- SMEs and mid-caps receiving EIB loans have 5% higher employment and productivity, including 15% greater investment following funding.
- Start-ups backed by EIF-supported Venture Capital (VC) funds more likely to have successful exit, with 10.3% higher chance of being acquired.
Businesses in Europe are at a crossroads, with European competitiveness facing increasing challenges as a result of heightened global competition and disrupted value chains, according to a new study by the European Investment Bank (EIB) Group.
The study, EIB Group support for EU businesses, shows how its financial backing of companies including small and medium-sized enterprises (SMEs) and mid-caps plays a key role by filling a market gap in Europe.
"As the EIB Group, we truly are a powerful European financial instrument for the success, competitiveness and resilience of businesses across Europe." said Nadia Calviño, EIB Group President. "As this report shows, our intervention is targeted and makes a real difference to businesses’ capacity to grow and to innovate."
The European financial sector, largely bank-based, is often unwilling to provide finance for SMEs as well as fast-growing and innovative firms. SMEs account for two-thirds of total employment in Europe and any impairment to their stability and growth implies higher economic costs and slower job creation, innovation and productivity. EU firms, particularly small and more innovative ones, face challenges accessing financing for their operations and expansion. The lack of a fully developed European ecosystem has also contributed to a relatively small number of start-ups in Europe.
The EIB Group has supported about 400,000 SMEs and mid-caps annually, with €31.1 billion in financing including loans and guarantees for businesses in 2023 alone. Of the total last year, about €15 billion came from the European Investment Fund (EIF).
The new report compiles the results of several impact studies from the Group, comparing the performances of businesses that received EIB Group financing with the evolution of comparable companies that lacked it. The study concludes that EIB Group support, which also includes venture debt and venture capital, has tangible benefits for companies that receive it.
The report shows that the EIB Group's range of financing instrument compensate for gaps in the market. In the area of SMEs, businesses that benefitted from EIB financing had 5% higher employment and productivity. The effect of EIB lending is greater for smaller and younger firms and in cohesion regions.
The EIB Group’s intermediated loans increased lending volumes, enabling 15% more investment and supporting 5% higher job creation and 6% greater productivity among beneficiary SMEs and mid-caps compared with peers that lacked such support.
Firms receiving EIF-guaranteed loans saw a decrease in bankruptcy rates by about a third and increases in employment by 8% to 30%, depending on the region, compared with similar businesses that did not receive EIF guarantees.
With young European firms struggling to find the right financing to support innovation, the impact of EIB and EIF support via venture capital and venture debt products is crucial. Start-ups backed by EIF-supported Venture Capital (VC) funds were more likely to have a successful exit, with a 10.3% greater chance of being acquired and a 1.7% higher rate of going public.
Because the EIB’s Venture Debt product is perceived as a seal of quality, beneficiary businesses have had better funding conditions on the market in other rounds as well as faster growth compared with their peers.
"Access to finance is crucial for businesses to invest, innovate, create jobs and drive productivity growth," said Debora Revoltella, director of economics at the EIB. "Our analysis demonstrates how the EIB Group's targeted support is making a real difference. It is striking to see that when scientifically comparing firms that are ultimate beneficiary of our support, be it SMEs lending, guarantees, venture debt or venture capital, they outperform other players in the market after obtaining EIB Group funding. This means that the EIB Group makes a difference."
The study also highlights how the EIB Group's countercyclical role has been valuable, maintaining access to finance for viable businesses even when private credit diminishes during economic downturns. By addressing critical market failures, the EIB Group's business-support instruments are crucial to achieving the EU's goals of enhancing sustainability, digitalisation and competitiveness.
The full report is available here.
Background information
The European Investment Bank is the long-term lending institution of the European Union owned by its Member States. It provides finance and expertise for projects that contribute to EU objectives. The EIB Group works closely with public and private-sector partners to support sustainable investment, job creation, economic growth and innovation across Europe.
The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized enterprises (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.