Evaluation: Finland’s guarantee scheme improved SMEs’ access to funding  

The purpose of Finland’s guarantee scheme was to support the availability of SME financing by providing banks with guarantees for business loans. According to an evaluation commissioned by the Ministry of Economic Affairs and Employment, the guarantee scheme achieved its economic policy objectives well. The scheme provided a tenfold leverage effect on public funding. 

By granting additional guarantees on business loans, the Finnish guarantee scheme made it easier for small growth companies to obtain financing. Guarantees focused on companies that are new, innovative, experiencing strong growth or in the process of internationalising.

“I am very pleased with the results of the guarantee scheme evaluation. The programme has succeeded both in improving the financial position of companies and in expanding the supply of services in the financial markets. Finland, the European Investment Bank Group and the European Commission have cooperated to share the risk, which has resulted in a tenfold leverage effect on public funding. This, if anything, is effective cooperation,” says Minister of Economic Affairs Mika Lintilä.

 “I am very pleased to see the positive impact of a multiannual effort by the European Commission, the Government of Finland, the EIF and the EIB in support of fast growing and innovative local small businesses. The results from the evaluation study provide a clear evidence that SME Initiative Finland achieved its objectives in increasing access to finance for Finnish SMEs by providing preferential borrowing conditions which would have not been available without the instrument. The European Investment Fund is looking forward to continue its successful cooperation with the Finnish Ministry of Economic Affairs and Employment”, says Alain Godard, EIF Chief Executive.

The financing reserved for the guarantee scheme in the years 2016–2020 totalled EUR 40 million. Of this, EUR 20 million was funded from the European Regional Development Fund (ERDF) and EUR 20 million from national funds. The European Investment Fund, which is part of the European Investment Bank (EIB) Group, was responsible for the implementation of the guarantee programme. Five banks acted as intermediaries for the loans: OP Bank, Nordea, Aktia, Oma Savings Bank and Savings Banks Group.

Significant amount of support directed to start-ups

By the end of 2020, loans from the guarantee scheme were granted to more than 700 companies. The overall amount of loans granted was about EUR 400 million. Most loans were granted to companies in the industry and trade sectors.

The evaluation shows that the guarantee scheme provided funding to start-ups and young companies to a significant degree.  Almost one in three guarantees were granted to companies that were less than one year old at the time of the granting and more than half of the guarantees went to companies less than five years old. 

The scheme’s objective was to allocate funding to growing companies and, according to the evaluation, this objective was met. On average, the turnover of companies that received funding under the scheme grew much more than the turnover of other SMEs.

Guarantee scheme increased number of SMEs obtaining bank financing

According to the evaluation, the guarantee scheme succeeded in improving the availability of financing for SMEs. It increased the number of SMEs obtaining bank financing.

A large part of the guarantees were granted to micro-sized enterprises, start-ups and companies involved in corporate acquisitions or undergoing generational change. The scheme was successfully used in situations where a lack of guarantee typically hampered access to bank financing.

The majority of the companies interviewed believed that they would not have received any bank financing without the guarantee offered by the scheme. On the other hand, a large number of companies believed that the funding could have been arranged from other sources. Without the scheme, projects and investments would have been slower and smaller in size, however. 

The evaluation also examined the scheme’s wider impact on the financial markets and the business sector. The guarantee scheme has expanded the SME loan market, especially for start-ups, and diversified the provision of loan financing to SMEs. The scheme has also helped to expand funding opportunities as banks have utilised EIB's new financing services. 

Involving banks and introducing the scheme in bank branches key to success

Banks widely introduced the scheme within the framework permitted and the allocation of guarantees was driven in particular by banks’ strategies and focus on certain customer segments or geographic areas. 

According to the evaluation, it was important for the coverage of the SME market that several banks acted as intermediaries in the scheme and that it was introduced widely in the banks’ branches.  Despite the extensive use of the scheme by banks, some companies may have been excluded from the scheme, as banks geared it towards their preferred markets.  The report states that using the guarantee scheme was easy for companies, because banks were responsible for the administrative work.

The evaluation was carried out by 4FRONT Oy.

Inquiries: 
Jenny Hasu, Special Adviser to the Minister of Economic Affairs, tel. +358 40 658 3510
Jaana Valkokallio, Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 50 306 4932, [email protected] 
Ulla Roiha, Project manager for the evaluation, 4FRONT Oy, tel. +358 40 873 2706, [email protected]