Innovative financial instruments for EU policies

Unlike pure grants, innovative financial instruments (IFIs) are EU budget tools that trigger equity or debt funding, for example in the form of investments in share capital, loans or guarantees. Financial institutions and intermediaries are often involved in their implementation on behalf of the European Commission (EC).

IFIs are not deemed to fit all kinds of public spending, but have features that make them attractive. Notably, they are expected to increase the impact of the EU budget by leveraging additional funding from other sources. In addition, IFIs generate income through amounts repaid by beneficiaries of funding that can be used for new operations in line with the same policy objectives.

Under the 2007-2013 Multiannual Financial Framework, a number of EU programmes developed different IFIs. Evaluations of some instruments have identified positive outcomes and shortcomings. The complexity, variety and number of IFIs can make it difficult to gain a complete overview of their activities.

The EC has put forward proposals to streamline the relevant tools, suggesting a greater use of IFIs under the 2014-2020 Financial Framework. The European Parliament is supportive of IFIs, but underlines the need to ensure transparency, accountability and democratic scrutiny.