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Financial Instruments in rural development: past failures and future challenges

Apr 28, 2015 | News

(28 April 2015) – A report published today by the European Court of Auditors (ECA) finds that financial instruments (loan and guarantee funds) have so far been unsuccessful in the field of rural development.

Financial instruments are meant both to attract additional public and/or private capital (leverage effect) and allow the initial allocations of funds to be recycled (revolving factor). The ECAS’s report concludes that they did not work as expected in this regard.

For the 2014-2020 period, it was found that persistent overcapitalisation and the risk of a continued dependence on grants were amongst the possible remaining obstacles to a more extensive use of these instruments.

The ECA’s main recommendations to the Commission and the Member States are that:

  • better incentives should be given for Member States to set up financial instruments for rural development and stimulate demand from farmers or other beneficiaries (for instance by setting a certain share of the available budget for rural development aside for financial instruments and making them more attractive than grants), and
  • the effectiveness of financial instruments should be improved for the 2014-2020 programming period, for instance by setting appropriate standards and targets for leverage and revolving effects.

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