One of the regional funds’ key tasks is to eliminate barriers to access to capital by offering guarantees, loans, and other financial instruments, as well as to make it easier for SME’s to make investment decisions regarding the business activity. The difficult economic situation caused by the coronavirus pandemic has affected thousands of companies in Poland. Therefore, domestic entrepreneurs are increasingly taking into account the support that Regional Development Funds can provide to them, which isn’t just about direct financial support.
What are Regional Development Funds? These are institutions established as a result of circumstances including the accumulation of resources returned from EU programmes (e.g. such as JEREMIE and JESSICA, as well as other ones – implemented in the repayable form under Regional Operational Programmes). At present, the funds already operate in 11 voivodships – Wielkopolskie (Greater Poland), Dolnośląskie (Lower Silesia), Kujawsko-Pomorskie (Kuyavia-Pomerania), Pomorskie (Pomerania), Zachodniopomorskie (West Pomerania), Śląskie (Silesia), Małopolskie (Lesser Poland), Podkarpackie, Podlaskie, Łódzkie, and Opolskie. Their main role is to support micro-, small and medium-sized enterprises by offering repayable financial instruments, including loans, guarantees and sureties, as well as equity investments, including dedicated instruments (e.g. “liquidity” loans) for companies in difficulty due to the coronavirus pandemic.
At the national level, institutions using repayable instruments in development policy include the following: National Economy Bank (Bank Gospodarstwa Krajowego) and Polish Development Fund (Polski Fundusz Rozwoju), both of which are owned by the State Treasury. Polish legislation, also at the regional level, has given voivodship self-governments the possibility of creating new regional funding institutions, set up to initiate business development, build the labour market, support the development of science and cooperation between science and business, support technological progress and innovation, as well as – finally – obtain and combine public and private funding. Voivodships’ self-governments are increasingly focusing on regional development through repayable financing as this type of support allows capital to accumulate in the regions with the invested and returned funds being used repeatedly.
– One of the regional funds’ key tasks is to eliminate barriers to access to capital by offering guarantees, loans and other financial instruments, and to facilitate investment-related decisions with respect to business activity made by micro-, small and medium-sized enterprises. It’s also important to enable the implementation of economic projects that serve to increase the competitiveness of regional entrepreneurs – says Kamila Radziecka, President of the Kuyavian-Pomeranian Development Fund, who also holds the role of a board member with PARDF – the Polish Association of Regional Development Funds www.pardf.org
The vice-President of the Pomeranian Development Fund and also a PARDF board member Jarosław Kała is of a similar opinion: – Some of the areas important for us are the support provided to SME’s, urban development, or energy efficiency projects. Moreover, we aim to build a long-lasting regional system of financing investments in the above-mentioned areas. We’re also taking action to promote our region as a place that’s attractive to investors and conducive to economic activity – adds Jarosław Kała.
In addition to activities at the regional level, the funds have started to self-organise their activities by exchanging experiences via the economic self-government within the above-mentioned Association of Regional Development Funds. Regional Development Funds, which the Association’s work is focuses on, manage financial resources amounting to more than 3.6 billion, and this figure is expected to triple in the coming years.
– The Association is an organisation tasked with supporting the implementation of the regions’ development strategies and coordinating related activities. Działalność Stowarzyszenia skupia się przede wszystkim na propagowaniu szczególnej roli Regionalnych Funduszy Rozwoju, jak również na współtworzeniu rozwiązań legislacyjnych i merytorycznych w celu rozwoju finansowania zwrotnego w Polsce, dedykowanego możliwie szerokiemu gronu odbiorców, w tym sektorowi mikro-, małych i średnich przedsiębiorstw – says Marek Ignor, President of the Lower Silesian Development Fund www.dfr.org.pl and President of PARDF itself. An equally important issue here is to streamline the flow of information exchange between the funds, as well as the exchange of experiences and good practices regarding development financing with the use of repayable instruments at the regional level – adds Marek Ignor.
PARDF also pursues its objectives by undertaking activities such as initiating and supporting sustainable development measures, influencing the shaping of the business policy supporting the growth of regions and entrepreneurship, drawing up opinions on financing regional growth, as well as cooperating with public, non-governmental, and financial institutions.
One of the important elements of economic development in Poland is to pursue a policy of sustainable development that involves interregional cooperation coordinated by the Association. It’s indisputable that, as far as the SME sector is concerned, the level of business development varies from region to region. As many studies have shown, taking into account the simplest indicator, i.e. the number of natural persons conducting business activity per 1 thousand inhabitants, Eastern Poland does much worse compared to the whole country. So, it can be said that the propensity to set up one’s own business varies considerably between regions. Therefore, for example, the Podkarpackie voivodship, which has Poland’s lowest indicator in this respect, requires special attention and determines challenges not only of a financial nature but also organisational and educational ones, as well as those related to the promotion of entrepreneurship development, e.g. based on repayable financing – says Krzysztof Staszewski, President of the Podkarpackie Development Fund.
The essence of the regional funds’ operation therefore goes far beyond financial support. Activities equally important here include support for SME’s in the shape of consultancy services and activities integrating regional ecosystems of entrepreneurship support through cooperation with universities, entrepreneurs, and Business Environment Institutions – emphasises Marek Ignor.
Regional Development Funds support not only standard businesses or investments, but also innovative ventures with high growth potential, which is why some of them, such as the DFR Investment operating in Lower Silesia or the Silesian Development Fund, play the role of professional funds investing capital, which may acquire shares or buy stocks, as well as provide mixed financing, including, among other things, providing capital through the purchase of bonds or granting loans. – The smart money formula we are implementing is far from insignificant – says Krzysztof Górka, President of DFR Inwestycyjny.
As Marcin Wilk, President of the Silesian Development Fund, emphasises, investing in start-ups requires professional knowledge and multidimensional investment experience, but also the ability to cooperate, for example through co-investments consisting in combining public and private funds, which bring benefits to all parties involved. Investors spread the risk connected with project financing among each other, and the company itself gains additional credibility in the eyes of customers, for whom the participation of public funds is a factor inspiring their trust – emphasises Marcin Wilk.
As public funds, we want to fill the financial and capital gap, so we focus on continuous growth, with respect to both a full range of financial instruments and flexible and tailored solutions, which is particularly important in the current pandemic situation – points out Sławomir Koprowski, President of the Pomeranian Development Fund.
The leverage effect that can be achieved by combining public and private resources cannot be overestimated – says Wojciech Marcinkiewicz, President of the Wielkopolska Development Fund, and adds: – Focusing on achieving synergies with projects implemented by different market participants is definitely something that distinguishes Regional Development Funds, which are becoming a key instrument for stimulating economic growth in the regions and a catalyst for structural change. Efficiency, combined with the closeness to those whom the support offered is intended to serve, became crucial during the pandemic. The Wielkopolska Development Fund, as is the case with several other regional funds, launched intervention support for entrepreneurs both in the debt form (the Liquidity Loan) and as guarantees (Intervention Reguarantee) in a very short time. The ability to act flexibly and, importantly, to react quickly is currently essential for the economies of countries that want to keep up with the dynamically occurring changes – concludes President Marcinkiewicz.
The very name of the funds encapsulates their mission, i.e. development. However, this is not development at all costs. The idea of sustainable development, i.e. integrating the three spheres: environment, society, and economy, isn’t a mere slogan for Regional Development Funds. The funds support R&D projects or activities aimed at reducing the negative impact on the environment in areas such as improving energy efficiency or energy production from renewable sources. The uniqueness Regional Development Funds’ activities is also attested to by their role as an initiator of business, educational, and research activities.
For instance, in Lower Silesia, another edition of the “Battle for Start-up” competition was organised in December this year. The initiative aimed to select and recognise the most interesting ideas for a new business presented by local universities’ students and employees. Its finalists can expect the Lower Silesian Development Fund’s support and assistance – not only financial but also in terms of risk assessment and recommendations for translating an idea into a successful business. The winners of the competition’s previous edition took advantage of this opportunity and today, as a company operating under the Refeel brand, they provide customers with high-quality household chemicals and cosmetics in returnable glass packaging.
Another example of the activity is the Wielkopolska Development Fund’s initiative launched in 2018 under the name “Doing Business in…”, which has already become the fund’s hallmark and a brand in its own right. The project is a series of business meetings addressed to entrepreneurs from the Wielkopolska Region and introducing them to the specificity of a given foreign market, taking into account the most up-to-date macro-economic data, as well as information on business etiquettes in culturally different economies. The meetings’ fixture is the “success stories”, i.e. ones of Wielkopolska-based entrepreneurs who are successfully implementing the expansion strategy in a specific market, often owing it to funds distributed by the Wielkopolska Development Fund via the Expansion Loan. So far, the Company has organised 18 such meetings, in which it presented the characteristics of 30 countries.
Also worth mentioning is the initiative of the Pomeranian Development Fund, which in cooperation with the research agency PBS conducted a study to assess the impact of the SARS-CoV-2 pandemic on Pomeranian SME’s. The results of the first stage of the survey (August 2020) were used, among other things, to introduce changes to product ranges to adapt them to the Pomeranian market’s needs. The second stage of the study will be conducted in Q1 2021.
– The Association is also undertaking several activities aimed at developing multidimensional cooperation, such as with the European Investment Bank, the Polish Bank Association, the Polish Development Fund, and industry organisations of loan and guarantee funds – explains Jarosław Kała.
What goals do Regional Development Funds’ representatives set for themselves? These primarily consist in coordinating activities that involve providing information about the activities of institutions of this kind in Poland as well as exchanging experiences. The members of the Association emphasise that they’re keen to raise the profile of regional development funding institutions in our country. The capital of PARDF is in fact the specific competencies and tools that can be offered to local entrepreneurs. The basis for social and economic growth is the creation of an effective system for disseminating knowledge on supporting small and medium-sized enterprises.
– We want to operate as a think tank dedicated the development and implementation of good practices wherever we have to deal with the use of financial instruments. Actually, I can see more areas for our support, where I would include key development programmes and activities of a regional nature, as well as their complementarity with national programmes. As a result, what we’re dealing with here is the development of society and an innovative economy – adds Marek Ignor.
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