for the poorer results achieved by the financial intermediaries offering guarantees. However, this does not disqualify the guarantee instruments as such, because the availability of guarantees is still important for some of the entrepreneurs, hence the offer of local and regional guarantee funds is needed.) Another result of the advisory services was the proposal of new financial products, which, as the survey results indicate, could enjoy an adequate level of interest from the regional SME sector. These proposals may be a good starting point for shaping a regional offering of financial products, which could then be implemented using the funds returned within the framework of the PV ROP 2007–2013 financial engineering instruments. Potentially, other funds available to the voivodeship could be allocated in order to facilitate access to financing on the regional level. The following products are proposed: • Working capital loans • Working capital loans for exporters • Real estate purchase loans 8 Financial instruments – performance evaluation and proposals for the utilization of funds It seems that the new types of loans, as proposed, are not competitive with respect to the PV ROP 2014–2020 financial instruments currently offered in the Podlaskie Voivodeship. The justifiability of introducing a new range of financial products is supported by the conducted survey, as well as by a broader context of SMEs, in terms of the availability of external financing for the sector. In essence, the proposed instruments are largely complementary to those available within the framework of the current PV ROP. Naturally, in a longer time perspective, including with regard to the potential utilization of funds from the PV ROP 2014–2020, additional financial products may be considered. Concerning the institutional model for the management of the returning funds from the finan- cial engineering instruments (implemented under the PV ROP 2007–2013), and, after an analysis of a number of possible solutions, the authors recommend adopting a model that involves es- tablishing a Podlaskie Development Fund (working name) in the region. This fund would focus on offering financial instruments through financial intermediaries, and also directly, in the case of selected product(s). In this report, this model is referred to as Sub-Option A3. According to that option, the Podlaskie Development Fund (PDF) would implement financial instruments by using the experience and capacity of the financial intermediaries (selected by way of public competitive bidding), while conducting a somewhat limited part of their activity in the area of financial instruments directly. (This direct approach would pertain only to specific financial products or to the testing of new products). The Fund would be organized in the form of a limited liability company owned by the Podlaskie Voivodeship. It would be an autonomous regional-level unit that specializes in the design and implementation of financial instruments targeted to the regional SMEs sector. In the future, it could collect and manage funds from the financial instruments implemented under the current PV ROP 2014–2020. If, for any reason, it were not possible to quickly implement the solution recommended above (e.g. within the next few months), the report suggests Sub-Option B2 as the alternative solution. This assumes that funds returned from the financial engineering instruments under the PV ROP 2007–2013, would be reused, as the Marshal Office selects financial intermediaries in an open public tender. This option would enable the utilization of returned funds, and, at the same time, it would for some time reinforce the capitalization (operating capacity) of the financial intermediaries active in the Podlaskie Voivodeship. This will ensure the relative availability of a broad range of financial products intended for the regional SME sector (taking into account both new products, as well as those offered under the PV ROP 2014–2020 financial instruments). This solution, however, would not lead to the establishment of a structure specializing in the management of financial instruments. The summary matrix (see Table 15) presents a list of analyzed models for the reuse of funds returned under the financial engineering instruments (PV ROP 2007–2013). Executive summary 9 PART I EXPERIENCES FROM THE IMPLEMENTATION OF FINANCIAL INSTRUMENTS UNDER THE PODLASKIE VOIVODESHIP ROP FOR 2007–2013 AND DIRECTIONS FOR THE UTILIZATION OF FUNDS RETURNED UNDER THOSE FINANCIAL INSTRUMENTS ANALYSIS OF THE UTILIZATION OF FUNDS FOR FINANCIAL ENGINEERING INSTRUMENTS UNDER THE PV ROP 2007–2013 Programmatic basis for the support of financial engineering instruments under the PV ROP 2007–2013 Support for financial engineering instruments in the Podlaskie Voivodeship Regional Operational Program 2007–20132 was envisaged within the framework of priority axis I Increase of innovation and support of entrepreneurship in the region, measure 1.3 Supporting Business Environment 3. The ob- jective of the intervention was to facilitate access to external sources of investment financing to micro, small, and medium-sized enterprises (MSMEs), as well as to create better conditions for the development of entrepreneurship in the region. The objective of measure 1.3, i.e. facilitating access to sources of financing, was implemented indirectly. It was done by providing capital to non-bank lending and guarantee institutions (loan and guarantee funds), which, acting as financial intermediaries, utilized the received capital, by offering loans and guarantees to the final recipients, i.e., (SMEs) operating in the Podlaskie Voivodeship. Capital injection agreements concluded for the purpose of supporting financial engineering instruments under the PV ROP 2007–2013 Capital contributions under the program were transferred based on the results of the relevant competitions. Throughout the implementation of measure 1.3 PV ROP, twelve capital support agreements were concluded with six financial intermediaries. Selected financial intermediaries operate the support funds even now, offering loans or guarantees. TABLE 1  Financial intermediaries operating financial engineering instruments in the Podlaskie Voivodeship, using funds from the PV ROP 2007–2013 Number Number of agreements of agreements No. Intermediary Instrument (loans) (guarantees) Agencja Rozwoju Regionalnego “ARES” S.A. Guarantees 1 3 1 (Regional Development Agency) and loans Fundacja na rzecz Rozwoju Polskiego 2 Rolnictwa (Foundation for Polish Loans 2 — Agriculture Development) Podlaska Fundacja Rozwoju Regionalnego 3 Loans 2 — (Regional Development Foundation) Fundacja Rozwoju Przedsiębiorczości 4 in Suwałki (Suwałki Foundation for Loans 2 — Entrepreneurship Development) Podlaski Fundusz Poręczeniowy Sp. z o.o. 5 Guarantees — 1 (Podlaski Guarantee Fund) Łomżyński Fundusz Poręczeń Kredytowych 6 Guarantees — 1 Sp. z o.o. (Łomżyński Guarantee Fund) TOTAL 9 3 Source: Own calculations, based on the data from the Podlaskie Marshal Office. 12 Financial instruments – performance evaluation and proposals for the utilization of funds TABLE 2  Intermediaries and value of support agreements in the area of financial engineering instruments in the Podlaskie Voivodeship (gross value – including fund administration and management costs) Agreement 1 Agreement 2 Agreement 3 Total value in value in value in value in No. Intermediary PLN million PLN million PLN million PLN million Loans 1 Agencja Rozwoju Regionalnego “ARES” S.A. 14.975 10.815 8.000 33.790 (Regional Development Agency) 2 Fundacja na rzecz Rozwoju Polskiego Rolnictwa 10.000 3.000 - 13.000 (Foundation for Polish Agriculture Development) (12.500*) (15.500*) 3 Podlaska Fundacja Rozwoju Regionalnego 10.000 15.000 - 25.000 (Regional Development Foundation) 4 Fundacja Rozwoju Przedsiębiorczości in Suwałki 15.000 5.150 - 20.150 (Suwałki Foundation for Entrepreneurship Development) 91.940 (94.440*) Guarantees 1 Agencja Rozwoju Regionalnego “ARES” S.A. 7.820 - - 7.820 (Regional Development Agency) 2 Podlaski Fundusz Poręczeniowy Sp. z o.o. 47.158 - - 47.158 (Podlaski Guarantee Fund) 3 Łomżyński Fundusz Poręczeń Kredytowych Sp. z o.o. 15.000 - - 15.000 (Łomżyński Guarantee Fund) TOTAL 69.978 161.918 Support for financial engineering instruments, total (164.418*) * Including own contribution (PLN 2.5 million). Source: Own calculations, based on data from the Podlaskie Marshal Office. The financial intermediaries that implemented projects under the PV ROP 2007–2013, were mostly experienced loan/guarantee funds with varying levels of activity, as shown in the table below. TABLE 3  General level of the loan and guarantee activities of institutions serving as financial intermediaries under the PV ROP 2007–2013 Loan/guarantee Number of loans/ Value of loans/guarantees Type of financing capital, in PLN guarantees provided in 2017 Institution offered thousands provided in 2017 in PLN thousands Agencja Rozwoju Regionalnego “ARES” S.A. Loans 40,319 41 9,071 (Regional Development Agency) Fundacja na rzecz Rozwoju Polskiego Rolnictwaa Loans 89,277 259 31,811 (Foundation for Polish Agriculture Development) Podlaska Fundacja Rozwoju Regionalnego (Regional Loans 34,930 71 9,822 Development Foundation) Fundacja Rozwoju Przedsiębiorczości in Suwałki (Suwałki Foundation Loans 26,400 26 5,500 for Entrepreneurship Development) Loans, total 397 56 204 Agencja Rozwoju Regionalnego “ARES” S.A. Guarantees N/Ab N/A N/A (Regional Development Agency) PART I  |  Experiences from the implementation of financial instruments 13 Podlaski Fundusz Poręczeniowy Sp. z o.o. Guarantees 63,296 162 15,436 (Podlaski Guarantee Fund) Łomżyński Fundusz Poręczeń Kredytowych Sp. z o.o. Guarantees 15,289 45 2,120 (Łomżyński Guarantee Fund) Guarantees, total 207 17,556 Note: Data for 2017 based on the reports of the Polish Union of Loan Funds and the National Association of Guarantee Funds a. The Foundation operates countrywide, separate data on its loan activity in the Podlaskie Voivodeship is not published. b. “ARES” probably did not provide any guarantees in 2017 and, therefore, was not included in the annual report of the National Association of Guarantee Funds (KSFP). The most recent data on the guarantee activity of “ARES” in KSFP reports pertains to 2015 (data as of 12/31/2015: guarantee capital = PLN 9,516,000, commitment = 9 active guarantees with total value of PLN 1,544,000, number of guarantees provided in 2015 = 6 guarantees with a total value of PLN 1,364,000; all guarantees were provided to secure loans). Source: M. Mika, P. Rogowiecki, K. Sabarańska, “Fundusze pożyczkowe w Polsce – Raport 2017” (plus attachments), PZFP, 2017. M. Gajewski, Kubajek, J. Szczucki, Rynek lokalnych i regionalnych funduszy poręczeniowych w Polsce w 2017 r, National Association of Guarantee Funds, Warsaw, September 2018 It is evident that the Podlaskie Voivodeship has strong and prosperous loan intermediaries, as well as somewhat weaker and less active intermediaries offering guarantees (mostly due to the difficult sit- uation in the guarantees market and competitive value proposals on the central level). Either way, the capacity of both types of financial intermediaries present in the region should be recognized as significant. Supported financial products – the existing offer of loans and guarantees Within the framework of capital injection agreements, financial intermediaries offered various financial products. The base parameters of those products (e.g. minimum/maximum loan amount, maximum guarantee amount, duration, and grace period) were specified in applications submit- ted by the financial intermediaries within the framework of competitions for the support funds4. The parameters were configured specifically for the needs of the (newly created) fund receiving a capital injection, or were based on the existing products (that had been distributed based on the funds already owned), with minor modifications. As far as the supported loan funds are concerned, the range of loan products offered based on capital injection under the PV ROP 2007–2013, are homogenous. Product characteristics5 (see Table 4  Loan products offered by financial intermediaries supported with funds from the PV ROP 2007–2013a) are described based on a number of parameters, such as: types of loan recipients (clients), purpose of the loan, duration, grace period and collateral. These parameters are identical (e.g. duration) or similar (e.g. purpose: investment purposes only or investment and working capital). However, they are with- out a sector focus or a specific type of recipient/client as their target. Only one product was focused on two selected categories of SME segment, i.e. micro and small-sized enterprises, leaving out the medium-sized companies. Conditions related to the grace period on principal repayment, and the requirements regarding the scope of the borrower’s own contribution to the financed project, were also similar. The situation was analogous with respect to the loan collateral requirements, which are much alike in all cases and include (allow for) various formally acceptable forms of collateral. The practical use of diverse forms of collateral (personal and property-based) is understandable. Such an approach stems from the rather restrictive loss limits imposed on the financial intermediaries in the capital injection agreements. This all leads to the conclusion that the range of supported debt instruments covers most universal type products, and is addressed to an average representative of the regional SME sector (including very young entities that are just starting their economic activity). Such a solution made it easier for the intermediaries to find clients (proposed loans could be offered to previously serviced client groups), which was justifiable given the binding limits on the costs of fund management and administration6 by the financial intermediary. The resulting limitations inevitably led to a search for solutions that would not be based on the assumption that clients would (entirely or mostly) have to be found in new (for the given intermediary) specific market niches, or be concentrated exclusively in a single market niche (even if already known to the intermediary). The greatest differences between the loan products are found with respect to the following parameters: • Minimum/maximum loan amount • Loan interest rate • Fees and commissions 14 Financial instruments – performance evaluation and proposals for the utilization of funds TABLE 4  Loan products offered by financial intermediaries supported with funds from the PV ROP 2007–2013a Fundacja na rzecz Fundacja Rozwoju Podlaska Fundacja Agencja Rozwoju Rozwoju Polskiego Financial Przedsiębiorczości in Suwałki Rozwoju Regionalnego regionalnego “ARES” Rolnictwa w Warszawie (Suwałki Foundation Sp. z o.o. in Białystok S.A. in Suwałki (Foundation intermediary → for Entrepreneurship (Regional Development (Regional Development for Polish Agriculture Development) Foundation) Agency) Development in Warsaw) (1) Podlaski Fundusz (1) Fundusz Przedsiębiorczości I Północny I (1) Support for SME sector (Regional Fund (Northern (3) Fundusz in Podlaskie Voivodeship Project of Entrepreneurship) Fund) Północny III (1) “Sami Swoi” I (2) “Start i rozwój” – (fund) → (2) Podlaski Fundusz (2) Fundusz (Northern (2) “Sami Swoi” II loans for SME sector in Przedsiębiorczości II Północny II Fund) Podlaskie Voivodeship (Regional Fund of (Northern Entrepreneurship) Fund) Parameters Product Loans ROP 0% MikroStart 1. — name for SMEs loan loan Micro, small, and medium- Micro, small, and Micro, small, Microand sized enterprises medium-sized enterprises Recipient and medium-sized small-sized enterprises 2. (with registered seats (with registered seat (client) enterprises (operating (operating in Podlaskie or investments in Podlaskie or investments in Podlaskie in Podlaskie Voivodeship) Voivodeship) Voivodeship) Voivodeship) PLN 50,000 – Loan amount PLN 120,000 – Up to PLN Up to PLN PLN 500,000 PLN 50,000 – PLN 240,000 3. (min – max) PLN 700,000 500,000 230,000 (FP II) / PLN PLN 390,000 (max) 700,000 (FP III) Loan period 4. (duration) 60 months (max) 3 months 6 months Grace period 6 months 5. (for principal None (for principal (max) (for principal repayment) repayment) repayment) From 2.87% p.a. From 2.43% p.a. 2.85% - 5.80% p.a. 5.87% p.a. (fixed, (fixed, determined 6. Interest rate (fixedb, based on EC 0% 0% (fixed) based on EC based on EC announcement) announcement) announcement) 1–5%, depending 3% + From 0.5% + 5% + Yes + on loan Yes + 7. Commission other other other other fees period, other fees fees fees fees min. PLN 500) + other fees Own No Up to 20% 8. contribution 10% 20% 20% requirement (min. 10%) (minimum, %) • Investment • Investment purposes • Investment • Investment purposes purposes • Working capital • Investment purposes • Investment • Working capital 9. Purpose • Working capital (production/services/ purposes • Working purposes (production/services/ (tangible commercial operations) capital commercial operations) working assets) • 100% - 200% of base amount • Min. 100% of base + interest amount + interest • Min. 100% of base amount + interest • Blank promissory note • Blank promissory note 10. Security • Blank promissory note (including declaration) + other (including declaration) + (including declaration) forms (broad catalog of collateral) other forms (broad catalog + other forms (personal of collateral) or property based) Notes Universal loan product, regional coverage (entire voivodeship) a Description of the products based on current information, sourced from the intermediaries’ websites and the formal documentation of the funds. b Interest rate fixed for the loan agreement period (as specified in the agreement, in accordance with interest rates applied, at the time, to loans financed from EU funds) – this comment pertains to all the presented products.. PART I  |  Experiences from the implementation of financial instruments 15 TABLE 5  Guarantee products offered by financial intermediaries supported with funds from the PV ROP 2007–2013a Financial Łomżyński Fundusz Poręczeń Agencja Rozwoju Regionalnego Podlaski Fundusz Poręczeń Kredytowych Sp. z o.o. “ARES” S.A. in Suwałki (Regional Kredytowych Sp. z o.o. intermediary → (Łomżyński Guarantee Fund) Development Agency) (Podlaski Guarantee Fund) Project Supporting entrepreneurship Supporting entrepreneurship Północny Fundusz Poręczeniowy in the region by increasing in Podlaskie Voivodeship (fund) → (North Guarantee Fund) guarantee capacity by providing guarantees Parameters 1. Product name — — — Micro, small, and medium- Micro, small, and medium- Micro, small, and medium- sized enterprises (with sized enterprises (with 2. Recipient (client) sized enterprises (operating registered seat and operations registered seat or investments in Podlaskie Voivodeship) in Podlaskie Voivodeship) in Podlaskie Voivodeship) PLN 750,000 PLN 390,000 PLN 2.5 million Guarantee amount 3. (no more than 5% of the fund’s (no more than 5% of the fund’s (no more than 5% of the fund’s (max) capitalization) capitalization) capitalization) Debt obligation 4. coverage ratio 70% (of the principal of the guaranteed transaction) (max) Guarantee duration 60 months (with possibility of extension 5. 61 months (max) for time required for debt collection activities) • From 0.45% to 2% of the guarantee amount, depending • Up to 4% of guarantee amount on the guarantee’s share (depending on guarantee • 0% to 3% of the guarantee in guaranteed debt obligation duration) (min. PLN 300 amount, depending on type and guarantee duration regardless of guarantee of guaranteed transaction Commission and (min. PLN 400 regardless of duration); in the case of 6. and guarantee duration (paid fees guarantee duration) enterprises qualified as start-up as lump sum upon granting • In cases of a particular 3.8% (per annum) the guarantee) guarantee risk, commission may • No commission in the case • No handling fees be increased of guarantees granted as de • Fee for guarantee promissory minimis assistance note – PLN 100 Mostly investment loans, All kinds of loans offered by additionally financing current Loans for financing business 7. Purpose cooperating entities (so-called operations in connection with activity of the entrepreneur cooperating lenders) investments, as support • Blank promissory note (including declaration) of the principal • Blank promissory note (including debtor 8. Security declaration) of the principal • Depending on circumstances – additional security (property based debtor or personal) Institutions Guarantees pertain to Guarantees pertain to 3 banks Guarantees pertain to loan cooperating with loans of 9 banks and 2 non- 9. and 2 non-bank lending offering of a single bank, the Fund in scope of bank lending institutions institutions cooperating with the Fund guarantees cooperating with the Fund • Universal guarantee product, regional coverage (entire voivodeship) Notes • Guarantee application submitted via banks/non-bank lending institutions cooperating with the Fund a Description of the products based on the current information, sourced from the intermediaries’ websites and the formal documentation of the funds. The differences in the scope of those parameters stem from adopting different strategies and the differing experiences of the intermediaries in their operation so far. The situation was similar in the case of guarantee type products (for product characteristics, see Table 5). The supported funds offered universal guarantee type products. This was most evident in the targeting of the offered guarantees to a broad range of investment and working capital loans, the similar guarantee duration periods, and the same maximum loan coverage ratio of the guarantees. Each of the financial intermediaries directed their guarantee offer to MSMEs, and adopted a procedural solution (common in the practice of the Polish guarantee funds on both the local and regional levels), under which the guarantee application is sent to the fund via the institution which provides the financing (e.g. a bank). Requirements with respect 16 Financial instruments – performance evaluation and proposals for the utilization of funds to security were also very similar in the case of guarantees. (One of the intermediaries adhered to a standard typical of many guarantee funds in Poland – a blank promissory note and a dec- laration of exchange; two others supplemented that solution with an option to demand further collateral, both personal and property-based, depending on the risk assessment of the project). The two main differing parameters in the guarantees value proposal were: • Maximum guarantee amount • Fees and commissions for providing the guarantee The first element resulted from the size of the fund, which in turn, was derived from the max- imum concentration standard applied by all the financial intermediaries. According to that standard, a guarantee cannot exceed 5% of the fund’s capitalization. The second element, fees and commissions, expressed the fund’s strategy and reflected the given intermediary’s internal cost calculation of the guarantees operation. Another element that differentiated the guarantees offer, was the coverage reach. Specifically, for all the intermediaries that offered guarantees, the guarantee proposal covered the loans granted by the institutions with which the given guarantee fund had a cooperation agreement. The guarantee operators supported in the Podlaskie Voivodeship differ in that respect. One of the most experienced intermediaries, the Podlaski Guarantee Fund, has been offering guarantees since 1995. It has a broad, well developed network of cooperating institutions, comprised of nine banks and two non-bank lending institutions. As for the two other intermediaries, their network of cooperating institutions is fairly limited. In one case, the network consists of one cooperative bank, indicating the local reach of that intermediary’s guarantees. Characteristics of the loan products7 As of June 30, 2018, the average loan amount for the entire loan portfolio of financial interme- diaries supported in the Podlaskie Voivodeship was on the level of PLN 189,700. This amount is above the average loan value in the countrywide loan portfolio of non-bank loan funds from 2012–2017, which amounted to approximately PLN 100,1008 (the average countrywide value of a loan granted in 2017 amounted to almost PLN 114,5009). Analysis of the loan portfolios of individual financial intermediaries in the Podlaskie Voivodeship shows significant differences between the average value of loans granted within the framework of individual capital injection agreements. These values ranged from approximately PLN 91,000 to approximately PLN 392,000. The different averages arose from the differing parameters of loans offered by various intermediaries. However, presented data gives credence to the statement that support in the form of financial engineering instruments under the PV ROP 2007–2013 has allowed financial intermediaries in the Podlaskie region to react effectively to the need for a wider scope of financing for economic activity, especially in the case of the MSMEs that dominate the loan portfolios. At the same time, the size of the loan was not a decisive factor, which is a positive phenomenon. The average amount of loan application (almost PLN 198,000) within the framework of supported loan funds was higher than the average amount of loan granted. Smaller enterprises play a central role in the loan portfolios of the financial intermediaries sup- ported in the voivodeship. Interviews with representatives of the financial intermediaries indicate that micro-sized enterprises clearly dominate in the loan portfolio’s structure. This structure is similar to that already observed for a long time at the national level (approximately 75% of loans are granted to micro-sized enterprises, and approximately 20% to small-sized enterprises10). Given the scale of committed capitalization (value), the results of the activity of financial inter- mediaries supported in the Podlaskie Voivodeship are in line with the average values of capital utilization recorded for the entire countrywide loan funds sector in Poland. In the case of inter- mediaries from the Podlaskie Voivodeship, this indicator is on the level of approximately 70% to 80%11, while the countrywide average is approximately 72%12. There is also no doubt as to the pace of revolving the capitalization funds by supported financial intermediaries. During the PART I  |  Experiences from the implementation of financial instruments 17 support agreements period (until June 30, 2018), the total value of granted loans reached almost double (1.97) the value of capitalization received by all of the funds (taking into account the own contribution in one of the projects in the amount of PLN 2.5 million). Therefore, it can be con- cluded that the pace of committing the funds received by the supported financial intermediaries was appropriate. The detailed data, of the support funds’ use is shown on a historical scale in the table below. TABLE 6  Historical utilization of the support funds—loans (as of June 30, 2018) Financing Value Historical (support) of loans utilization ratio No. Financial intermediary Agreement amount in PLN granted in PLN (turnover) Fundacja Rozwoju Przedsiębiorczości in Suwałki 1 RPPD-01.03.00-20-002/10-02 15,000,000 36,099,180 2,41 (Suwałki Foundation for Entrepreneurship Development) 2 as above RPPD.01.03.00-20-001/15-04 5,150,000 6,230,000 1,21 Podlaska Fundacja Rozwoju Regionalnego 3 RPPD.01.03.00-20-002/09-03 10,000,000 26,917,200 2,69 (Regional Development Foundation) 4 as above RPPD.01.02.00-20-004/15-01 15,000,000 20,292,100 1,35 Agencja Rozwoju Regionalnego “ARES” S.A. 5 RPPD.01.03.00-20-003/09-05 14,975,452 37,218,329 2,49 (Regional Development Agency) 6 as above RPPD.01.03.00-20-003/10-05 10,815,000 23,081,916 2,13 7 as above RPPD.01.03.00-20-003/15-01 8,000,000 9,576,199 1,20 Fundacja na rzecz Rozwoju Polskiego Rolnictwa 10,000,000 2,24 8 RPPD.01.03.00-20-004/09-03 22,356,600 (Foundation for Polish (12,500,000*) (1,79*) Agriculture Development) 9 as above RPPD.01.03.00-20-002/15-01 3,000,000 3,969,325 1,23 91,940,452 2,02 TOTAL 185,740,849 (94,440,452*) (1,97*) * Taking into consideration own contribution of PLN 2.5 million (project of the Fundacja na rzecz Rozwoju Rolnictwa Polskiego) Source: Own calculations, based on data from the Podlaskie Marshal Office. Two further indicators that enable the evaluation of the efficiency of the utilization of the support funds by intermediaries in the Podlaskie Voivodeship are: • Loss levels of loan activity • Cost intensity of the utilization of support capital (costs related to building loan portfoli- os within the framework of support agreements) The data reported as of June 30, 2018 indicates very low loss levels for the loan activity of interme- diaries in the Podlaskie Voivodeship that are implementing capital injection agreements based on funds from the PV ROP 2007–2013. During the implementation period of those agreements, the number of loans lost in the entire portfolio of the intermediaries was 15 (approximately 1.5% of the total number of loans granted), almost PLN 3.8 million in value (approximately 2% of the total value of loans granted). The value of loans lost, compared to the value of capital injection agreements (loan capital), was 4%. In accordance with procedures applied by the funds, these loans are subject to debt collection processes. This pertains to 14 loans, and the value of funds recovered so far (as of June 30, 2018) is approximately 12.4% of the total lost value, and it most 18 Financial instruments – performance evaluation and proposals for the utilization of funds likely will increase due to the continued debt collection procedures. Ultimately, the level of lost capital will be lower than the ratios calculated above. Due to methodological differences in the scope of the monitoring of the lost loans portfolio, data on the loss levels of loan activity of the Podlaskie Voivodeship’s intermediaries (who received support capital) are difficult to compare with countrywide data presented in the reports of the Polish Union of Loan Funds. Nonetheless, there is scope for more reliable conclusions based on the “collections and terminations” ratio available for countrywide data. As of the end of 2017, that ratio was 9.03%13. With certain simplifications14, the same ratio calculated for the portfolio of supported loan funds in the Podlaskie Voivodeship is almost 3.3%. The share of such loans in the Podlaskie Voivodeship intermediaries’ portfolios is, therefore, much lower (2.7 times) than the country average. In summary, this aspect of the activity of financial intermediaries supported in the Podlaskie Voivodeship could be evaluated as positive. As far as the cost intensity of building the loan portfolios of supported intermediaries in the Podlaskie Voivodeship, threshold values of “fund administration and management costs” were regulated in capital injection agreements (and annexes thereto) under the program. The costs were determined in line with the rates specified in relevant EU regulations15, which meant a max- imum average level per annum of 4% of provided capital for the funds granting loans exclusively to microentrepreneurs; or a maximum average level per annum of 3% for the funds granting loans to all SMEs. These principles were applied to the so-called first turnover (value of loans granted16), and again later, after exceeding 120% of the amount of support received, or capital turnover on a level exceeding the amount of support received by PLN 3 million17. However, for the second and subsequent turns, it was determined that the financing of the intermediary’s fee would be subtracted from the revenues from fees and commissions, as well as the interest on granted loans, plus the revenues from investing uncommitted funds. Thus, financing of overhead costs for subsequent turns did not encumber the initial capitalization amount. As a result of the above described principles, the cost of managing the capital injection from the PV ROP 2007–2013 funds are competitive in comparison with loan capital manage- ment offers submitted in tenders for loans under the cohesion policy funds in the 2014–2020 perspective. These funds are distributed in most voivodships by the Bank Gospodarstwa Krajowego (BGK), which plays the role of the Fund of Funds Manager responsible for the distribution of support for financial instruments in the regional operational programs for 2014-2020. As the Polish Union of Loan Funds reports, the average value of the fee offered in the winning bids for building a portfolio18 was on the level of 8.65%19of the value of loans granted (and disbursed), while the average value of offered fees in all of the considered bids was approximately 9.14%20. The estimates presented here are confirmed by other (regrettably few) research reports. The report dated February 2018 estimates that the average fee offered in selected tenders pertaining to financial instruments in the 2014–2020 perspective ranged from approximately 7% to somewhat over 11%21, which was in line with the estimates of the Polish Union of Loan Funds. Moreover, the report provides data from tenders conducted by the Kujawsko-Pomorski Fundusz Rozwoju Sp. z o.o. (Kujawsko-Pomorski Development Fund) at the end of 2017/beginning of 2018, with respect to the reuse of capital from financial engineering instruments under the Kujawsko-Pomorskie Voivodeship Regional Operational Program 2007–2013. Data shows that offered fees ranged from 4% to 10.2% of the loan portfolio value. Conclusions of the report state, that the “typical, usually proposed level of management fee falls in the range from 7.5% to 10.5%”22. It seems that the level of management and administration fees for support agreements in the Podlaskie Voivodeship was not excessive, thanks to linking the fees to a standard specified in relevant EU regulations (this standard was also applied to continued lending activity after the initial commitment of funds received). Current practice shows that financial intermediar- ies in the Podlaskie Voivodeship are able to conduct lending activity under these conditions. However, it should be expected that a new round of contracting those funds (in accordance with new rules, i.e. using the Public Procurement Law bidding procedures) will probably result in bids with higher fees, amounting to approximately 10% or more of the loan portfolio value. PART I  |  Experiences from the implementation of financial instruments 19 Conclusions – evaluation of the loan products The overall assessment of the use of the capitalization (support) by financial intermediaries in the Podlaskie Voivodeship is positive. The determining factors were: • Satisfactory speed in utilizing the received capital, resulting from well-designed loan products, responding to the needs of SMEs in the region. • Level of current utilization of capital (active loans value to capital value ratio) is high and comparable to countrywide indicators. • Loss level of lending activity is moderate. which suggests the high quality of loan portfoli- os. This means that beneficiaries of the capital injection have relevant selection mecha- nisms which operate correctly, as well as risk monitoring procedures. • Costs of lending activity are relatively low, in particular when compared to loan port- folio building fees proposed in bids within the framework of the financial instruments implemented under the regional operational programs in the current perspective of the cohesion policy in Poland (2014–2020). Characteristics of the guarantee products The support for the financial engineering instruments under the PV ROP 2007–2013 included guarantee products as well that were implemented by three financial intermediaries. When analyzing effects of supporting financial intermediaries offering guarantees in the Podlaskie Voivodeship, it should be kept in mind that the implementation of the guarantees was conducted in rather specific conditions, which had an impact on the guarantees market. First and foremost, since approximately 2013, there was an intensifying phenomenon of in- creasing competition between guarantee activity conducted on the local and regional levels (by the so-called local and regional loan guarantee funds), and guarantee activity conducted on a national level (within the framework of countrywide programs). At the same time, there was a lack of coordination of support between the regional and central levels (it is quite often stated that such a situation stems from the absence of a well-coordinated policy of support for guarantee activities in Poland23). As was emphasized in the most recent report of the Na- tional Association of Guarantee Funds24, there is a significant increase of competition in the Polish guarantees and sureties market. In the case of the value proposal of local and regional guarantee funds (the financial intermediaries supported within the framework of financial engineering instruments of the PV ROP 2007–2013, fall into that category), this involves country- wide guarantee programs implemented by the BGK25. In particular, it includes the government program of the De Minimis Portfolio Guarantee Line (de minimis guarantee) implemented since 2013; the BGK guarantee proposal, covered by the counter guarantees of the EU COSME program (COSME guarantee); and a new, very attractive guarantee product launched by the BGK in 2017, known under its trade name “Gwarancja Biznesmax” (the source of financing for this program is submeasure 3.2.3 of the Smart Growth Operational Program 2014–2020. This guarantee is a hybrid instrument, including also a subsidy that refunds part of the interest on the guaranteed loan26). All these programs are distributed by the BGK using a portfolio model through key commercial banks (in principle, the BGK guarantee products are available countrywide).These guarantees are instruments operating on a large scale. Moreover, some of the banks, as well as some of the guarantee funds, also use support available at the EU level. Notable examples are: the portfolio guarantees from the European Investment Fund within the framework of European Union programs (the COSME program mentioned above; and ad- ditionally: Horizon 2020, EaSI, or the currently launched loan repayment guarantee program, Creative Europe27). It is striking that there is little interest in supporting guarantee activity within the framework of the regional funds of the current EU financial perspective, through the mechanism of financial instruments (i.e. the support addressed to the financial interme- diaries on the local/regional level, in the area of capitalization of guarantee instruments28). 20 Financial instruments – performance evaluation and proposals for the utilization of funds Given the above context, it should be also noticed that the activity of guarantee intermediaries supported in the Podlaskie Voivodeship must have been affected by the negative influence of the general situation observed on the guarantee market. As for the future, such a situation creates new, specific challenges for the community of local and regional guarantee funds. During the agreements period (as of June 30, 2018)29, the financial intermediaries supported in the Podlaskie Voivodeship have issued 521 guarantees with a value of PLN 114.3 million, which enabled the launch of lending activity on the level of at least approximately PLN 163 million. The average historical value of a guarantee was on the level of approximately PLN 219,40030. Such a relatively high average value of guarantees provided by financial intermediaries in the Pod- laskie Voivodeship reflects a generally appropriate direction for adjusting the size of financial products to the needs of the regional SME sector, with due regard to the strategies of individ- ual intermediaries. The main recipients of guarantees provided by financial intermediaries supported in the Podlask- ie Voivodeship were micro, and small-sized enterprises. Interviews with representatives of the intermediaries show that such a distribution is generally in line with the structure of guarantee recipients typical for a countrywide guarantee portfolio of local and regional funds31. On the other hand, data on the current use of capital in the guarantees looks limited. The ratio of active guarantees to capital received has remained on a low level of approximately 30%32 (the value of active guarantees to the value of capital received , as of June 30, 2018). While the average “current” capital utilization in the entire portfolio of local and regional guarantee funds in Poland as of end 2017, was on the level of 158%. That was more than five times higher than numbers reported for the capital support agreements analyzed here33. As for the turnover of the capital (multiplicity of use of received resources), the guarantee intermediaries that were supported in Podlaskie score moderate, though their activity seems acceptable. The ratio of the value of all the guarantees granted to the value of capital injection agreements amounted to over 1.6 times the value of support received (this is after a reduction of the agreement value in the case of one of the intermediaries – nearly by half) – see Table 7. TABLE 7  Historical utilization of support funds – guarantees (as of June 30, 2018) Financing Value Historical (support) of guarantees utilization ratio No. Financial intermediary Agreement amount in PLN issued in PLN (turnover) Łomżyński Fundusz Poręczeń 1 Kredytowych Sp. z o.o. RPPD.01.03.00-20-001/10-07 15,000,000 32,909,859 2.19 (Łomżyński Guarantee Fund) Podlaski Fundusz 2 Poręczeniowy Sp. z o.o. RPPD.01.03.00-20-001/09-05 47,157,572 73,336,580 1.56 (Regional Guarantee Fund) Agencja Rozwoju Regionalnego “ARES” S.A. 3 RPPD.01.03.00-20-004/10-00 7,820,263 8,076,265* 1.03 (Regional Development Agency) TOTAL 69,997,835 114,322,704 1.63 *Based on the payment request of September 30, 2018 Source: own calculations, based on data from the Podlaskie Marshal Office. An important element of the guarantee activity support utilization efficiency characteristics (as in the case of the financial intermediaries conducting lending activity) is the loss level of guarantee activity, as well as the costs related to building and managing guarantee portfolios. PART I  |  Experiences from the implementation of financial instruments 21 As the reports of the financial intermediaries (and in the case of one of them – supplementary data) show, 15 guarantees issued under the support agreements were lost. In the case of two funds34, for which precise data is available, the value of (14) lost guarantees was approximately PLN 3.2 million, i.e. approximately 4.9% of the capital injection agreements value. Such loss levels may be recognized as insignificant (and thus acceptable). According to the data provided by the Polish Financial Su- pervision Authority on the quality of loans to enterprises35, the share of impaired loans in the SME loans segment, as of the end of 2017, amounted to 10% (in mid-2018, it increased to 11.6%). Although the two indicators are not easily comparable, nonetheless, loss levels in the banking sector may possibly be used as a benchmark for the financial intermediaries providing guarantees. If so, the recorded loss levels fall within the standard and are therefore acceptable. This means that the guarantee applications selection system, including guarantee risk assessment, operates properly. As far as costs of building guarantee portfolios are concerned, solutions equivalent to those described before (appropriate for the financial intermediaries who received support for guar- antee activity) apply also to agreements analyzed here. Recorded levels of fund management and administration costs, pertaining to the period from signing the agreements to mid-2018, are acceptable36 and probably lower than values that could be expected in the case of tenders related to the capital provision for the instruments under the regional operational programs for 2014–202037. Here, we can use the results of a consulting study that tried to estimate the benchmark value for guarantee portfolio creation and management fees38, based on the support funds from the current financial perspective. In conclusion, the authors of the study state that reasonable rates range from approximately 7% to 8% of the portfolio value (approximately PLN 30 million), and an additional 1% to 2% in the case of larger portfolios. Therefore, the final range is (approximately) 7% to 10% of the portfolio value39. Conclusions – evaluation of the guarantee products The overall assessment of support funds utilization, by financial intermediaries in the Pod- laskie Voivodeship offering guarantees (based on capital provided under the PV ROP 2007–2013 within the framework of support for financial engineering instruments), is not unequivocal. Specifically: • For a long time, guarantee activity conducted by local and regional guarantee funds has been conducted in a difficult (and deteriorating) environment due to the decisive role of increasing competition from countrywide guarantee programs based on the portfolio guarantee model that is attractive to the banking sector. The parameters of this type of guarantee is also sufficiently attractive to institutions offering debt instruments, which, therefore, forces local and regional guarantee funds to seek new sources for their guarantee value proposal. As a result, proposals securing non-financial instruments (mostly tender deposits) have become increasingly important in the local and regional guarantee funds sector. • The pace and scale of the allocation utilization (the average for all the supported inter- mediaries in the Podlaskie Voivodeship) may be recognized as satisfactory. However, it should be kept in mind, that in the case of one of the agreements, it was necessary to significantly reduce the initial support amount, probably due to anticipated difficulties with its effective utilization. As a side note, it is worthwhile to mention the differences in the types of the supported financial intermediaries: one of them is a typical regional intermediary; the other two are more local in nature. Each intermediary has a different number of cooperating institutions (banks and other providers of debt financing). This number is largest in the case of the regional intermediary (one of the intermediaries that established a guarantee fund as a new financial instrument, based on the capital received from the program). • The observed level of commitment of the support funds under the analyzed agreements is a problem. It is low and far removed from the countrywide standard (in the regional and local guarantee funds sector). 22 Financial instruments – performance evaluation and proposals for the utilization of funds • The loss level of the guarantee activity is moderate and acceptable in relation to the amount of guarantees paid at this time. At this point of this, this suggests the good quality of guarantee portfolio. Also both application and risk assessment procedures applied by the intermediaries that offer guarantees, seem suitable. • The cost of capital-supported guarantee activity are acceptable, and probably lower than levels which could be expected from value proposals of financial intermediaries. INDICATIONS WITH RESPECT TO THE STRATEGY OF INVESTING THE FUNDS RETURNED UNDER THE FINANCIAL ENGINEERING INSTRUMENTS OF THE PV ROP 2007–2013 Background – financial instruments in the PV ROP 2014–2020 The application of financial instruments as a format for transfer of support is envisaged in the currently implemented Podlaskie Voivodeship Regional Operational Program for 2014–2020. Allocation for the purposes of support in the form of financial instruments in the ROP amounts to approximately PLN 226.9 million. This is supplemented by a national contribution (including private contribution(s) provided by the financial intermediaries) in the amount of approximately PLN 40 million. In total, the allocation to financial instruments amounts to approximately PLN 267 million. In accordance with the methodology applicable to the current financing perspective of the co- hesion policy, the scope of application, as well as the types of financial instruments (including respective appropriate products), were defined in the Investment Strategy40 developed based on an ex-ante assessment of the financial instruments41. Given the results of the ex-ante analysis with respect to the organizational model for the implementation of financial instruments under the PV ROP 2014–2020, their implementation was entrusted to the Bank Gospodarstwa Krajowego. Pursuant to the agreement from November 201642, the BGK commenced its role in the Podlaskie Voivodeship as the Fund of Funds Manager responsible for the management of the funds made available for use as financial instruments as part of the Podlaskie Voivodeship ROP. In 2017, the Bank started public tenders leading to the selection of financial intermediaries. Financial instruments (respective financial products) are currently being implemented by a group of intermediaries selected by the Fund of Funds Manager. As a result, the range of currently offered financial products includes debt instruments (loans) and an equity instrument (being organized). The list of products is presented in Table 8. TABLE 8  Financial products in the PV ROP 2014–2020 No. Financial product Base parameters Financial intermediarya Debt instruments – loans 1. Loan for • Final recipient: micro, small, and medium-sized enterprises • Towarzystwo Inwestycji development in the services sector Społeczno-Ekonomicznych investments • Purpose: development projects in the services sector S.A. (Association for Social and and investments pertaining to application of ICT Economic Investments) in Warsaw technologies, with no industry limitation, implemented (operating via office in Białystok) in Podlaskie Voivodeship • Fundusz Wschodni Sp. z o.o. • Maximum loan value = PLN 1 million in Białystok (Eastern Fund) • Repayment period: up to 84 months • Fundacja Rozwoju • Grace period: up to 6 months Przedsiębiorczości in Suwałki • Loan granted at market conditions or better (Suwałki Foundation for Entrepreneurship Development) PART I  |  Experiences from the implementation of financial instruments 23 No. Financial product Base parameters Financial intermediarya 2. Micro-loan • Final beneficiary: loan for persons 30+ years of age, • Fundacja Agencja Rozwoju for starting unemployed or inactive on the labor market, including those Regionalnego w Starachowicach a business in a particularly disadvantaged position on the labor market, (Foundation Agency for Regional as well as persons leaving agriculture and their families, Development) (operating via so-called working poor, persons employed on short-term offices in Białystok and Łomża) contracts, civil law contracts, immigrants (including persons of Polish origins), and re-emigrants • Purpose: financing expenditures related to starting a business (investment purposes, working capital or both) • Maximum loan value: 20 times average pay as of the day of entering into the agreement with the Borrower • Repayment period: up to 84 months • Grace period: up to 12 months • Loan granted at conditions better than market, in accordance with de minimis assistance principles (value proposal of the intermediary: 0.2% p.a., no fees or commissions) 3. Thermal retrofit • Final beneficiary: micro,, small, and medium-sized • Podlaska Fundacja Rozwoju loan (1) enterprises Regionalnego in Białystok • Purpose: financing of projects in the field of energy (Regional Development Foundation) efficiency improvement and renewable energy sources • Fundacja Rozwoju Przedsiębiorczości (including in-depth retrofits of buildings) in Suwałki (Suwałki Foundation • Maximum loan value = PLN 1 million for Entrepreneurship Development) • Repayment period: up to 120 months • Grace period: up to 12 months • Loan granted at market conditions or better 4. Thermal retrofit • Final beneficiary: loan for housing cooperatives, • Voivodeship Fund for Environmental loan (2) homeowners associations, and social housing associations Protection and Water Management • Purpose: in-depth retrofitting of multi-family residential in Białystok buildings in Podlaskie Voivodeship) • Alior Bank (Branches: Białystok, • Maximum loan value = PLN 2.5 million Suwałki, Łomża) • Repayment period: up to 120 months • Grace period: up to 12 months • Loan granted at conditions better than market (e.g. Alior Bank: 0.1% to 0.3% per annum, depending on possible savings in terms of final energy use, as specified in an energy audit verified and approved by Alior Bank) Equity instruments – equity stake 5. Equity stake • Final beneficiary: companies (SMEs) at an early stage • None – despite selection (product under of development (up to five years from first commercial of the intermediary, agreement was organization) sale, or newly established entities – companies before first not signed commercial sale) • Purpose: innovation related projects (product, service, process, organization or marketing innovations) • Maximum value of investment in a company (including continuation investments) = PLN 1 million • Scope of equity investment: taking on a maximum of 60% of equity stake in the investment target company (shares or interests) • Equity investment period: up to 120 months (as a principle) • Other: FIZAN or ASI formula a. https://rpo.bgk.pl/instytucje-finansujace/wojewodztwo-podlaskie/ [dostęp: 10.01.2019]. Source: Own compilation based on the financial products’ descriptions presented in the tender documentation, as well as information on financial intermediaries websites. The above range of financial products provides a background for planning measures and the structuring of specific financial products to be implemented in order to utilize the funds re- paid under financial engineering instruments from the PV ROP 2007–2013. The key conclusions, important for the design parameters of the new financial products (developed based on funds from the PV ROP 2007–2013), are as follows: • Financial products focus on financing investment projects (only “Micro-loan for starting a business” includes finance for working capital needs, but the scale of this instrument is small: the value of the project, currently implemented by the financial intermediary, is PLN 9.9 million, of which contribution from the program is approximately PLN 8.4 million43). Moreover, this is an instrument exclusively serving processes related to starting a business, with a relatively narrow target group (persons unemployed or not active in the labor market, as well as persons from other specific groups listed above, 30+ years old). 24 Financial instruments – performance evaluation and proposals for the utilization of funds • The financial product, “Loan for development purposes”, which is focused on the devel- opment related investments, has one important limitation regarding the purpose of its financing. That is, the product is only available to entrepreneurs operating in the services sector, or – more broadly – investing in ICT technologies44. • Two financial products are focused on thermal retrofits as the purpose of financing. One is tar- geted at the SME sector; and the other, at the residential sector. • The presented array of financial instruments includes an equity instrument. However, the following aspects should be noted with respect to that instrument: –– First, the financial scope of the equity interventions is fairly small (expected contribution from the program is PLN 18.4 million: PLN 9.2 million of initial support + 100% option rights). –– The maximum level of equity stake is also not very significant, at PLN 1 million (including any potential continuation investments). Therefore, it can be expected that the investment objectives of this instrument, would be looking for further financing soon after the first capital investment is made. –– The instrument will operate in the background of a broad program of capital investment support, based on the funds from the national Smart Growth Operational Program 2014–202045. It represents, at the same time, a possible threat, due to the probable com- petition for investment projects as a factor that makes it easier for the investment projects to obtain support in the further stages of raising equity (this is especially relevant in the case of supported venture capital (VC) funds investing in the early phases of a business STARTER46 and BIZNEST47 programs). Findings and conclusions based on qualitative research with stakeholders of the financial instruments in the Podlaskie Voivodeship Certain conclusions can be drawn from interviews with stakeholders of financial instruments in the Podlaskie Voivodeship, with respect to the perception of currently offered instruments (both those implemented based on funds from the PV ROP 2007–2013 and the current PV ROP 2014–2020). According to some of the respondents, entrepreneurs in the region were reluctant to use re- payable financing, due to the risk involved – the obligation to repay the debt, regardless of the company’s circumstances. On the other hand, many other entrepreneurs indicated that they are happy to use loans, as they are necessary for the company’s development. The loans are particu- larly useful to entrepreneurs aiming to scale up their activity. All the more so, since, according to some of the respondents, loans for economic purposes have recently become more available. Although, of course, a lot depends on the applicant’s situation and the particulars of the project for which financing is sought. Another argument raised in the interviews, was that projects for which repayable financing was used are more durable and also better conceived, as the entrepreneurs are fully risking their own funds. That is why the offering of repayable instruments based on public funds should be maintained, and maybe even expanded. On the other hand, it would seem that the banking sector’s value proposal is well developed, diverse, and fairly attractive financially. In general, companies larger in size and with a longer history of activity don’t have any major problems with obtaining bank loans. Obtaining financing is considerably more difficult for smaller and younger companies. Banks, for obvious reasons, are rather reluctant with respect to companies that in recent years have suffered losses due to implemented investments or market difficulties. Such an approach PART I  |  Experiences from the implementation of financial instruments 25 is understandable, as the most important factor from the bank’s perspective is the given company’s ability to repay the loan. On the other hand, companies which are only temporarily unprofitable, encounter very serious problems when trying to obtain repayable financing. In this context, the time-consuming procedures related to loan decisions, were pointed out as one very significant limitation to the obtainment of debt financing, particularly in the case of network banks. In some loan funds, however, decisions are made relatively quickly, which gives them a great advantage. The respondents have also raised the topic of financing trucks with trailers (there are many transport companies operating in Podlaskie). This type of financing is not available if loans are granted within the framework of de minimis aid. Conversely, where a loan fund offers loans bearing interest above a relevant reference rate (thus constituting neither public aid nor de minimis assistance), such financing is possible. Infrequently, the respondents have pointed out that the loan funds offering loans financed from public funds apply fairly rigid rules for granting loans, as described in their by-laws. These entrepreneurs expressed interest in products tailored to their individual needs, especially given that loan funds are usually small entities, with significant decision making powers. Wait time for a decision is not long, and a decision is usually made on site. On the other hand, it is worth remembering that when loans are backed by public funds, their basic parameters must be described, and the principles for granting loans must be formalized in the loans’ terms and conditions. It is also worth mentioning that parts of the decision are made based on the evaluation of the specific borrower and the financed project (such as: potential application of grace period and its duration, where applicable; type and value of security accepted; and possibly also approval for the disbursement of the loan in tranches). Support provided by startup platforms under Measure 1.1 of the Eastern Poland Operational Program was assessed very positively. Of course, one still has to wait for an in-depth evaluation of that support program48. Both the advisory support provided at the stage of preparing the business idea, and the grant financing (up to PLN 800,000), were well received. On the one hand, thanks to this initiative, people considering starting innovative businesses were able to seek financial assistance on a very large scale, aided by soft support (advisory, training, and information support). On the other hand, in an entirely natural way, such an attractive offer of grant financing led to significantly reduced interest in financial instruments. The matter of loan collateral is still a significant problem, especially in the case of smaller and/or younger companies. While in the case of the banks, either guarantees offered by the BKG or guarantees provided by the guarantee funds could be used; in the case of loans from loan funds, the offering is very modest. Only the Podlaski Fundusz Poręczeniowy (Podlaski Guarantee Fund) cooperates with both loan funds from Suwałki (“ARES” and the Foundation for Entrepreneurship Development, FRP). Additionally, entrepreneurs to whom we have spoken, have pointed out that where commercial law companies are concerned, many of the banks as well as some of the loan funds, require not only the signing of a promissory note on behalf of the company’s board, but also a guarantee from the board members as natural persons. Such an approach is deemed very controversial, as for example, it contradicts the very concept of a limited liability company. Unfortunately, both in the Podlaskie Voivodeship and other regions, such a practice is widespread. This practice comes from a natural (though onerous for entrepreneurs) tendency to minimize the risk of loan default and the loss of a significant part of the capital. A relatively large group of respondents have indicated the need to offer debt instruments backed by public funds, to support export activity. Although the export potential of the region is relatively limited, in the case of selected industries (e.g. metalworks or wood processing), there are many firms in the region for whom a significant share of their revenues come from export sales (including to the European Single Market). There is also data available that shows that the development of exports is a very important factor fueling the growth of the voivode- ship’s economy49. Companies of this type usually seek working capital financing, as the time 26 Financial instruments – performance evaluation and proposals for the utilization of funds between shipment of a given batch of goods from the country and the reception of payment is frequently relatively long. Sometimes an additional problem is the fact that government institutions which secure export transactions (BGK and Export Credit Insurance Corporation, KUKE) are not willing to provide such financing if the transaction is made between affiliated entities, for fear of non-compliance.50 However, many of the larger companies in the region effect export transactions by selling the goods to a subsidiary, created specifically for that purpose in the target country. In general, it was also pointed out that working capital financing is often used to finance invest- ment objectives. This is also the direction taken by banking products modeling (investment/ working loans for any economic purpose). Since working capital products are not, in principle, admissible for financing under either the PV ROP 2007–2013 or 2014–2020, the respondents have pointed out the justifiability of the launch of this type of product, especially for the micro, and small-sized companies that usually have the most difficulty accessing bank financing. Additionally, the launch of such products is worth considering in the context of the oncoming economic slowdown, as under such conditions payment delays become much longer. As a result, many of the smallest companies develop significant problems in terms of cash liquidity, which ultimately may even put their very existence at risk51. Financial intermediaries that have been surveyed, in turn, have pointed out the issues de- scribed below. First and foremost, the majority of the intermediaries have indicated that allowing the loan funds to provide working capital loans should lead to a significant increase in the number of clients, as many of them have been asking about the availability of this type of financing. On the other hand, it’s worth remembering that the loan funds are not able to provide the most attractive product – overdraft facility - where the client can flexibly regulate the level of the utilization of the loan. Thus, it may be very difficult for loan funds to compete against banks with respect to this kind of loan. However, banks prefer to grant loans of higher value, especially to smaller companies, as a credit account. Therefore, perhaps this limitation is not quite so significant. Many of the respondents have also raised the issue of the lack of appropriate security, resulting in a certain group of entrepreneurs being unable to obtain financing. Additionally, in connection with the tightening of regulations regarding the sale of agricultural land, the possibility of using such land as collateral, has decreased significantly. On the other hand, it was also indicated that problems of this type can be solved, although obviously not in every case. Some of the respondents have also pointed out that in the future, when funds from the 2007– 2013 perspective definitely lose the status of European funds, a possibility should be created to account for a small portion of the loan (e.g. 10% or 20%) to be based on a statement, instead of accounting evidence. Such a solution would facilitate the process of the accounting for a loan, both from the perspective of the borrower, and of the loan fund itself. The respondents have indicated that in the future, loans with longer maximum maturity should be offered. It would be particularly important for microenterprises, including startups, for whom – if loans of relatively high value are drawn – repayment installments are sometimes too much of a burden. On the other hand, it’s worth remembering that extending loan maturity results in increased risk for the loan fund. Some of the respondents have mentioned that innovative companies periodically approach them seeking a loan to finance development of an innovative product. However, clients of this type, as well as the projects they develop, bear too high a risk for most intermediaries, and therefore, in such a situation the clients’ applications are usually rejected. Selected representatives of financial intermediaries have also signaled that it doesn’t make sense to offer loans targeted at smaller groups of enterprises, that are more niche in character. They believe that the best working solution is loans with a very broad scope and without detailed PART I  |  Experiences from the implementation of financial instruments 27 parametrization. It was also indicated that one clear limitation of the so-called development loans under the PV ROP 2014–2020 is that they exclusively target developing companies in the service sector, while no similar offer exists for manufacturing companies. The topic of loans for the purpose of buying real estate has also been raised in interviews with intermediaries (in the 2014–2020 programing period, expenditures of this type cannot exceed 10% of eligible costs). In other regions, a significant number of this type of product has been launched, based on funds from the 2007–2013 perspective. Both the majority of the intermediaries’ representatives as well as the entrepreneurs, have emphasized the justifiability of introducing this type of product. At the same time, they indicated that perhaps it would be sufficient to offer investment loans that do not exclude this option. This is, in fact, the case with funds from the 2007-2013 perspective. Surveyed representatives of the financial intermediaries have also emphasized the problem of the poor recognizability of loan funds that offer public funds backed loans; as well as the difficulty of mistaking them for purely commercial loan funds, some of which use very aggres- sive marketing strategies and do not always provide accurate information about the real cost of the loan. In order to minimize this problem, it would be reasonable to conduct appropriate information and education activities, preferably on the national level. Benchmarks – new financial products – experiences of selected voivodships (Pomorskie and Dolnośląskie) In a number of voivodships where regional development funds were created, new financial products are launched based on funds from the relevant operational program from the 2007–2013 perspective. Products are usually developed by the personnel of the given development fund, often in consultation with representatives of the entrepreneurs’ associations and the financial intermediaries. Sometimes, research is commissioned to identify such products and discuss their parameters with key stakeholders. In general, the main reason for the launch of such products is to minimize their competition with the financial instruments offered within the framework of regional operational programs in the 2014–2020 perspective. Such an approach is implemented in two ways: • By launching products that finance those types of eligible expenditures that cannot be fi- nanced under the current round of ROPs, or can be financed, but only to a very limited extent. Such products include, for example, working capital loans or loans that finance the purchase of real estate. • By launching niche type products that target a limited group of beneficiaries. Examples of this solution include: the employment loan (a loan used for financing the search for employees, all costs of preparing them for work, for employees not coming from the given city/from Poland, the cost of accommodation, and other necessary relocation costs, etc.); and the tourism loan (targeted at businesses in the tourist industry that are struggling with the problem of seasonality). Among all the so-called regional development funds operating in Poland, the Pomorski Fundusz Rozwoju (Pomorski Development Fund) and the Dolnośląski Fundusz Rozwoju (Dolnośląski Development Fund), are universally recognized as institutions which develop the most inter- esting product solutions and cooperate closely with financial intermediaries. These two funds were also created the earliest. Regardless of structural solutions (which we discuss in the chapter devoted to the management model for funds from the financial engineering instru- ments 2007–2013), both funds have launched a significant number of financial products that are currently implemented by a large number of financial intermediaries selected in tenders. 28 Financial instruments – performance evaluation and proposals for the utilization of funds The financial instruments, which were implemented on the market as a result of tenders con- ducted by the two aforementioned institutions, are described below. TABLE 9  Financial instruments launched by the Pomorski Fundusz Rozwoju (PFR) Allocation Number to the of intermediaries Instrument instrument offering No. name General description in PLN million the product Pomorskie Voivodeship 1 Small loan Loan up to PLN 250,000, available to micro and small-sized enterprises 30 5 located in Pomorskie Voivodeship, excluding part of Gdańsk-Gdynia- Sopot Metropolitan Area. Investment and working capital purposes (up to 20% for working capital). Market interest rates, for start-ups preferential. Lending period up to 60 months 2 Tourism loan Loan up to PLN 750,000, for a period up to 72 months, for micro 55 3 and small-sized companies conducting activity related to leisure services, including tourism, catering, culture, rehabilitation and therapeutic services; market interest rates, possible seasonal repayment structure (grace period during repayment) 3 Employment Loan for SMEs, up to PLN 300,000, no more than 100 thousand 10 2 loan per employee, lending period up to 60 months, possible grace period during repayment, preferential interest rates (50% of base rate). Loan for all types of expenditures related to seeking and attracting employees, their hiring, training, relocation (if needed) etc. 4 Export loan Loan up to PLN 750,000, for a period up to 84 months with possible 15 1 one year grace period on principal repayment for SMEs, for investment purposes or both for investment and working capital contributing to starting or expanding export activity, loan granted on market terms 5 Loan to Loan up to PLN 1.5 million for SMEs, for a period up to 120 months 25 1 purchase real with possible one year grace period on principal repayment, estate for investment purposes related to purchase of real estate located in Pomorskie Voivodeship or adapting a building for development of own business activity, loan granted on market terms 6 Guarantee Counter guarantee covers guarantees on revolving or non-revolving 30 1 with PFR working capital loans, contributing to development of a Micro, counter small, or medium-sized enterprises in the Pomorskie Voivodeship. guarantee Guarantees may be issued on market or preferential terms, as de minimis assistance. Counter guarantee covers up to 80% of the amount of issued guarantees. Maximum value of a single guarantee covered by a counter guarantee is PLN 1 million Dolnośląskie Voivodeship 1 Regional Loan for SMEs, for current expenditures excluding tangible fixed assets 80 4 working and intangible assets, granted on market terms, for a period up to second capital loan 3 years round 40 2 Large regional Loan for SMEs, for investment expenditures on tangible fixed 40 5 investment assets, intangible assets, excluding real estate, market interest rates, loan value up to PLN 1.5 million, period up to 5 years 3 Regional Loan up to PLN 1.5 million, for a period up to 15 years, for purchase 80 5 mortgage of real estate and land in Lower Silesia, for business purposes. loan Loan for SMEs, market interest rates 4 Equity stakes Value proposal of “Dolnośląski Development Fund – investments N/A 1 (DFR inwestycyjny)” company is offered on market terms and involves equity investments in various SME projects. The company offers both equity financing and debt financing; also mezzanine finance 5 Counter Counter guarantee covers: 20 1 guarantee a) guarantees for a working capital loan; b) tender deposit guarantees; c) operational leasing guarantees; d) factoring transactions’ guarantees, covering (i) domestic receivables not yet due; (ii) disclosed receivables; (iii) with maximum due date up to 120 days. Maximum value of guarantees secured by the counter guarantee is PLN 1.5 million per SME, and maximum share of counter guarantee, in the guarantee, is 80%. Maximum counter guarantee validity period is 60 months Source: Own compilation, based on information on the websites of the Pomorski Fundusz Rozwoju and the Dolnośląski Fundusz Rozwoju. PART I  |  Experiences from the implementation of financial instruments 29 As can be seen, the two voivodships have taken a slightly different approach. The Pomorskie Voivodeship focuses on niche instruments targeted at specific types of companies; the only instruments available to a broad range of enterprises are the small loan and counter guarantee for working capital loans. The Dolnośląskie Voivodeship, on the other hand, prefers universal products available to a broad group of enterprises. The following aspects are worth emphasizing: • In both regions we are dealing with the introduction of products supporting the purchase of real estate, related to the significant limitations imposed on financing this type of ex- penditures in the ROP 2014–2020 (up to 10% of total eligible expenditures). At the same time, due to economic upturn, many companies plan or implement real estate investments. • In both regions, working capital products have been introduced, that, similarly, may be backed by European funds only to a very limited extent. In the case of the Dolnośląskie Voivodeship, there is both a loan product and a guarantee; in the case of Pomorskie – at the present time – there is only the guarantee product. • In both regions, instruments were designed to support the guarantee offer, through coun- ter guarantees. It is an interesting choice, as guarantee activity on the regional and local levels seems to be “in retreat”, mostly due to a very attractive guarantee offer provided on a central level (by the Bank Gospodarstwa Krajowego, BGK). Nonetheless, counter guar- antee instruments (impossible to offer based on funds from the 2014–2020 perspective due to the flow of funds requirement) are quite universally recognized as a very well designed mechanism that significantly reduces the risk of guarantee funds. One serious limitation is the fact that this type of instrument tends to work best when the capitalization of the guarantee funds sector is high. Proposals of new financial products to be implemented based on funds repaid from the financial engineering instruments under the PV ROP 2007–2013 Below, the proposed financial instruments are presented that can be implemented based on funds from financial engineering instruments introduced under the PV ROP 2007–2013. When designing the instruments, the following assumptions were applied: • Proposed instruments should compete with products implemented under the PV ROP 2014–2020 to the least possible extent. • The instruments should respond to the financial needs identified by SMEs in the Podlaskie Voivodeship. • It would be worthwhile to extensively research, the experiences of other voivodships which launched debt financing facilities based on the Regional Operational Programs 2007–2013, while, of course, taking into account the specificity of the Podlaskie Voivodeship and the companies operating therein. Additionally, it should be kept in mind that the development loan currently offered under the PV ROP 2014–2020 does not cover any and all investment expenditures, but only the financing of development projects in the services sector and the application of ICT technologies (however, the possibility of expanding its scope cannot be excluded, especially since such actions were suggested within the framework of updating the ex-ante assessment of financial instruments under the PV ROP 2014–2020). Thus, after the allocation to the development loan is committed, it would be worthwhile to consider the launch of an investment loan based on funds from the 2007–2013 perspective, targeted to a broad range of entities. 30 Financial instruments – performance evaluation and proposals for the utilization of funds Additionally, what remains to be considered is the introduction of a loan instrument for local governments, in accordance with comments presented during the workshop with representatives of the Podlaskie Voivodeship Marshal Office (within the framework of this study, interviews with representatives of local government units were not conducted, hence it’s difficult to make any pronouncements in this respect). It’s also worthwhile to verify whether using these funds for any purposes aligned with the objectives of the PV ROP 2007–2013 is formally admissible, or whether the loans, or other financial instruments, should exclusively serve the purpose of developing companies from the SME sector. Within the framework of the financial instruments described below, we do not propose any guarantee products because of the generally unfavorable situation of local and regional loan guarantee funds (in the entire country, not just the Podlaskie Voivodeship). This situation is the result of, first and foremost, the very attractive value proposal of the Bank Gospodarstwa Kra- jowego, available countrywide in the form of numerous guarantee instruments implemented by the BGK, as well as the (somewhat understandable) unwillingness of commercial banks to cooperate with institutions that offer guarantees and sureties only in a single region. Hence, guarantee funds increasingly target their value proposal to the cooperative banks sector; they also offer quasi-insurance instruments not related to debt financing (e.g. tender deposits). Such a solution might create problems for the activity of the Łomżyński Fundusz Poręczeń Kredytowych (Łomżynski Guarantee Fund), the relatively active but weakest (capital-wise) guarantee intermediary. This problem is somewhat unique, as the Podlaskie Voivodeship holds a 75% share in the company. Therefore, it is generally worthwhile to consider the prospects of this fund’s operation, as well as its capitalization level. This is because, as project funds will be gradually phased out, this entity may almost completely lose its capacity to provide guaran- tees (its own equity is slightly above PLN 1 million). Nonetheless, it is possible that in the future, instruments may be introduced to support guarantee activity, including the financing of cer- tain non-financial instruments (this can be done by providing, on a temporary basis, capital enabling the fund to conduct guarantee activity, or, in the form of counter guarantees. In the latter case, however, it should be noted that this instrument is not well suited for funds with low capitalization – such as the Łomżyński Guarantee Fund. Other than that, counter guarantees remain a very effective instrument). In the following tables, abbreviated descriptions for three financial products are presented, specifically: • Table 10. Working capital loan; • Table 11. Working capital loan for exporters ; and • Table 12. Loan for the purchase of real estate. TABLE 10  Working capital loan No. Instrument 1 – working capital loan A. General parameters A1. Final beneficiary Option 1: Micro, small, and medium-sized enterprises (MSMEs) with registered seat or operations in Podlaskie Voivodeship Option 2: Micro and small-sized enterprises with registered seat or operations in Podlaskie Voivodeship A2. Loan amount Up to PLN 200,000 A3. Purpose (of financing) Capital to finance general needs of the enterprise, related to its current operation (financing current expenditures) A4. Repayment period Up to 12 months A5. Required own contribution of None the Borrower A6. Other — PART I  |  Experiences from the implementation of financial instruments 31 No. Instrument 1 – working capital loan B. Cost parameters and repayment terms B1. Interest rate On market terms – on the level of appropriate reference rate determined by the financial intermediary in accordance with risk assessment methodology and taking into account the recommendations from Communication from the Commission on the revision of the method for setting the reference and discount ratesa – increased by 1 percentage point (100 basis points). Thus, currently, the interest rate would be at least 3.87% per annum B2. Commissions charged by the No commission, the remuneration of the financial financial intermediary intermediary would be entirely covered by the management fee, determined by way of a competitive tender B3. Repayment terms At the discretion of the financial intermediary B4. Other — C. Security C1. Basic Blank promissory note C2. Additional At the discretion of the financial intermediary – in accordance with applied methodology for loan collateralization D. Other – organizational D1. Commitment Option 1 – maximum of one loan per borrower (second loan cannot be granted during repayment period) Option 2 – no more than 2 loans active at any given time, loan exposure should not exceed PLN 300,000 D2. Deadline for building the No deadline (loans should be met with a lot of interest) portfolio by the financial intermediary D3. Loss limits 15% of the disbursed loan amounts D4. Collections Cost of collections is covered by the financial intermediary, or partly reimbursed by the Regional Development Fund or the Marshal Officeb in a specified proportion (e.g. 50%) D5. Other — a. Communication from the Commission on the revision of the method for setting the reference and discount rates, Official Journal of the European Union C 14 of 1.119.2008. p. 6. b. The latter solution, fairly rare but justifiable, should increase the intermediaries’ willingness both to undertake a certain risk when granting loans, and to make sure that they invest significant efforts towards ensuring the effectiveness of the collections activity. TABLE 11  Working capital loan for exporters No. Instrument 2 – working capital loan for exporters A. General parameters A1. Final beneficiary Micro, small, and medium-sized enterprises with registered seat or operations in the Podlaskie Voivodeship, conducting export activity (exporting to countries outside the European Single Market or sale in the European Single Market) A2. Loan amount Up to PLN 500,000 A3. Purpose (of financing) Working capital to finance export sales A4. Repayment period Up to 12 months A5. Required own contribution of None the borrower A6. Other — 32 Financial instruments – performance evaluation and proposals for the utilization of funds No. Instrument 2 – working capital loan for exporters B. Cost parameters and repayment terms B1. Interest rate On market terms – on the level of appropriate reference rate determined by the financial intermediary in accordance with risk assessment methodology and taking into account the recommendations from Communication from the Commission on the revision of the method for setting the reference and discount rates B2. Commissions charged No commission, remuneration of the financial intermediary would be entirely covered by the financial intermediary by the management fee, determined by way of a competitive tender. B3. Repayment terms At the discretion of the financial intermediary B4. Other — C. Security C1. Basic Blank promissory note C2. Additional At the discretion of the financial intermediary – in accordance with applied methodology for loan collateralization D. Other – organizational D1. Commitment Current commitment in terms of principal installments within the framework of one or more loans cannot exceed the maximum value of a loan D2. Deadline for building the 36 months portfolio by the financial intermediary D3. Loss limits 15% of the disbursed loan amounts D4. Collections Cost of collections is covered by the financial intermediary, or partly reimbursed by the Regional Development Fund or the Marshal Officea in a specified proportion (e.g. 50%) D5. Other — a The point is to allow a large group of final recipients to take advantage of this rather attractive instrument. If there is not much interest in the product, this condition may be waived. TABLE 12  Loan for the purchase of real estate No. Instrument 3 – loan for the purchase of real estate A. General parameters A1. Final beneficiary Micro, small, and medium-sized enterprises with registered seat or operations in Podlaskie Voivodeship A2. Loan amount Up to PLN 1 million A3. Purpose (of financing) Investment projects related to the purchase of real estate located in Podlaskie Voivodeship or the adaptation of a building for the purposes of own business activity (financing for the purchase of real estate, construction works, restoration and conservation works, as well as other expenditures related to the investment process) A4. Repayment period Up to 144 months A5. Required own contribution of 10% of loan value the borrower A6. Other — B. Cost parameters and repayment terms B1. Interest rate On market terms – on the level of appropriate reference rate determined by the financial intermediary in accordance with risk assessment methodology and taking into account the recommendations from Communication from the Commission on the revision of the method for setting the reference and discount rates – increased by 1 percentage point (100 basis points). Thus, currently, the interest rate would be at least 3.87% per annum B2. Commissions charged by the No commission, remuneration of the financial intermediary would be entirely covered financial intermediary by the management fee, determined by way of a competitive tender. B3. Repayment terms Grace period on repayment of principal for up to 18 months B4. Other - PART I  |  Experiences from the implementation of financial instruments 33 No. Instrument 3 – loan for the purchase of real estate C. Security C1. Basic Blank promissory note and mortgage on the financed property, and until a mortgage can be established, loan insurance C2. Additional At the discretion of the financial intermediary – in accordance with applied methodology for loan collateralization D. Other – organizational D1. Commitment Each entrepreneur may only use this loan oncea D2. Deadline for building the 24-36 months portfolio by the financial intermediary D3. Loss limits 15% of the disbursed loan amounts D4. Collections Cost of collections is covered by the financial intermediary, or partly reimbursed by the Regional Development Fund or Marshal Officea in a specified proportion (e.g. 50%) D5. Other - a. The point is to allow a large group of final recipients to take advantage of this rather attractive instrument. If there is not much interest in the product, this condition may be waived. INDICATIONS (ASSUMPTIONS) WITH RESPECT TO THE EXIT STRATEGY FROM THE FINANCIAL ENGINEERING INSTRUMENTS UNDER THE PV ROP 2007–2013 Agreements currently in force, signed with the financial intermediaries within the framework of the PV ROP 2007–2013, have a clearly defined time horizon. This mainly reflects the implementation period of the project for which the financing was granted, plus five years (this corresponds to the so-called durability period, which was once required, but later was abolished for projects involving financial engineering instruments). In the table below, we present the end dates for the durability period of individual agreements. The general manner of using the funds from the financial engineering instruments under the Re- gional Operational Program 2007–2013 is regulated by article 98 of the so-called Implementation Act52. These regulations, referring to the relevant provisions of European law, indicate that the remaining (repaid) funds should be used for projects in the area of urban development or small and medium-sized enterprises. In accordance with the signed agreements, after the end dates listed above, the deciding factor that determines the further use of funds should be the loan fund management performance evalua- tion. It may be assumed that a significant part of the intermediaries will achieve (or already have achieved) the required performance indicators, although, many of them still have a lot of time before the end date of their agreements. TABLE 13  End dates of the agreements with financial intermediaries under the PV ROP 2007–2013 Number of financing Agreement Project Financial No. agreement end date title intermediary Supporting entrepreneurship in Łomżyński Fundusz Poręczeń 1. RPPD.01.03.00-20-001/10-07 June 30, 2019 the region by increasing guarantee Kredytowych Sp. z o.o. capacity (Łomżyński Guarantee Fund) Fundacja Rozwoju Przedsiębiorczości Podlaski Fundusz Przedsiębiorczości in Suwałki 2. RPPD.01.03.00-20-002/10-02 June 30, 2019 (Regional Fund of Entrepreneurship) (Suwałki Foundation for Entrepreneurship Development) 34 Financial instruments – performance evaluation and proposals for the utilization of funds Number of financing Agreement Project Financial No. agreement end date title intermediary Agencja Rozwoju Loan Fund for micro, small and Regionalnego “ARES” medium-sized enterprises, (MSMEs) 3. RPPD.01.03.00-20-003/09-05 June 30, 2019 S.A. in Suwałki hereafter called the Północny Fundusz (Regional Development Pożyczkowy (Northern Loan Fund) Agency) Agencja Rozwoju Regionalnego “ARES” Północny Fundusz Pożyczkowy II 4. RPPD.01.03.00-20-003/10-05 June 30, 2019 S.A. in Suwałki (Northern Loan Fund) (Regional Development Agency) Fundacja na rzecz Rozwoju Forming the “Sami Swoi” loan fund Polskiego Rolnictwa 5. RPPD.01.03.00-20-004/09-03 June 30, 2019 for enterprises from the Podlaskie (Foundation for Polish Voivodeship by capital injection Agriculture Development) Podlaska Fundacja Supporting SMEs from Podlaskie Rozwoju Regionalnego 6. RPPD.01.03.00-20-002/09-03 February 28, 2019 Voivodeship by providing loans (Regional Development Foundation) Supporting entrepreneurship in Podlaski Fundusz 7. RPPD.01.03.00-20-001/09-05 October 3, 2019 Podlaskie Voivodeship by providing Poręczeniowy Sp. z o. o. guarantees (Podlaski Guarantee Fund) Agencja Rozwoju Regionalnego “ARES” November 30, Północny Fundusz Poręczeniowy 8. RPPD.01.03.00-20-004/10-08 S.A. in Suwałki 2020 (Northern Guarantee Fund) (Regional Development Agency) Podlaska Fundacja Start and development – loans Rozwoju Regionalnego 9. RPPD.01.03.00-20-004/15-01 February 9, 2022 for MSMEs from the Podlaskie (Regional Development Voivodeship Foundation) Fundacja na rzecz Rozwoju Capital injection to “Sami Swoi II” loan Polskiego Rolnictwa 10. RPPD.01.03.00-20-002/15-01 March 13, 2022 fund for entrepreneurs investing in (Foundation for Polish Podlaskie Voivodeship Agriculture Development) Agencja Rozwoju Regionalnego “ARES” Północny Fundusz Pożyczkowy III 11. RPPD.01.03.00-20-003/15-01 February 21, 2022 S.A. in Suwałki (Northern Loan Fund) (Regional Development Agency) Fundacja Rozwoju Przedsiębiorczości in Podlaski Fundusz Przedsiębiorczości II 12. RPPD.01.03.00-20-001/15-04 February 27, 2022 Suwałki (Suwałki Foundation (Northern Loan Fund) for Entrepreneurship Development) Source: own compilation, based on data from the Podlaskie Marshal Office.. Performance indicators used in the signed agreements differ: • Option 1: Funds turnover is on the level of 200% (loan funds) or 150% (guarantee funds). • Option 2: Average annual level53 of the utilization of the fund’s capital is at 60% (loan funds) or 100% (guarantee funds). In the case of option 1, performance assessment should be conducted no earlier than one year before the agreement end date; and in the case of option 2, six months before the end of the durability period. If performance indicators are too low, all funds should be returned within 14 calendar days. In some agreements, there are additional provisions pursuant to which the Marshal Office would take over the obligations stemming from granted loans or guarantees. PART I  |  Experiences from the implementation of financial instruments 35 The following comments are offered regarding the solutions adopted in the agreements: • Current provisions of the agreements assume that if appropriate performance indicators are achieved, the funds would remain at the disposal of the financial intermediary, and their utilization would be regulated by a new agreement. However, such an approach, may be in conflict with the relevant principles of competition. Additionally, those issues may be regulated on a higher level54. • It is acceptable, however, to commence negotiations with the financial intermediary regard- ing the amendment of the existing agreement, and to then negotiate a solution in which the financial intermediary would cease to provide loans and guarantees upon the end of the five-year period from the project implementation or even earlier. At the same time, the amendment would determine the principles for returning the funds committed in the guarantees, or outstanding on loans, as well as the principles of intermediary’s remuner- ation in that period. • A solution where the Marshal Office takes over the obligations stemming from provided guarantees and receivables (not liabilities) on loans does not seem realistic. It would require a significant administrative effort (in fact, it would require amending all the financing agreements, which would require consent of all the entrepreneurs, and in the case of guar- antees, also the banks). Besides, it is doubtful whether it is formally admissible at all. Thus far, similar solutions have been applied, but under a somewhat different model, where obligations stemming from agreements between the Bank Gospodarstwa Krajowego and financial intermediaries within the framework of the JEREMIE Initiative, were transferred by the way of assignment to regional development funds. This change did not affect the entrepreneurs directly, as they continued to repay the loans to the same intermediary. Therefore, we recommend the following solution: First, a meeting should be organized with representatives of the financial intermediaries to com- mence negotiations as to the principles of using the funds that the intermediaries have at their disposal (to a certain extent, possible directions for action were outlined during the workshop with intermediaries in November 2018). Negotiations should result in annexes to existing agreements regulating the principles of the utilization of the returning funds. Principles should be somewhat different for the funds that did achieve the required level of effectiveness, and different for those that did not. In both cases, efforts should be made to: • Cease to grant new loans or guarantees within a specified time, at the latest, on the end date of the five year period; • Agree on the timeframe for the refund of unused funds not committed to loans or guaran- tees – e.g. within 1 month from signing the annex to the agreement; • Provide in the agreement an appropriate period for repayment of funds from loans repaid/ guarantees expired. This may turn out to be up to 5 years from the moment of the discon- tinuation of the issuance of financial instruments, plus an additional 3 months, for example, to account for all the funds. The funds could be repaid in tranches. For example, the inter- mediaries could transfer the funds from loans repaid/guarantees expired every quarter; and • Determine the remuneration for financial intermediaries for the period of managing the repaid/expiring portfolio. 36 Financial instruments – performance evaluation and proposals for the utilization of funds It is also worth investigating how the matter of managing the funds from returned resources looks from the legal perspective: • According to article 78 paragraph 7 of the General Regulation for funds in the perspective 2007–201355, “Resources returned to the operation (...) shall be reused by the competent authorities of the Member States concerned for the benefit of urban development projects or of small and medium-sized enterprises.” That is, using both repayable and non-repayable instruments. Interest may only be used for the financial engineering instruments for SMEs. • The so-called Implementation Act56 envisages the same objective. According to article 98 paragraph 1 of the Act, “Financial resources from contributions under the national and regional operational programs to financial engineering instruments, implemented pur- suant to Article 44 of the Council Regulation (EC) No 1083/2006 (…) [i] shall be re-used for implementation of objectives laid down in Article 78(7) of the Regulation”. • At the same time, based on article 98 paragraph 2 of the same Act, “In order to reuse the resources referred to in paragraph 1, the managing authority shall open an account with the Bank Gospodarstwa Krajowego to service the financial engineering instruments”, and the only administrator of the financial resources on the account referred to in paragraph 2, shall be the voivodeship board (article 98 paragraph 4). PART I  |  Experiences from the implementation of financial instruments 37 PART II MANAGEMENT MODEL FOR FUNDS RETURNED FROM THE FINANCIAL ENGINEERING INSTRUMENTS UNDER THE PV ROP 2007–2013 OPTIONS FOR THE SOLUTION This part of the study presents the options for institutional solutions concerning the manage- ment of the financial resources returned from the financial engineering instruments, with the purpose of ensuring continued support for financial instruments on the regional level. These financial engineering instruments were implemented within the framework of the regional operational programs of the previous Cohesion Policy financing perspective57, in the Podlaskie Voivodeship: PV ROP 2007–2013. The presented proposals fall into two main options. The first “external” option envisages the creation of a separate, autonomous organizational unit and tasks it with the management of the support funds (three potential approaches are presented). The second “internal” option describes potential three approaches under which the owner of the funds (i.e. the voivodeship self-government) manages distribution of funds devoted to the fi- nancial instruments, implemented via the self-government’s executive structures and offices (the Marshal, Board and the Marshal Office). In the final part of the chapter, the recommended solution is discussed. Option A: the external management of funds (via the Regional Development Fund – a specialized institution of the Podlaskie Voivodeship self-government) One of the institutional solutions aimed at creating and ensuring the operation of an institu- tion to manage the funds owned by the Podlaskie Voivodeship self-government is to establish a separate organizational unit, 100 percent owned by the voivodeship. The objective of this new unit would be to reuse the voivodeship funds to increase the availability of the sources of financing to the SME sector in the region. Such a unit could be called (a working name) the Podlaskie Development Fund (PDF). Such an institutional model is already applied in a number of voivodships, where regional development funds were established as entities responsible for the management of the funds returned from the financial engineering instruments under the 2007–2013 perspective, and the reuse of those funds to develop financial instruments. Table 14 presents a list of regional development funds already in operation in other regions in Poland (with the exception of one case – the Zachodniopomorskie Voivodeship, whose entities are separate from other structures and manage their funds independently). TABLE 14  Regional development funds in Poland Target amount of funds under management Legal Starting capital (approximate) Name Owner (Voivodeship) format in PLN million in PLN million Dolnośląski Fundusz Rozwoju Dolnośląskie Sp. z o.o. 7.00 400 (Dolnośląski Development Fund) Pomorski Fundusz Rozwoju 530 Pomorskie Sp. z o.o. 2.86 (Pomorski Development Fund) (JEREMIE and JESSICA) Wielkopolski Fundusz Rozwoju 800 Wielkopolskie Sp. z o.o. 0.15 (Wielkopolski Development Fund) (JEREMIE and JESSICA) 40 Financial instruments – performance evaluation and proposals for the utilization of funds Target amount of funds under management Legal Starting capital (approximate) Name Owner (Voivodeship) format in PLN million in PLN million Kujawsko-Pomorski Fundusz Rozwoju (Kujawsko-Pomorski Development Kujawsko-Pomorskie Sp. z o.o. 0.50 180 Fund) Podkarpacki Fundusz Rozwoju Podkarpackie Sp. z o.o. 3.50 135 (Podkarpacki Development Fund) Opolski Regionalny Fundusz Rozwoju Opolskie Sp. z o.o. 3.00 110 (Opolski Development Fund) Małopolski Fundusz Rozwoju Małopolskie Sp. z o.o. 1.00 170 (Małopolski Development Fund) Zachodniopomorski Fundusz Rozwoju 430 (Zachodniopomorski Development Zachodniopomorskie S.A. a 6.98 (JEREMIE and JESSICA) Fund) a. The function of a regional development fund is fulfilled by one of the departments of Zachodniopomorska Agencja Rozwoju Regionalnego S.A. Source: Own compilation. The need to create a separate organizational structure (legal person) to implement tasks related to the management of financial resources, with the goal of increased availability of financing to the SMEs sector in the form of financial instruments, stems from the specificity of the objective and the operating mechanism that supports the financial instruments. Specifically, the point is to create a durable and efficient institution for the voivodeship’s resources coming from funds returned under financial engineering instruments (and, in the future, also from subsequent regional programs). The PDF will be responsible for obtaining, committing, monitoring and supervising the use of the funds, with due regard to the specificity of the financial instruments. To fulfill this task, the institution will have to acquire knowledge about the enterprises’ financing need to conduct their business activity, the expected instruments, and the preferred solutions for obtaining such financing. Therefore, specialization is an important factor, which should ensure efficient management of funds based on the accumulated knowledge about the financial instru- ments market and the needs of the regional SME sector. Such an institution must be equipped with adequate personnel and financial resources to fulfill its function. The organizational solution may take different shape and three sub-options are presented in this chapter - each of them is already applied in practice in Polish regions: Sub-Option A1 – regional development fund as an institution supporting the regional financial instruments through financial intermediaries Sub-Option A2 – regional development fund as an institution implementing the financial instruments in the region directly Sub-Option A3 – (mixed option) regional development fund as an institution operating directly for part of the tasks, and implementing the financial instruments through financial intermediaries for other tasks The creation of a separate organizational entity (PDF) to manage the financial resources offers advantages related to the specialization and concentration of the tasks – these are the same for all three presented sub-options. The most important of these benefits include: • The organizational separation of tasks and competences for supporting financial instru- ments in the region will result in having a specialized operator in this area, which in turn, will have a positive impact on the quality and efficiency of task implementation. A sort of regional think tank will be established that specializes in financial instruments as tools for supporting the development of the SME sector in the Podlaskie Voivodeship. PART II  |  Management model for funds returned from the financial engineering instruments 41 • Due to the high level of task delegation to the PDF , voivodeship authorities and personnel of the Marshal Office will not need to get intensively involved in the technical side of or- ganizing and implementing support in the form of financial instruments. • Since there already exists a number of regional development funds operating in Poland, if a similar entity is created in the Podlaskie Voivodeship, it will be possible to benefit from the experience of other self-governments and institutions (both at the stage of establishing the institution, and later, during its operation). The fund will become a part of a group of several institutions recognizable on the national level. This will have a positive reputational impact. The existence of a financially meaningful regional entity that specializes in supporting the economy through financial instruments will help create a positive image of the region and of the regional authorities (as the initiator and owner of the endeavor). • The solution involving the distribution of support funds to the financial intermediaries level by a separate specialized entity is known to financial intermediaries from the experience of other regions and from the financial instruments support implementation model applied in the current perspective (the implementation of support via the so-called “fund of funds”, usually managed by the Bank Gospodarstwa Krajowego.) This solution is also used in the Podlaskie Voivodeship. • Concentration of significant funds in the PDF will create a capacity for further support to financial instruments in the region, as well as obtaining funds from other programs (some funding sources prefer financing programs that are implemented on a large scale, for example, programs offered on the European level by the European Investment Fund). The creation of the PDF will make it possible to benefit from the economies of scale, in terms of distribution of financial instruments and the identification of additional sources of fi- nancing for the PDF. • This solution provides for unencumbered, flexible and relatively easy programing, and launches new financial instruments based on the adopted strategy and knowledge about the needs of the regional economy. • There will be a possibility to develop (and update) a single strategy to support financial in- struments in the voivodeship through financial intermediaries (involved to a varying degree, depending on the sub-option adopted), with due regard to its assumptions and objectives, as formulated in broader programmatic documents (e.g. a regional development strategy). The PDF will emerge as a new stakeholder that participates in the process of shaping the regional policy of the voivodeship. and emphasizes the role of financial instruments and SMEs’ access to finance. • The existence of the entity, and the pooling of part of the funds allocated to financial instru- ments in that entity, will enable coordination of this form of support with other programs implemented within the framework of the Podlaskie Voivodeship’s ROP58. • The PDF will be able to organize the regional business community around its activities – e.g. by organizing the activity of consultative bodies, comprised of representatives of business organizations in the region, in order to obtain knowledge about business needs and to guide organized/planned activities that support financial instruments. • The PDF, as an entity concentrated on the management of the financial instruments, will have stronger incentives to promote financial instruments in the entire region, thus reinforcing the activities of the individual financial intermediaries. 42 Financial instruments – performance evaluation and proposals for the utilization of funds The weaknesses of the PDF solution (individual, sub-option specific weaknesses aside), es- sentially relate to the need to form a separate organizational unit. In most cases, a number of formal actions must be completed, and then conditions for the PDF’s launch and operation need to be ensured (personnel, technical and financial resources, etc.). This solution is also sensitive to political factors regarding the appointment of the entity’s management board. Additionally, financing of the newly created institution is an important issue. It must be equipped with starting capital, and subsequently, the cost of its operation must be financed. The latter should not be difficult, because, regardless of the adopted sub-option, the financial resources (capital) that are at the development fund’s disposal, at any given moment, are usually so high that the cost of operations may be financed by the financial revenues from the investment of unused capital. It is also worth remembering that in the option which does not envisage creation of the the external entity, there will be additional tasks for the employees of the Marshal Office, such as, the hiring of new, highly qualified employees. Following sections present specific characteristics of the three discussed sub-options. Sub-Option A1 - regional development fund as an institution supporting the regional financial instruments through financial intermediaries This sub-option focuses on supporting financial instruments by way of the organization and implementation of activities supporting such instruments, which will eventually be distrib- uted by financial intermediaries. In this case, the PDF’s role is mostly comprised of the design of appropriate instruments, the selection of intermediaries, the transfer of support funds to those intermediaries, settling the accounts of the support utilization , and monitoring implementation performance. Thus, the PDF’s task is to reinforce regional financial inter- mediaries, in order to form a whole network of institutions offering financing to SMEs in the Podlaskie Voivodeship. On the other hand, the de facto activity of the fund will be based on utilizing this enhanced capacity of the financial intermediaries. An important charac- teristic of this solution is the possibility to share with the financial intermediaries the risks related to lending resources to SMEs. This will depend on the particular solutions specified in the agreements with the intermediaries. The main advantage of this solution is that it uses the capacity and experience of the finan- cial intermediaries active in the region and does not require building the entire toolkit and competences, which would be necessary if the fund were to offer the financial instruments on the regional level directly. Sub-Option A2 – regional development fund as an institution implementing the financial instruments in the region directly This option assumes the direct distribution of financial products at the level of the final recipients (SMEs) by the fund itself. Thus, the PDF will perform the functions of a financial intermediary. This solution has advantages, stemming mostly from the streamlining (flatten- ing) of the support distribution model, which may result in the faster transfer of funds to the entrepreneurs. On the other hand, this model has following disadvantages: • It does not build upon the existing capacity of the financial intermediaries, they developed over several years, including their knowledge about the market and the specialization of financial products’ distribution. • As a result of this solution, it will also be necessary to provide greater capacity at the level of the regional development fund (PFR), regarding the direct implementation of finan- cial instruments (e.g. providing analytical tools and specialized analytical knowledge, PART II  |  Management model for funds returned from the financial engineering instruments 43 organizing and operating the system of debt collection, and providing other functions related to the building and monitoring of the portfolios of financial products). Currently these tasks are performed by the intermediaries. • In this solution, the entire risk related to financing activity is borne by the regional devel- opment fund. • Due to the expected high capitalization of the regional development fund, its activity may in time lead to a weakening of the financial intermediaries operating in the voivodeship. Thus, a threat will emerge of significant market distortion resulting from the operation of a large entity on a regional scale, which could lead to the marginalization of local non-bank financial intermediaries. This in turn could result in diminishing the diversity of financing sources available to SMEs. Sub-Option A3 – (“mixed” option) regional development fund as an institution operating directly (in scope of for part of the tasks,) and implementing the financial instruments in the region through financial intermediaries for other tasks This option is a hybrid between the solutions A1 and A2 described above,. It enables the focused use of the strengths of both previously described solutions. Additionally, it would be advisable to imple- ment option A1 first, and only later, (optimally, after potentially developing niche financial products and confirming the justifiability of offering them), move on to the implementation of option A3. It should be assumed that this model will focus predominantly on supporting financial in- struments using the distribution functions of the financial intermediaries, thereby benefitting from all of the strengths of option A1 (mainly: the wide distribution network, the ability to take advantage of the knowledge and competences of the intermediaries, risk sharing, and the development and strengthening of the regional network of financial intermediaries). Under this option, the regional development fund would fulfill the role of the fund of funds for the Podlaskie Voivodeship. This will pertain mostly to financial products directed to a broader group of final recipients. At the same time, in the case of designing interventions in the form of financial instruments for specific market niches (e.g. supporting equity instruments), the regional fund may undertake activities in this area by itself. This would be justified by a situation, where, due to the specificity of the given market niche, it could not be reasonably expected that the intermediaries would be interested in the distribution of financial products (for example, in the case of small value portfolios or products addressed to few recipients). Moreover, direct activity of the fund may be particularly advisable in the testing phase of new solutions, even in the case of products that may eventually gain a more universal character (and be subsequently implemented by intermediaries). —— The options for the institutional solutions presented above provide a number of advantages that outweigh the disadvantages. The latter, mainly pertain to the complexity involved in the creation of the PDF as a separate organizational unit (with a legal personality). On the other hand, those disadvantages are mitigated by the fact that the establishment of new legal persons is not exactly something unusual in the practice of the voivodeship self-government. It should also be emphasized that the regional development funds operating in Poland are not particularly large organizational units59, although they manage, or will eventually manage, fi- nancial resources of a significant value, and fulfill functions that are important for the economy. This is particularly vital during the stage of creating the entity. As a result of this fact, the initial equity investment will not be particularly high. Details of the development (operations) path of the regional development fund should be provided both in its business plan, and then, in the strategy for the supporting instruments in the Podlaskie Voivodeship, after the establishment of the regional development fund, developed under the direction of the fund. 44 Financial instruments – performance evaluation and proposals for the utilization of funds Moreover, as a separate entity is created and tasked with managing returned funds, as well as the shaping of the financial instruments in the voivodeship, supplementary solutions could be im- plemented. A recommended solution would be to establish an investment council as an advisory body at the level of the Voivodeship Board. The Council would consult and provide opinions on the PDF’s strategy, Action Plans, as well as proposed financial products. Representatives of business organizations in the voivodeship, the academic community, or experts in the field, could be invited to be members of the Council. The Council would also include a representative of the voivodeship, e.g. the Marshal or another member of the Voivodeship Board60, possibly also a representative of the office’s organizational unit tasked with the coordination/super- vision over the implementation of financial instruments within the framework of the current Regional Operational Program. Affiliation of the Council members would be essentially open. It is important, however, to make sure that the body includes representation, on the one hand, of the actual stakeholders of the financial instruments, and, on the other hand, people with knowledge and experience in the area of financing the SME sector. In order to ensure appropriate operational agility and effectiveness, the Council should not be a large body (limited to no more than a dozen people). Option B – internal management of financial resources An alternative option to the solution A1, A2 and A3 (the establishment of the PDF), is to not estab- lish a separate institution to manage the funds returned from financial engineering instruments under the PV ROP 2014–2020. In such a situation, three scenarios are possible: Sub-Option B1 – extending the existing agreements with financial intermediaries Sub-Option B2 – returning funds to the Marshal Office and the subsequent selection of financial intermediaries by the Marshal Office Sub-Option B3 – return of funds to the Marshal Office, followed by direct lending effected by the Marshal Office Following sections describe pros and cons of each solution. Sub-Option B1 – extending the existing agreements with financial intermediaries Since loans or guarantees are currently offered in the Podlaskie Voivodeship by six financial intermediaries, theoretically, the easiest solution would be to extend the current agreements with them (signing annexes). Such a solution would have a number of advantages, including: • There would be no interruptions in the provision of financial instruments61, which (to a greater or lesser extent), would probably need to happen if the funds were to be gradually returned to the Marshal Office (or through the Marshal Office to the PDF). • Entrepreneurs could still use the offer of the financial intermediaries, which they already know well. In addition, this solution reduces the need for a promotional and information campaign. • This solution is by far the simplest and least labor-intensive; basically it requires only the annexation of the existing contracts. PART II  |  Management model for funds returned from the financial engineering instruments 45 This solution also has a number of disadvantages: • First of all, this solution could be legally questionable, as it potentially violates the principle of competitiveness. Although the original contracts with the intermediaries were concluded as a result of a competition, and not a tender, an extension of these contracts would limit ability of other potential intermediaries to compete for the management of financial instru- ments, hence there would be no open competition. currently, the financial intermediaries are selected through a tender procedure, implemented under the public procurement law. If such a solution were adopted, the possibility that a potential financial intermediary, de- prived of the opportunity to apply for these funds, could complain about the situation to the EC Directorate for Competition, cannot be ruled out. This would have adverse consequences for the flow of financial instruments financed with the 2007-13 resources in the region. • Even if a decision were made to sign annexes to existing agreements, one serious limitation would be the inability to change the parameters of the financing offered, which is always an important limitation, especially in the situation of significant changes on the financial market or in the economic situation. Similarly, in case of this option, it would not be possible to launch new financial instruments based on the funds from the PV ROP 2014–2020. This means that the ability to flexibly shape financial products would be lost. • The decision to sign annexes to existing agreements would additionally petrify the financial intermediaries’ market in the region, where new entities could theoretically appear, which could intensify competition among the intermediaries and introduce new skills. • The extension of the duration of the agreements could also demotivate the existing inter- mediaries, which could result in reduced levels of their activity. Summing up the above pros and cons of this option, the disadvantages and limitations signifi- cantly outweigh its advantages, and its introduction is not recommendable. Sub-Option B2 – returning funds to the Marshal Office and the subsequent selection of financial intermediaries by the Marshal Office This option is similar to Option A1, but without creating a separate institution (PDF). Therefore, this option assumes that the tasks related to the selection of the financial intermediaries and their monitoring etc. would be carried out by the Marshal Office itself. The advantages of this option are as follows: • Organization-wise, this option is less complicated and less labor-intensive than the option that assumes the creation of a regional development fund (A1). Under this option, it is not necessary to design a new institution (i.e. PDF) and to divide tasks, carry out appropriate formal procedures (e.g. consent of the regional parliament - Sejmik), register, provide capital. There would be need to hire experts, in the area of financial instruments; office staff and public procurement specialists should be readily available in the Marshal office. • The Marshal Office would have direct control over the process of creating new financial products, as well as the designing and implementing of the tender procedures (in which area the Marshal Office has appropriate competent staff). • When the financial intermediaries start returning capital from the unused/repaid funds, this option allows for the relatively rapid disbursement of new funds. This is because when the intermediaries return funds to the Marshal Office, then the transfer of these funds through the account of the Marshal Office at the BGK, the design of products, the prepa- ration of tender documentation, and the initiation of public procurement procedures can be quickly performed. 46 Financial instruments – performance evaluation and proposals for the utilization of funds This solution also has following limitations and disadvantages: • This solution assumes a fairly significant workload for the employees of the Marshal Office, when it comes to designing the final version of the financial products: the need to consult them with key stakeholders; and then, to design and conduct the appropriate tender pro- cedure (assuming that it would enable effective resolution of the public tender). • Such a solution builds only limited institutional capacity in the region, which should be utilized to monitor the situation in terms of meeting the needs in the field of repayable instruments and the need to develop new instruments. Functions of this type could be per- formed by employees of the Marshal Office, but they would need to highly specialize in this area and focus on this specific activity. However, it often happens in the marshal offices that employees have many other duties and deep specialization and strong concentration on a narrow activity are difficult to achieve. • Since regional development funds have been created in many other regions, their rep- resentatives regularly meet, exchange experiences and formulate proposals for further actions. If this type of institution were not created in the Podlaskie Voivodeship, it would probably be possible for representatives of the Marshal Office to participate in such meet- ings, however, a number of experiences and solutions would be impossible to implement due to differences in institutional solutions. Sub-Option B3 – return of funds to the Marshal Office, followed by direct lending effected by the Marshal Office Such an option would seem to be formally admissible. However, it has more disadvantages than advantages. The advantages include the following: • The regional self-government takes full control over the whole process of implementing financial instruments, from the stage of designing a specific financial instrument to actually offering it and monitoring the timeliness of repayments. • Theoretically, this option involves the least level of institutional complexity. Under this formula, there is no new institution to be created at the regional level, and financial inter- mediaries do not participate in it at all. Disadvantages include: • While the provision of loans by the voivodeship self-government is formally possible, the detailed rules and formal conditions that would have to be followed are complicated. Hence, such situations were questioned by the Regional Chambers of Auditors (RIO) in the past. Furthermore, after appeals were lodged, the RIO resolutions were frequently confirmed by the administrative courts62. For this reason, the preparation of the entire process in the formal aspect would be complicated and time-consuming. In addition, the possibility and risk of the relevant resolutions being challenged by a financial supervisory authority, cannot be excluded. • Such a solution would not take advantage of the capacity and experience of financial inter- mediaries who have previously offered financial instruments in the Podlaskie Voivodeship; • This solution would also impose a heavy burden on the office staff with respect to the lending process. The staff would be responsible for following elements of the financial instrument management: the call for applications, evaluations, approval and valuation of collateral, funding, monitoring the timeliness of repayments and possibly taking appropriate action in response to delays in repayment, and the termination of loan agreements and debt collection. PART II  |  Management model for funds returned from the financial engineering instruments 47 • The Marshal Office would need to hire people with experience in the field of managing financial instruments, evaluating applications for financing, validating and accepting col- lateral, etc. While the Marshal Office’s employees have some knowledge in terms of offering financial instruments, knowledge of a much more technical type is necessary as well and is not readily available in the Marshal Office. • It would also be necessary to equip the Marshal Office with the appropriate software to facilitate the financial analysis of the potential applicant and the project proposed for financing. Alternatively, such analyses could be outsourced to a specialized consulting company, although such a solution would not be ideal (it is generally better if such analyses are created internally, then the person performing the analysis feels much more responsible for the correctness of its implementation). • The solution, consisting of the voivodship self-government granting loans (and other financial instruments) to the SME sector companies directly, is virtually unheard of in the country. The usual solution for implementation of this type of instrument, is to establish companies partly or wholly owned by the voivodship self-government, or to entrust implementation of the instruments to independent financial intermediaries, selected through competitive bidding or competition. Therefore, it would be difficult to take advantage of all this expe- rience, if this option is used. This solution seems the least advantageous of all the options considered in this report. RECOMMENDED SOLUTION On the basis of the above analysis, the option A3 (“regional development fund as an institution acting independently (in scope of some of the tasks) and implementing financial instruments in the voivodeship through financial intermediaries”) is recommended. This model envisages the establishment of the Podlaskie Development Fund. This solution could be implemented gradually over time. First, the structure and division of tasks within the fund would need to be developed and the PDF would focus solely on launching financial instruments with the participation of fi- nancial intermediaries. Farther on, the potential development of niche financial instruments could be considered, if there would be such a need. Key arguments in favor of a phased approach to implementing this model are: • Ability to benefit from the capacity of experienced financial intermediaries already operat- ing in the region, thus reducing the risks associated with the independent operation of the regional development fund • Lack of the immediate necessity (usually requiring time) to acquire own competences and capacity to offer and manage financial products • Strengthening the operational capacity (and therefore durability) of the financial interme- diaries functioning in the region • Possibility of attracting new financial intermediaries to the region (thereby strengthening competition in the regional market) • Ability to use the experience of financial intermediaries with respect to assessing the needs of the final recipients of the financial products (easier identification of needs). This would help design and implement new financial products • Directing support to SME via the network of the financial intermediaries will limit direct influence of the public institution at the market 48 Financial instruments – performance evaluation and proposals for the utilization of funds • Ability to test and design completely new financial products and then launch their distri- bution, either through financial intermediaries or directly (in the case of niche products on a small scale). These developments could emerge together with a growing experience and competences gained over time, • Opportunity to create a regional competence center in the field of non-banking financial instruments. The role of such a center could be played by the PDF. The fund is predisposed to this role due to the accumulated experience gained from its cooperation with financial intermediaries, its acquired competences, as well as its participation in the design and im- plementation of the voivodship’s development strategy in the area of financial instruments • Ability to benefit from the experience of already existing solutions in Poland (regional development funds operating both through financial intermediaries and also directly) During the initial phases of PDF’s functioning, regional needs will be analyzed, for which (if it is considered necessary) specific niche financial products could be designed, to be imple- mented directly by the PDF. They could be implemented when the fund has sufficient capacity to directly offer financial products. It is assumed that the activities carried out directly by the PDF would not be a prevalent form of its operation. If the A3 option would be unfeasible, the B2 option would be second best reommended solution. In this approach, the Marshal Office would manage the funds on a temporary basis, by trans- ferring them to financial intermediaries after selecting said intermediaries via an unlimited public tender. The table 15 below summarizes the main advantages and disadvantages of the analyzed options: TABLE 15  Summary of the advantages and disadvantages of each option Option and Conclusions its assessment Brief description Advantages Disadvantages and recommendations Option A. Sub-Option A1 The PDF does not • Benefitting from capacity • Need to build a new In the first phase, – Podlaski conduct any direct and experience of institution “from scratch” this option is strongly Development lending or guarantee financial intermediaries • Need to find and recommended, it is Fund (PDF) activity, but it operating in the region recruit employees and the best Sub-Option; as an institution develops financial (also attracting new a management team, subsequently may be supporting products and selects, intermediaries to and also to equip the gradually phased into regional financial in a competitive the region) institution with other Sub-Option A3 model. instruments procedure, financial • No need to build resources necessary to through financial intermediaries the entire toolkit and begin operation intermediaries. responsible for the competences necessary distribution of the in the case of offering +++ products in the region financial instruments directly on the regional level • Creation, within the framework of PDF, of a regional competence center in the area of financial instruments • Model aligned with solutions implemented in a number of other voivodeships – additional opportunity to exchange experiences PART II  |  Management model for funds returned from the financial engineering instruments 49 Option and Conclusions its assessment Brief description Advantages Disadvantages and recommendations Sub-Option A2 In this option, • In terms of organization, • Solution results in immediate Solution decidedly – PDF as an PDF replaces a little simpler than A1 direct competition with not recommended, institution existing financial model, no need to select the existing financial in particular due to implementing intermediaries and financial intermediaries intermediaries; their strong competition financial conducts lending and capacity and experience with the financial instruments in the potentially guarantee are not used intermediaries region directly. activity directly (may • Need to build competences and unpredictable also implement other in the area of granting impact on financial -- forms of financial loans/issuing guarantees, intermediaries instruments) applications for financing currently operating evaluation, accepting in the region security, monitoring portfolios and debt collections • Need to promote PDF’s offer “from scratch” (new entity/ new offer on the market) Sub-Option Under this solution, • Ability to launch • Need to build competences This solution may A3 – (mixed the basic offer of specialized products, in two areas, i.e. both in be combined option) regional financial instruments is requiring very specialized the area of commissioning with sub-option development fund provided by financial knowledge, including implementation of the A1, implemented as an institution intermediaries (as products targeted at financial instruments with depending on operating directly in A1 sub-option), a very small group of the intermediaries, but needs; definitely (with respect to while selected recipients also in the area of direct recommended for some of the tasks) specialized niche • Ability to test new implementation of financial the future and implementing financial products are products (e.g. before instruments financial offered by the PDF launching them through instruments in directly. Naturally, the financial intermediaries) the voivodeship envelope of funds • The most flexible option through financial allocated to such (combining, respectively, intermediaries products should be the advantages of sub- significantly smaller options A1 and A2) ++ / +++ than funds distributed by the financial intermediaries Option B. Sub-Option B1 – The solution consists • No need to introduce any • This solution is extremely Solution definitely not extending existing of signing annexes changes or organizational debatable from the legal recommended, for agreements to agreements with actions, other than signing perspective – due to substantive reasons with financial existing financial the annexes potential non-compliance as well as – first and intermediaries intermediaries and • Availability of existing with principles of public foremost – due to extending the period financial products on the procurement and rules of legal risks --- of offering financial same terms, no need to competition instruments on the promote new offer • No possibility of launching same terms • Existing intermediaries new financial products or interested in maintaining modifying the existing ones status quo (probably) • No possibility to bring in new financial intermediaries Sub-Option B2 – This solution entails • No need to create a PDF, • Maintained limitations In case a decision returning funds to gradual return of funds while maintaining the in the scope of creating is made not to the Marshal Office to the Marshal Office, competition rules (new financial products create a regional and subsequent and subsequently (as tender) and the supervision development fund, selection sufficient envelope • Ability to create new of implementation within best remaining solution of financial of funds becomes financial products and the structures of the (recommended as intermediaries by available) organizing bring new financial Marshal Office second best) the Marshal Office. tenders for financial intermediaries to • Forgoing the added value intermediaries to the market that could be potentially + implement specific created by establishing the financial products, PDF developed by the Marshal Office 50 Financial instruments – performance evaluation and proposals for the utilization of funds Option and Conclusions its assessment Brief description Advantages Disadvantages and recommendations Sub-Option B3 This solution entails • Complete control over • Complete lack of Solution definitely – return of funds gradual return the financial instruments experience in this area in not recommended, to the Marshal of funds to the implementation process the Marshal Office, need very difficult in terms Office and then Marshal Office, in the region to build competences, of organization lending effected and subsequently procedures, etc. and probably very by the Marshal (as sufficient • This solution is very difficult inefficient, virtually Office directly. envelope of funds from the organizational never applied in becomes available), perspective, regional self- Poland (or, in fact, --- the Marshal Office government’s structure in other European offering the financial and rules of operation are countries) instruments directly not well adapted to this type of activity • Competition with financial intermediaries and no opportunity to use their competences and experience • Need to promote the offer “from scratch” (a new entity offering financial products) Note: ‘+’ and ‘-‘ express the evaluation of each option - +++ means very positive evaluation while ‘---‘ very negative. PART II  |  Management model for funds returned from the financial engineering instruments 51 ATTACHMENT 1 LIST OF INDIVIDUAL INTERVIEWS Individual interviews with financial instruments stakeholders in the Podlaskie Voivodeship No. Institution Respondent Interview date 1 Podlaska Fundacja Rozwoju Regionalnego/Podlaski Vice-President 09/26/2018 Fundusz Poręczeniowy (Regional Development Foundation/ (Podlaski Guarantee Fund) 2 Fundacja Rozwoju Przedsiębiorczości in Suwałki Director of the Loan Fund 09/29/2018 (Suwałki Foundation for Entrepreneurship Development) 3 Agencja Rozwoju Regionalnego “ARES” S.A. President 11/8/2018 (Regional Development Agency) 4 Fundacja Rozwoju Przedsiębiorczości Director of the Knowledge 11/8/2018 in Suwałki (Suwałki Foundation for Entrepreneurship and Innovation Transfer Center Development) 5 Fundacja na Rzecz Rozwoju Polskiego Rolnictwa Director of the Foundation Remote 11/8/2018 (Foundation for Polish Agriculture Development) Office in Zambrów 6 Instytut Innowacji i Technologii Politechniki Białostockiej President 11/13/2018 Sp. z o.o., Kleosin (Institute of Innovation and Technology of Białystok University of Technology) 7 Białostocki Park Naukowo-Technologiczny (Science Director of BPNT 11/13/2018 and Technology Park in Białystok) 8 Łomżyński Fundusz Poręczeń Kredytowych (Łomżyński President 12/3/2018 Guarantee Fund) 9 Park Naukowo-Technologiczny Polska-Wschód in Suwałki President 12/3/2018 (Science and Technology Park Poland-East) 10 Izba Przemysłowo-Gospodarcza in Suwałki Office Director 12/3/2018 (Chamber of Industry and Commerce) 11 Klaster Obróbki Metali, Centrum Promocji Innowacji Cluster Coordinator 01/10/2019 i Rozwoju w Białostockim Parku Naukowo-Technologicznym (Metalworking Cluster, Center for Promotion of Innovation and Development in Science and Technology Park in Białystok) 12 Akademickie Inkubatory Przedsiębiorczości, Białystok Manager 01/10/2019 (Academic Incubators of Entrepreneurship) 13 Monrol Sp. z o.o., Mońki President 01/10/2019 14 RiftCat Sp. z o. o President 01/10/2019 15 ITS TR (sole proprietor) Owner 01/10/2019 16 Podlaskie Stowarzyszenie Właścicielek Firm Vice-President 01/10/2019 (Podlaskie Association of Companies’ Proprietress) 17 T-Matic Grupa Computer Plus Sp. z o.o. President (Vice-President 01/10/2019 and Podlaskie Employers Association of the Podlaskie Employers Association) 52 Financial instruments – performance evaluation and proposals for the utilization of funds ATTACHMENT 2 LIST OF WORKSHOP MEETINGS Workshops Lp. Topic Participants Workshop date 1 Financial instruments management models Representatives of the Podlaskie Voivodeship 11/23/2018 on the regional level and proposals for Marshal Office, representatives of the financial new financial products intermediaries, implementing financial instruments under the current (2014–2020) or the previous (2007–2013) PV ROP, representative of the World Bank and World Bank experts 2 Models for the management of funds The Marshal of the Voivodeship and 12/14/2018 from the financial engineering instruments representatives of the Podlaskie Voivodeship from the Regional Operational Programs in the Marshal Office, representatives of the 2007-2013 perspective – proposals for the European Commission, World Bank, and World Podlaskie Voivodeship Bank experts 53 NOTES 1. http://ec.europa.eu/regional_policy/pl/policy/how/im- 11. For seven capital injection agreements in mid-2018, this proving-investment/lagging_regions/ ratio was approx. 74%. When this is compared to the 2. Regionalny Program Operacyjny Województwa Podlaskie- countrywide average, it is a satisfactory value. Calcu- go na lata 2007–2013. http://www.rpowp.wrota podlasia. lations do not include one financial intermediary (two pl/dokumenty/dokumenty-programowe,2.html [accessed agreements), as the reported utilization was 100%, which on: 01/10/2019]. did not seem probable (and therefore the data was not included). On the other hand, it should be noted that this 3. Szczegółowy Opis Priorytetów Regionalnego Progra- intermediary also reports high turnover of capital (the mu Operacyjnego Województwa Podlaskiego na lata average for the two agreements is 2.1 times the capital 2007–2013. p. 42-44. http://www.rpowp.wrotapodlasia.pl/ received). This in turn means that in this case as well, dokumenty/dokumenty-programowe,3.html [accessed on: a high utilization ratio can be expected, certainly at least 01/10/2019]. on a level close to the average for the other intermediaries. 4. For example, with respect to loans, the project “Podlaski Under such circumstances, we conclude that the level Fundusz Przedsiębiorczości” (Podlaskie Entrepreneurship of utilization for all the analyzed agreements of capital Fund) of the Fundacja Rozwoju Przedsiębiorczości in Su- injection for the purposes of loan activity was high, and wałki, application no. WND-RPPD-01.03.00-20-002/10 as such, satisfactory. (dated 12/21/2010 pt III.1. p. 7), and with respect to gu- arantees, the project “Supporting entrepreneurship 12. M. Mika, P. Rogowiecki, K. Sabarańska, op. cit., p. 72-75. in the region by increasing guarantee capacity” of the own calculations based on data from Attachment No. 3 Łomżyński Fundusz Poręczeń Kredytowych Sp. z o.o. ”Activity of loan funds – selected information about funds (Łomżyński Guarantee Fund), application No. WND-RP- as of 12/31/2017”. PD.01.03.00-20-001/10 (dated 06/26/2012), section III.5. p. 8, 13. M. Mika, P. Rogowiecki, K. Sabarańska, op. cit., p. 37. (reference to by-laws of the Fund and guarantee product 14. To calculate the ratio, it was necessary to assume that the described therein – see https://lfpk.eu/Oferta.html). line “loans lost and recovered from the clients of the Fund” 5. Prepared based on a query of financial intermediaries’ in the reports of supported funds from Podlaskie, is the websites (analyzed materials were accessed on 01/10/2019), same as the line “collections and terminations” in the re- including available formal documentation – e.g. loan port “Fundusze pożyczkowe w Polsce – Raport 2017” of the terms and conditions, fees and commissions tables, Polish Union of Loan Funds. as well as individual interviews with financial interme- 15. Commission Regulation (EC) No 1828/2006 of December 8, diaries representatives (and, with respect to guarantees, 2006. art. 43 para. 4. in the case of the financial intermediaries discussed later). 16. In most agreements, the maximum value of the fund ma- 6. As set forth in Commission Regulation (EC) No 1828/2006 nagement and administration was provided as an amount of December 8, 2006 setting out rules for the implemen- (which could not be higher than the amount calculated tation of Council Regulation (EC) No 1083/2006 laying based on rates). down general provisions on the European Regional Development Fund, the European Social Fund and the 17. For example, based on the reported data of one of the Cohesion Fund and of Regulation (EC) No 1080/2006 of the financial intermediaries running two supported loan European Parliament and of the Council on the European funds; in the first one (a capital injection of PLN 10 mil- Regional Development Fund, art. 43 para. 4. lion), the fund management and administration fee is PLN 1,076,000 (as of 06/30/2018). This covers the building and 7. When describing and evaluating the results of the sup- managing loan portfolio, the historical value of which (all porting financial engineering instruments (uptake/com- the loans granted within the framework of the agreement) mitted funds, loss levels, cost of implementation of the amounts to over PLN 26.9 million (i.e. 2.7 times the capital financial engineering instruments on financial interme- injection, which was PLN 10 million). This means that diaries level), implemented based on the funds from the the theoretical cost of the utilization of the initial capital PV ROP 2007–2013, we apply the vocabulary used in the injection was approx. 4% of its value (PLN 1,076,000 / 2.7 / agreements with the financial intermediaries. We would PLN 10 million). like to note here, however, that some of the notions (e.g. lost loans/lost capital) were not clearly defined, which may 18. Data shows that 42 tenders were analyzed, divided into lead to certain difficulties, especially at the stage of acco- 104 parts (portfolios), resolved from 2017 to mid-2018. Most unting for the utilization of support, and negotiating the (29) tenders provided the financial intermediaries with financial instruments’ exit strategies with the intermedia- capital for loans without a thematic focus (general loans ries. (We believe that these matters would have to be the for SMEs). Profiled tenders were fewer and they covered subject of a discussion, leading to a precise determination financing for innovation, tourism, and thermal retrofits. of the meaning and interpretation of these terms.) Howe- 19. The majority of the selected bids (over 61%) fell into the ver, those deficiencies are not particularly significant for price range of 6%–8%. Approximately 8% fell into the range this paper. of 8%–10%. What is interesting is that the selected bids so- 8. Own calculations based on M. Mika, P. Rogowiecki, K. Sa- metimes included those with a price falling into the range barańska “Fundusze pożyczkowe w Polsce – Raport 2017”, of 15%–20% (approx. 5.6%). The lowest price range (1%–6%) PZFP, 2017. p. 17. comprised approx. 17% of bids. 9. M. Mika, P. Rogowiecki, K. Sabarańska, op. cit., p. 19. 20. M. Mika, P. Rogowiecki, K. Sabarańska, op. cit., p. 53. It should be added, that over the past years, this value 21. In this report, we analyzed tenders in which financing was has been systematically increasing. When comparing the provided for loan products with specific parameters and average value of a loan granted in 2017 with one granted expected portfolio values, in accordance with the needs in 2011, the increase is nearly 175%. of the entity commissioning the research. See M. Gajewski, 10. M. Mika, P. Rogowiecki, K. Sabarańska, op. cit., p. 28. J. Szczucki “Analiza i rekomendacje w sprawie oszacowa- 54 Financial instruments – performance evaluation and proposals for the utilization of funds nia wysokości opłaty za zbudowanie i zarządzanie port- gle region), one of the nationwide programs managed felem pożyczek, udzielanych ze środków pochodzących by the BGK could be indicated. Namely, in July 2018 the BGK ze zwrotów z instrumentów inżynierii finansowej RPO created the National Guarantee Fund (NGF) to implement ROP WK-P 2007–2013”, Warsaw, February 2018. the de minimis guarantee, which was subsidized with the 22. M. Gajewski, J. Szczucki, op. cit., p. 14. amount of PLN 900 million. In the period July-December 2018, this fund granted 14.4 thousand. guarantees worth 23. We refer to the commonly articulated opinions (of this PLN 4.3 billion. It can be then estimated that at the end type), presented during the Annual Meetings of the Natio- of 2018 the current capital use of the NGF amounted to aro- nal Association of Guarantee Funds – see e.g. presentation und five times its capitalization (see https://www.bgk.pl/ by J. Szczucki “Rynek poręczeniowy w 2018”, KSFP meeting aktualnosci/wyniki-finansowe-i-sprawozdanie-finanso- in Bronisławów on 11/29/2018. we-bgk-za-rok- 2018-2475 /). This result is a consequence 24. M. Gajewski, Kubajek, J. Szczucki „Rynek lokalnych of the portfolio nature of the de minimis guarantee pro- i regionalnych funduszy poręczeniowych w Polsce w 2017”, gram and the fact that, among others, the largest Polish Warsaw, September 2018. p. 5. banks utilized its guarantees. 25. Guarantee instruments range – see 34. These are the two financial intermediaries implementing https://www.bgk.pl/przedsiebiorstwa/poreczenia-i-gwa- support agreements that cover the majority of the support rancje/ [accessed on: 01/10/2019]. value, referred to in Note 30. In the case of the third 26. See https://www.bgk.pl/przedsiebiorstwa/porecze- intermediary, supplementary information shows one lost nia-i-gwarancje/gwarancja-biznesmax/ [accessed on: guarantee, of low value (the amount subject to the collec- 01/10/2019]. tions procedure was PLN 42,000). 27. https://www.bgk.pl/przedsiebiorstwa/poreczenia-i-gwa- 35. “Sytuacja sektora bankowego w okresie I-VI.2018”, Bureau rancje/gwarancja-splaty-kredytu-kreatywna-europa-plg- of Financial Supervision Authority, Warsaw, p. 11 and 12 -kreatywna-europa/ [accessed on: 01/10/2019]. 36. After comparing the implementation of both the financial 28. M. Gajewski, Kubajek, J. Szczucki, op. cit., p. 4-5. engineering instruments supported in the Podlaskie Vo- 29. For one of the financial intermediaries, data as of Septem- ivodeship, it turns out that the cost intensity of the guaran- ber 30, 2018. tees is, after all, higher than that of the loans (the admi- 30. This value was decidedly higher than the average histo- nistration and management fees per one loan/guarantee). rical value for guarantees in the entire local and regional To a large extent, this stems from, among other things, the guarantee funds sector in Poland, which in 2013–2017 was lower turnover in using the support. However, it is difficult approx. PLN 149,200 ); with the caveat that in 2016–2017, to assess the importance of this type of difference, as the this average increased significantly. In 2017, it was approx. two instruments are based on a different logic. PLN 203,700. Own calculations, based on: M. Gajewski, 37. It should be kept in mind, that in the 2014–2020 financial Kubajek, J. Szczucki „Rynek lokalnych i regionalnych…”,. perspective, regulations in the scope of the support for the p. 20 (and the KSFP reports for 2013–2017). financial intermediaries providing guarantees and su- 31. As far as the structure of the countrywide portfolio reties were fundamentally changed. Currently, in the case in terms of beneficiary numbers is concerned, microen- of guarantees/sureties, there is a requirement to estimate, terprises comprise the largest group (59% of the guarantee by way of the ex ante risk analysis, expected and unexpec- beneficiaries). In terms of value, the share of micro and ted risk levels (i.e., the level of funds sufficient to guaran- small-sized enterprises is similar (approx. 44% each). tee a specific value of debt financing, as well as covering the related disbursements). Based on the ex ante analysis, 32. This ratio is probably somewhat higher, as the value an appropriate risk factor is determined. This determines presented here was calculated only for two (out of three) the value of the guarantees portfolio, established as a mul- financial intermediaries, for whom appropriate reporting tiple of the amount received from the operational program, data was available. (Though they account for almost 90% allocated to cover expected and unexpected losses (art. 8 of support capital, and the majority of active guarantees, of Commission Delegated Regulation (EU) No 480/2014 although not all of the active guarantees could be inc- of March 3, 2014). This means that the contribution from luded. Assuming that in the case of the third intermediary the program serves to cover the estimated level of guaran- half of the value of guarantees granted remains active, tee payments. At the same time, the amount of that con- the total ratio would slightly exceed 32%.) Moreover, tribution determines the required value of the portfolio it should be kept in mind that over the past three years, that the financial intermediary must achieve. For example, in the purpose aspect, there were some very significant if the risk factor is determined on the level of 20%, the sup- changes in the structure of the issued guarantees. Both port in the amount of PLN 10 million (allocated to cover in terms of the number of guarantees (more pronounced), disbursements) will require building a guarantee portfolio and in terms of the value, there was a definite increase to the value of PLN 10 million / 0.2 = PLN 50 million. in the share of the guarantees issued that secured tender deposits (i.e., non-financial instruments). In 2017, the As a side note, it is worth mentioning that the amount allo- share of the value of guarantees issued for that purpose cated to secure issued guarantees and cover any potential within the entire portfolio of the guarantees issued in 2017 losses is an eligible expenditure. Therefore, if the guaran- was approx. 25%. (The year before, it was 16%, and in 2015, tees paid and the costs of management incurred turn out it was 8%). See M. Gajewski, Kubajek, J. Szczucki “Rynek to be lower than the allocation, the remaining funds may lokalnych i regionalnych…”, p. 20 (and relevant portions still be used for this, or other financial instruments as well of the reports on the guarantees market in 2015 and 2016). – as in other forms (of financial products) compliant with Such a course change, in terms of the purpose of the gu- the original objectives (art. 42 pit 1 letter b and art. 45 arantees, has enabled the funds to offset losses resulting of General Regulation (EU) No 1303/2013 of the European from increasing competition from the national programs Parliament and of the Council of December 17, 2013. in the area of securing financial instruments (mostly 38. M. Gajewski, J. Szczucki “Analiza i rekomendacje w spra- loans). However, guarantees of this type were not offered wie oszacowania wartości opłaty za zarządzanie środkami within the framework of the capital injected under the wsparcia Regionalnego Programu Operacyjnego Woje- PV ROP 2007–2013. wodztwa Kujawsko-Pomorskiego na lata 2014–2020 prze- 33. As an interesting background (though rather of limited znaczonymi jako wkład do poręczeniowego instrumentu suitability for direct comparisons with the functioning finansowego”, Warsaw, December 2017 of guarantee intermediaries operating at the scale of a sin- M. Gajewski, J. Szczucki, op. cit., p. 17. 39. Notes 55 40. “Strategia inwestycyjna financial instruments Regio- the payment for the transaction will not be officially paid, nalnego Programu Operacyjnego Województwa Podla- but can informally process the payment for the exported skiego na lata 2014–2020”, Podlaskie Voivodeship Board, goods (in full or in part). In such a case an appropriate 01/08/2019 insuring institution will pay out an (in fact ineligible) 41. “Ocena ex-ante instrumentów finansowych w perspek- insurance and will take a loss. The risk of such a problem tywie finansowej 2014–2020”, WYG PSDB, version from does not exist in the case of the planned loan instrument, 2016. In 2018 “Ocena ex-ante”, was updated – paper (LB&E, since the loan would be granted to a mother company that Stowarzyszenie STOS) from August 2018, see „Streszcze- is registered in Poland. nie – Aktualizacja oceny ex ante instrumentów finanso- 51. Regardless of the justifiability of offering a working capital wych w ramach PV ROP 2014-2020 wraz ze świadczeniem product, in conjunction with an expected economic usług doradczych”, Białystok, August 2018. https://ROP. slowdown, even now (that is, in a time of good prosperity), wrotapodlasia.pl/pl/dowiedz_sie_wiecej_o_programie/ the problem of financing working capital remains very zapoznaj_sie_z_prawem_i_dokument/streszczenie- significant, as confirmed by the results of many analy- -ustalen-i-wnioskow-z-oceny-ex-ante-instrumentow-fi- ses. As an example, the study “Finansowanie działal- nansowych-w-perspektywie-finansowej-2014-2020.html ności przez mikro-, małe i średnie firmy w Polsce” may [accessed on: 01/10/2019]). At the time of preparing this be quoted here, which states that one of the most frequent report (January 2019), the “Investment Strategy” from reasons for using external financing (in the micro- and November 2017 was binding. Changes proposed in the small-sized companies sector) is payment delays. Mo- updated “Ocena ex-ante” include the modification of some reover, the conclusions of the quoted study indicate that of the parameters of the implemented financial products enterprises which “…finance investments and current (the proposed changes do not involve completely new in- operations by borrowed funds, usually repay their debt struments, nor indicate the justifiability of discontinuing within two years, with monthly interest on the level of ap- any instrument). This means that the modification of the proximately 2-5%.(…)”. Here, we are referring to a study Strategy (if any) will be minor. conducted by the Keralla Research Institute, commis- 42. Agreement between the Podlaskie Voivodeship and the sioned by the NFG, a provider of e-factoring services): Bank Gospodarstwa Krajowego on the financing of the https://a.msn.com/r/2/BBSPWS6?m=pl-pl&referrerID=- project entitled “Economic development of the Podlaskie InAppShare [accessed on: 01/28/2019] Moreover: “An incre- Voivodeship by the use of financial instruments” within asing number of enterprises in Poland are struggling with the framework of the Podlaskie Voivodeship Regional the problem of unpaid invoices. The share of companies, Operational Program for 2014–2020. https://ROP.wrota- where this problem is intensifying has increased to 16.2% podlasia.pl/pl/dowiedz_sie_wiecej_o_programie/poznaj_ (from 13.5%). At the same time, the number of firms who zasady_dzialania_programu/instrumenty-finansowe. do not experience such issues at all has significantly html [accessed on: 01/10/2019]. decreased, from 15.1% to 11.3%. As a result, as much as 89% of enterprises do not receive payment on time (…) the 43. http://farr.pl/index.php?option=com_content&view=ar- average period of arrears on invoices is 3 months and 12 ticle&id=269&Itemid=64 [accessed on: 01/10/2019]. days (…)”, see P. Białowolski “Portfel należności polskich 44. In the “Ocena ex-ante” update, those parameters were przedsiębiorstw – informacja sygnalna”, Konferencja identified as significantly limiting the efficiency of the Przedsiębiorstw Finansowych w Polsce and National Debt utilization of the allocation for this product. Therefore, the Register, July 2018, p. 4-5. https://krd.pl/Centrum-praso- appropriate adjustments were proposed, expanding the we/Raporty/2018/Portfolio-naleznosci-polskich-przedsie- potential group of final recipients of those loans (as well biorstw [accessed on: 01/10/2019]. as various other modifications), see “Streszczenie – Aktu- 52. Act of July 11, 2014 (i.e. of June 29, 2018), on the principles alizacja oceny ex ante financial instruments…”, p. 2 and 3. of the implementation of the cohesion policy programs, 45. See https://pfrventures.pl/pl/ [accessed on: 01/10/2019], financed under the 2014–2020 financial perspective (Jour- Funds of Funds part. nal of Laws of 2018, item 1431) 46. See https://pfrventures.pl/pl/fundusze/1/pfr-starter-fiz/ 53. The author of this provision probably did not realize how [accessed on: 01/10/2019]. difficult it is to calculate this value. Without a detailed 47. See https://pfrventures.pl/pl/fundusze/2/pfr-biznest-fiz/ methodology, it actually does not seem feasible. [accessed on: 01/10/2019]. 54. Unless one applies §11 para. 13 of the financing agreement 48. The evaluation of the pilot implementation of the startup which states “separate regulations as to the exit strategy, platforms is available. It is generally positive, indicating its issued by the European Commission or the Ministry of In- efficacy, and thus justifies developing this form of support. frastructure and Development, referred to in § pt 30 of this See “Ewaluacja pilotażu Działania 1.1 Programu Operacyj- Agreement, shall constitute a basis for amending this nego Polska Wschodnia 2014–2020. Platformy startowe dla Agreement in accordance with their content, and in scope, nowych pomysłów. Etap II – ewaluacja ex-post pilotażu in which such regulations would apply to the financial «Platform startowych»“, Fundacja Instytut Przedsiębior- engineering instruments implemented within the frame- czości i Rozwoju Regionalnego, Warsaw 2017. https://www. work of the Program”. However, there are no indications ewaluacja.gov.pl/strony/badania-i-analizy/wyniki-ba- that such regulations are to be issued. dan-ewaluacyjnych/badania-ewaluacyjne/ewaluacja- 55. Council Regulation (EC) No 1083/2006 of July 11, 2006, -pilotazu-instrumentu-platformy-startowe-dla-nowych- laying down general provisions on the European Re- -pomyslow-dzialanie-11-po-pw-etap-i-i-ii/ [accessed on: gional Development Fund, the European Social Fund 01/10/2019]. and the Cohesion Fund, and repealing Regulation (EC) 49. See W. Winogradzki “Analiza eksportu województwa pod- No 1260/1999. laskiego w latach 2007–2017” – presentation (own research 56. Act of July 11, 2014, on the principles of the implementa- conducted, based on data from the Central Statistical tion of the cohesion policy programs, financed under the Office and the National Tax Administration), Podlaskie 2014–2020 financial perspective (consolidated text in Jour- Association of Employers, Białystok 2018. nal of Laws of 2018, item 1431). 50. It seems that both institutions are afraid that in such situ- 57. At the basis for developing all of the individual options ations both parties to the transaction, i.e. a mother com- is the issue of providing an institutional solution that pany and a daughter company, can informally agree that would enable the effective use of the funds returned from 56 Financial instruments – performance evaluation and proposals for the utilization of funds the financial engineering instruments of the previous model, most employees are dealing with matters relating EU financial perspective. Of course, the proposed solu- to contracting support (providing the financial interme- tions presented here may also be used for the management diaries with capital) as well as monitoring and reporting of funds from other sources, (e.g. returned from the finan- (monitoring of the financial intermediaries’ portfolios). cial instruments supported under the current perspective PFR operating costs for 2017 amounted to approx. PLN 3.3 of Cohesion Policy). Regardless of the source of the funds, million (including remuneration and related considera- the considerations presented here focus on their use for tions on the level of PLN 2.2 million). The data for both the purpose of ensuring greater access to financing for regional development funds mentioned above is provided micro, small, and medium-sized enterprises sector in the based on financial statements for 2017. region. Therefore, we are only interested in solutions 60. Such a Council could have a broader function, e.g. provi- able to support the financial instruments, and not the ding opinions and consultations on the financial instru- organizing and implementing of other forms of support ments’ implementation processes under the currently (although, at least to some extent, these solutions may also implemented Regional Operational Program, with respect serve to implement other tasks). to the financial instruments component. Solutions 58. This factor is not specific; it is also present in some of the involving representatives of the Voivodeship authorities, sub-options under Option B (sub-options B2 and B3). Here as well as experts (such bodies are called Investment we only wish to point out that the functions in this area Councils), are already present in some voivodeships (for may also be supported by the Regional Development Fund example, the Warmińsko-Mazurskie Voivodeship and the (and, of course, implemented with the Fund’s participa- Pomorskie Voivodeship). In Pomorskie, the work of such tion). a council is related to the implementation of the current 59. For example, let us examine the staffing levels of the ROP, as well as the development of financial instruments Dolnośląski Fundusz Rozwoju Sp. z o.o. (DFR), an entity by the Pomorski Fundusz Rozwoju. In Warmińsko-Mazur- that operates based on the A3 model (the distribution skie, in turn, the Council is only dealing with the implemen- of financial instruments through intermediaries plus own tation of financial instruments within the framework of the direct activity) in the area of seed capital instruments. current (2014–2020) ROP of the voivodeship, as the regional As of the end of 2017, DFR employed 13 persons (13 full development fund has not been established there yet). time jobs). Compared to 2016, employment has increased 61. The issue of certain discontinuity in offering the financial by 2 jobs. The fund had (as of 12/31/2017) equity in the instruments or the temporary limitation of offer pertains amount of PLN 258 million. The operating costs for 2017 essentially to all other options as well. amounted to nearly PLN 3.5 million (including remune- ration and related considerations in an amount slightly 62. See, for example, the ruling of the Voivodeship Admini- exceeding PLN 2.1 million). The fund has achieved a net strative Court in Kraków of December 4, 2009, although profit of approx. PLN 1.28 million. In turn, the Pomorski that ruling pertained to self-government on the commune Fundusz Rozwoju Sp. z o.o. (PFR), operating under the level (http://orzeczenia.nsa.gov.pl/doc/068BF55B77. [ac- A1 model (financial instruments distributed through cessed on: 01/10/2019]), or ruling of the Supreme Admini- financial intermediaries), employed 18 persons (17.5 full strative Court of February 8, 2013 (http://orzeczenia.nsa. time jobs) as of the end of 2017. Due to the fund’s operating gov.pl/doc/9F58AEC158 [accessed on:.01/10/2019]). SOURCES P. Białowolski “Portfel należności polskich przedsiębiorstw – J. Szczucki “Rynek poręczeniowy w 2018”, KSFP meeting, informacja sygnalna”, Konferencja Przedsiębiorstw Bronisławów, 29.11.2018 Finansowych w Polsce i Krajowy Rejestr Długów, July 2018 M. Gajewski, Kubajek, J. Szczucki “Raport o stanie funduszy M. Gajewski, Kubajek, J. Szczucki “Rynek lokalnych poręczeniowych w Polsce – stan na dzień 31.12.2015” i regionalnych funduszy poręczeniowych w Polsce (and report for 2016), Warsaw 2016. 2017. w 2017”, Warsaw, September 2018 M. Mika, P. Rogowiecki, K. Sabarańska “Fundusze pożyczkowe M. Gajewski, J. Szczucki “Analiza i rekomendacje w sprawie w Polsce – Raport 2017” (plus attachments), PZFP, 2017 oszacowania wysokości opłaty za zbudowanie W. Winogradzki “Analiza eksportu województwa podlaskiego i zarządzanie portfelem pożyczek, udzielanych w latach 2007–2017” – (own research based on data ze środków pochodzących ze zwrotów z instrumentów of Central Statistical Office and National Revenue inżynierii finansowej RPO WK-P 2007–2013”, Warsaw, Administration), Podlaski Związek Pracodawców, February 2018 Białystok 2018 M. Gajewski, J. Szczucki “Analiza i rekomendacje w sprawie Keralla Research Institute (commissioned by NFG) study oszacowania wartości opłaty za zarządzanie środkami entitled “Finansowanie działalności przez mikro-, małe wsparcia Regionalnego Programu Operacyjnego i średnie firmy w Polsce”, 2018 Wojewodztwa Kujawsko-Pomorskiego na lata 2014–2020 Pomorski Fundusz Rozwoju i Dolnośląski Fundusz Rozwoju – przeznaczonymi jako wkład do poręczeniowego financial statements for 2016 and 2017. KRS. instrumentu finansowego”, Warsaw, December 2017 “Sytuacja sektora bankowego w okresie I-VI.2018”, Office M. Gajewski, J. Szczucki “Instrumenty finansowe – of Financial Supervision Authority, Warsaw 2018 województwo podkarpackie. Strategia inwestycyjna w zakresie instrumentów finansowych tworzonych “Ewaluacja pilotażu Działania 1.1 Programu Operacyjnego w oparciu o środki wsparcia zwracane z instrumentów Polska Wschodnia 2014–2020. Platformy startowe inżynierii finansowej Regionalnego Programu dla nowych pomysłów. Etap II – ewaluacja ex-post Operacyjnego Województwa Podkarpackiego na lata pilotażu «Platform startowych»”, Fundacja Instytut 2007–2013”, World Bank, 2017 Przedsiębiorczości i Rozwoju Regionalnego, Warsaw 2017 57 “Ocena ex-ante instrumentów finansowych w perspektywie Detailed description of priorities of Podlaskie Voivodeship finansowej 2014–2020”, WYG PSDB, version of 2016 Regional Operational Program for 2007–2013. “Strategia inwestycyjna instrumentów finansowych Project documentation (applications and agreements) Regionalnego Programu Operacyjnego Województwa and reporting documents – financial intermediaries, Podlaskiego na lata 2014–2020”, Podlaskie Voivodeship support beneficiaries within the framework of financial Board, 13.11.2017 engineering instruments under PV ROP 2007–2013. “Aktualizacja oceny ex ante instrumentów finansowych Description of loan and guarantee products offered w ramach PV ROP 2014–2020 wraz ze świadczeniem usług by financial intermediaries in Podlaskie Voivodeship, doradczych” (main document and executive summary), internal documentation (regulations and supplementary LB&E and Stowarzyszenie STOS Białystok, August 2018 documents), (as of January 2019). Regionalny Program Operacyjny Województwa Podlaskiego na lata 2007–2013. LEGAL DOCUMENTS Act of 11 July on the principles of implementation of the Commission Regulation (EC) No 1828/2006 of 8 December cohesion policy programs, financed under the 2014-2020 2006 setting out rules for the implementation of Council financial perspective (Journal of Laws of 2018, item 1431). Regulation (EC) No 1083/2006 laying down general Regulation (EU) No 1303/2013 of the European Parliament provisions on the European Regional Development and of the Council (General Regulation) of 17 December Fund, the European Social Fund and the Cohesion Fund 2013 laying down common provisions on the European and of Regulation (EC) No 1080/2006 of the European Regional Development Fund, the European Social Fund, Parliament and of the Council on the European Regional the Cohesion Fund, the European Agricultural Fund Development Fund. for Rural Development and the European Maritime Council Regulation (EC) No 1083/2006 of 11 July 2006 laying and Fisheries Fund and laying down general provisions down general provisions on the European Regional on the European Regional Development Fund, the Development Fund, the European Social Fund and European Social Fund, the Cohesion Fund and the the Cohesion Fund and repealing Regulation (EC) European Maritime and Fisheries Fund and repealing No 1260/1999. Council Regulation (EC) No 1083/2006. Communication from the Commission on the revision of the Commission Delegated Regulation (EU) No 480/2014 of 3 method for setting the reference and discount rates, March 2014 supplementing Regulation (EU) No 1303/2013 19.1.2008 (2008/C 14/02). of the European Parliament and of the Council Ruling of Voivodeship Administrative Court in Kraków laying down common provisions on the European of 4 December 2009. Regional Development Fund, the European Social Agreement between Podlaskie Voivodeship and Bank Fund, the Cohesion Fund, the European Agricultural Gospodarstwa Krajowego on financing the project Fund for Rural Development and the European entitled “Podlaskie Voivodeship economic development Maritime and Fisheries Fund and laying down general through use of financial instruments” within provisions on the European Regional Development the framework of Podlaskie Voivodeship Regional Fund, the European Social Fund, the Cohesion Fund and Operational Program for 2014–2020. the European Maritime and Fisheries Fund. INTERNET SOURCES http://ec.europa.eu/regional_policy/pl/policy/how/ https://www.bgk.pl/przedsiebiorstwa/poreczenia-i-gwarancje/ improving-investment/lagging_regions/ gwarancja-splaty-kredytu-kreatywna-europa-plg- http://www.rpowp.wrotapodlasia.pl kreatywna-europa/ https://a.msn.com/r/2/BBSPWS6?m=pl- https://ROP.bgk.pl/instytucje-finansujace/wojewodztwo- pl&referrerID=InAppShare podlaskie/ [10.01.2019]. https://pfrventures.pl/pl/ http://farr.pl/index.php?option=com_ content&view=article&id=269&Itemid=64 https://pfrventures.pl/pl/fundusze/2/pfr-biznest-fiz/ https://pfrr.pl/ https://pfrventures.pl/pl/fundusze/1/pfr-starter-fiz/ https://www.frp.pl/ https://www.bgk.pl/ https://www.fdpa.org.pl/ https://www.bgk.pl/przedsiebiorstwa/poreczenia-i- gwarancje/ https://www.lfpk.eu/ https://www.bgk.pl/przedsiebiorstwa/poreczenia-i- http://ares.suwalki.pl/ gwarancje/gwarancja-biznesmax/ http://poreczenia.com.pl/ 58 Financial instruments – performance evaluation and proposals for the utilization of funds