Written by Agnieszka Widuto,
The use of financial instruments in cohesion policy is increasing, as they are considered a resource-efficient way of using public funding. They provide support for investment in the form of loans, guarantees, equity and other risk-sharing mechanisms. In the 2014-2020 programming period, financial instruments can be applied in all thematic areas and funds covered by cohesion policy, combined with grants; and the amounts allocated are expected to double in comparison to the previous period.
The lessons learnt so far from the implementation of financial instruments show that they present both advantages and challenges. Their revolving nature can increase the efficiency and sustainability of public funds in the long term. The requirement to repay can stimulate better performance and quality of investment projects. They can improve access to finance, through targeting financially viable projects that have not been able to obtain sufficient funding from market sources. However, financial instruments can also entail high management costs and fees, as well as complex set-up procedures. Although financial instruments may be a beneficial way to optimise the use of the cohesion budget, in some situations grants can be more effective. It is also important to bear in mind that the primary goal of financial instruments is to support cohesion policy objectives rather than just to generate financial returns. These considerations are likely to feed into the debate on the post-2020 cohesion policy framework.
Read the complete briefing on ‘Financial instruments in cohesion policy‘.
Source Article from https://epthinktank.eu/2016/12/21/financial-instruments-in-cohesion-policy/