EIF supported financing helps European SMEs embrace digitalisation

European Investment Fund (EIF)
4 min readMar 19, 2021

According to estimates, the pandemic has accelerated the digital transformation by 4–6 years. Whilst differences across Europe persist in terms of small businesses’ readiness to digitalise — due to connectivity matters, or lack of skills and resources to invest, the past year has also shown that the imperative for digitalisation has never been greater. It is an opportunity for both SMEs and the European economy to come out stronger from the crisis. An interview with EIF Chief Executive Alain Godard.

It’s time to SwitchON

Is there currently a digital investment gap in Europe?

The EIB Group estimates that the total digital investment needed is about €380 billion, but the market can deliver only one-third of this. An investment gap of €50 billion per year remains, and this may increase due to covid-19. Last year, the European Commission and the EIF launched a Digitalisation Pilot programme aimed at bridging this gap. Since then, the EIF provides financing support — in the form of a portfolio guarantee to our intermediaries (banks and other financial institutions across Europe) — so that SMEs can access loans at favourable terms for their digital transformation.

Do SMEs have any advantages over larger corporations when it comes to digitalisation?

Our research shows that, when it comes to digitalisation, size matters. Larger firms have higher rates of digital adoption than smaller firms. Older or established small businesses tend to be persistently non-digital in Europe, while start-ups and businesses run by younger entrepreneurs are, understandably, more adaptable to digital technologies.

At the same time, I think that digital technologies are disrupting market dynamics at increasing speed and creating unprecedented opportunities for small businesses. These technologies allow them to scale, compete and disrupt in ways that were unheard of in previous generations — we are seeing this a lot during the covid-19 pandemic. But most of all, digitalisation, even in its simplest form, has allowed many businesses to stay alive.

What are some of the barriers SMEs face when it comes to digitalisation?

In the EU, a lack of access to finance is a key barrier to the adoption of digital technologies for smaller companies. The availability of skilled staff is also often cited as another major obstacle.

At the current juncture, I think we all agree that everyone sees the benefits of ‘switching on’. But we need to raise more awareness about the how: that EU supported financing is available in the market for both digitalisation related investments as well as for learning & digital skills. We are proud of some of the frontrunners across Europe who have already grasped this opportunity, such as Batak Grill in Croatia — financed via our partner Erstebank.

Digitalisation success story: Batak Grill, Croatia

How is the EIF supporting SMEs across Europe to embrace digitalisation?

I must say we’ve tried to cover all options from an economy as well as an SME perspective. The goal is to come out stronger and greener from the current crisis. We can support this in two ways: through debt financing for incremental innovation and skills under our main guarantee programmes — COSME, InnovFin, Skills&Education; and through equity financing for ground-breaking innovations in tech — internet of things, big data and AI.

In both areas, there are two important factors driving our support: to make financing available at all times even during the crisis, and making it seamless for those who want to invest in their digital transformation.

What are some of the most innovative digital solutions you have seen since the beginning of the pandemic?

Clearly, the potential of AI in healthcare. Vaccines against Covid-19 were already being tested on humans in March, less than three months after the initial outbreak in China — a feat many researchers wouldn’t have thought possible just a year ago. Many of those vaccines owed their speedy start to the power of AI or machine-learning systems and computational analyses. It gives us a glimpse of how much more it could do in the future to improve and save lives.

We’ve also seen strong growth in companies offering e-consultations, ed-tech distance learning, and, naturally, e-commerce. But one area which I found quite innovative was the development of apps for large buildings, be it in the form of building communities, helping each other out (like forming cycling or dog-walking groups), or more practical matters like controlling energy use, temperature or lighting, and reserving meeting rooms. Digitalising something as non-digital as a building is quite interesting.

Will digital solutions help us to prepare for any future crises?

Digitalisation was a key ingredient in the recipe for keeping society moving during the crisis. It made our economy and society more resilient than it would have been without digital solutions. This can be even more relevant in any future crises if we further develop and improve on the digital experiences and solutions that have helped us steer through the current crisis.

This applies as much to SMEs seeking to grow in the digital space or digitalise their business models as it does to public organisations, such as the EIF and our financial partners, as we digitalise our processes to make financing faster and more accessible for European SMEs.

This article was initially published in the context of the WebSummit 2020 attended by the EIB Group. https://bit.ly/3tOv1th



European Investment Fund (EIF)

Europe's leading provider of risk financing for SMEs. Cornerstone investor in VC and PE funds. Making debt financing more affordable for entrepreneurs. @EIF_EU