European Solidarity Voucher to ensure liquidity of SMEs especially in the EU’s tourism sector Challenge sponsored by the European Commission The impact of the coronavirus crisis on SMEs and micro-businesses in general and those in the tourism sector especially is huge. To remedy this we propose to mobilize potential clients of these businesses to buy digital vouchers for future consumption. This European Solidarity Voucher Scheme aims at keeping small SME’s and especially suppliers in Europe’s tourism sector (restaurants, bed&breakfast, small hotels) solvent during the COVID 19 crisis by selling services now and delivering them later. The project is complementary and cooperates with the pan European consortium Corazones against Covd19. That project focuses on increasing the impact of government fundings introducing a high local multiplier that stimulate the local economy as a whole. This project focuses on increasing the impact of the money consumers are willing to invest in claims on the small suppliers. Overall challenge: Solidarity Vouchers to deliver liquidity for Europe’s tourism sector The European Solidarity Vouchers (voucher) Scheme incentives customers to prepay services from local suppliers and consume the services after the crisis. Further development will be that these local digital prepayments will be extended to the tourism sector. Under the scheme customers would buy digital credits that are can only be spent at local SME’s. An emphasis of the solidarity scheme is that consumers are joining efforts to support small businesses. This project cooperates with the impact multiplier program that will be implemented by a consortium of European regions, presently representing 6 countries but soon to have partnerships in every European country. In that project payment environments will be introduced dedicated to increasing the impact of public expenditures by limiting the expenditures for a period and accelerating during that time the spending, earning, spending using a negative interest rate. The objective is to increase the impact threefold. The technology has been tested in practice since it was chosen by the e-pay industry as e-pay innovation award winner enabled by the horizon program to create pilots. In this program, the consumers in the EU regions will be asked to follow the lead of their governments and commit money to be spent in the local environment.
The money these consumers pay for the digital vouchers will be used to give cash loans to the SME’s. These themselves would offer discounts (10-15%) to contribute to the securization of the value of the vouchers. Most of the income the negative interest will generate will also be used to compensate for SME’s that do not survive the crisis. The regional governments will be asked to supplement the funding needed might the defaults pass the 22%, In this way consumers would make a critical contribution to finance the SMEs and micro-businesses through the purchase of the solidarity vouchers, knowing that they won’t be able to use the vouchers for the next couple of weeks or even months. Specific challenges: 1) The key challenge of the scheme is to convince citizens to purchase solidarity vouchers and make them understand that through this prepayment they generate the wider impact on the local economy which is needed to deliver a vibrant local community instead of becoming the victim of a depression 2) Covering the financial risks of potential bankruptcies over the 22% that can be generated by the project itself. One way is to have this burden shared by the buyers of the vouchers through paying a transaction fee the moment they pay with their vouchers. Another way would be an EU wide guarantee scheme where the European Commission absorbs the risks of defaults that pass the 22%. In any case, the increased economic activities boosted by the high-speed circulation of both the regional expenditures as the consumer investments would significantly lower the risk of bankruptcy of SMEs. The experience in the Horizon supported pilot Sardex shows a 68% improvement against the risk that would exist without the additional sales because of the dedicated payment environment. 3) Social Economy: In the foreseen project part of the income generated by the negative interest rate will be used to stimulate the civil society, in order to have a balanced recovery of the full scope of society The software used by the consortium (Cyclos.org) allows creating preferences for the most vulnerable businesses such as in the tourism sector. The most likely regions to start the project are located in Greece, Italy, Spain, France, England, Belgium, and the Netherlands. The idea is to raise funds to enable one region in every EU country to act as a pilot for its country. The objective is to raise funds that enable all these regions to start. These regions will be responsible for supporting other regions inside their country to copy the program. The increase of the Velocity of expenditures will weaken and no longer be necessary once employment figures rise and businesses deliver at full capacity. Clearly, the impact of the program will last longer and have more impact on the economies of regions that suffered a fragile economy even before the corona. The purchasing power of consumers varies significantly across Europa’s regions and the uptake of the solidarity voucher scheme might vary significantly across Europe. This, however, will change as soon as the additional circulation of money will reach out to the level of employees who form the bulk of the local consumers. In a later stage, the option will be added to buy vouchers European wide to support tourist facilities.
4) Uptake of the scheme For this to happen very strong communication and a strong outreach strategy would be needed. The involvement of the regional community will help a lot. The fastest way to reach the most possible amount of SMEs and consumers is the link to the consortium of regions that will introduce the impact multiplier in their environment to be used to increase the impact of the money they spend in the region. The main message of the communications campaign to the customers/consumers that is the focus of this project is that restoring the full width of the business community is in the interest of all businesses and inhabitants. 5) The partnering Social Trade Organisation has broad experience with implementing payment systems in environments with limited digitalization and digital skills of SMEs, because it facilitates providers that serve millions of very poor clients in Asia and Africa. Voip, SMS, USSD, apps on smartphones, NFC, smartcards, and QR codes all are available to facilitate even small businesses in the tourism industry that only have old mobiles of fixed lines. The objective is to involve the communities around vulnerable businesses and make the digital vouchers a tool that small businesses profit from regardless if they have an online presence.
6) Technological Solutions The dedicated payment environment can be hosted regionally and will be also offered on a European scale to limit costs and facilitate it to communities that lack the skills or facilities the solution themselves. Initially, these will be focussed on the region, but at some point longer distance voucher support will be facilitated, potentially introducing a quasi exchange rate to balance trade between the regions.
7) Role of E-platforms There will be no need to spend money on e-platforms because the match of the customers with the businesses can be made in the digital environment created which offers a marketplace next to the dedicated payment platform.
The program could be implemented in parallel with the implementation of the impact multiplier in the regions. Special attention and budget might be needed for communities that are more dependent on the income from tourism than others. In the regions, the governance structure is in the hands of the political authorities.
The Member States would be asked to use the payment environment of the impact multiplier as a tool to distribute the support money. The European Investment Bank and National Promotional Banks should be asked to take a role in guaranteeing the risk that passes the 22%.
EU should be asked to help to finance the start-up costs of the first demonstration project in every country.
Organizations of SMEs and micro-businesses could join the organisation in their region and help to onboard their members. 9) Economic Impact and Benefits of an EU Solidarity Guarantee Scheme This project and its sister project to increase the impact of the expenditures of the governments can help small businesses on loans and on increasing their sales. On many occasions the additional turnover will over time enable the repayments. Even if this avoids a long-lasting depression many tourist facilities normally have a 100% occupation. These cannot extend their sales when things get back to normal. So repayment will be very slow or should be supported by post covid support programs. The expected economic impact of the two programs together can be huge both in the regions that first employ the approach as those that follow their example. Hundred thousands of small businesses will benefit from the program, first of the loan, and later on the additional sales.