Financial Instruments

Nature of financial instruments: special schemes for financing that use resources from various sources.


  • debt instruments;
  • equity and quasi-equity investments.

Mechanism of financial instruments

  • Financial instruments are managed by a Fund of Funds, a body which allocates targeted public funds by implementing special financing schemes. Fund Manager of Financial Instruments in Bulgaria EAD operates as a Fund of Funds (FoF).
  • The managing authorities of EU programmes in Bulgaria conclude financing agreements with the FoF, assigning it the management of resources earmarked for financial instruments within the respective EU programme.
  • Applying a uniform EU methodology, the FoF conducts a preliminary assessment of the supply and demand for financial products and establishes the size and type of financial instruments, in line with the goals set in the respective EU programmes.
  • The FoF selects financial intermediaries in open and transparent procedures in accordance with EU regulations and established market practices.
  • The FoF provides public resources to financial intermediaries, which top it up with private resources.
  • The financial intermediaries provide the resources to eligible final recipients in the form of credit, equity and quasi-equity financing.
  • The use of resources in financial instruments is controlled by national and EU institutions at all levels — the EU programme, the Fund of Funds, the financial intermediary and the final recipient.

Sources of financial resources

  • the European Structural and Investment Funds (ESIFs); 
  • national financing from EU operational programmes;
  • funds raised additionally from the private sector. 

Goals of financial instruments

  • ensure more efficient use of the public resources compared to grant support; 
  • provide financial support for target groups of final recipients that have limited opportunities to access usual bank credit or investment on the free market;
  • enable the implementation of economically viable projects with little or no business track record or which have been assessed as risky;
  • overcome identified market inefficiencies;
  • contribute to the achievement of the EU strategic goals and to the implementation of EU policies.

Advantages of financial instruments

  • Overcoming market inefficiencies

Financing is available to target groups that have limited access to financial resources from the private sector and whose economic activity is important for the achievement of the goals of the respective EU programme.

Financial instruments are provided under more relaxed terms in comparison to other similar financial products on the free market.

  • Leverage effect

In addition to the public funds, financial instruments mobilise private financing, which increases the total amount of support available to final recipients.

  • Recycling of resources

Resources repaid by the financed projects and potential other income earned by them are re-used to provide support to other eligible final recipients and projects.

  • Fiscal discipline

Resources provided by way of financial instruments are subject to repayment by final recipients. This results in more efficient use of the public resources compared to grant support and reduces the likelihood of enterprises becoming dependent on public support.

  • Transfer of knowledge and experience

Final recipients can benefit from the expertise of financial intermediaries and other partners from the private sector in designing economically viable projects.