Transcript AECM and differente guarantees

AECM and the Different
European Guarantee Models
Berlin, 5 May 2006
M. Sousa Branca
AECM – European Mutual Guarantee Association
 Founded in 1992
 International non-profit organisation based in Brussels
 Open, democratic, politically independent association
 Main objectives:
Representing the interests of members
Partner of the European Commission
Reflects the economic role of Guarantee Entities
Exchange of information for the benefit of SMEs
2
Berlin, 5 May 2006
M. Sousa Branca
3
Berlin, 5 May 2006
M. Sousa Branca
AECM Members’ Main Figures
€ 3 845 million
 Own funds
 Outstanding commitments
€ 38 210 million
 Guarantees granted
€ 14 970 million
 Number of beneficiary SMEs
2 million
(data: 2003 annual reports of AECM members)
4
Berlin, 5 May 2006
M. Sousa Branca
European Union and SMEs
25 countries
455 million inhabitants
 23 million businesses
 99% of which are Micro and SMEs
 75 million jobs
 on average, between 3 and 4 employees per business
 57% contribution to GDP
5
Berlin, 5 May 2006
M. Sousa Branca
European Guarantee Environment
Some general beliefs:
 SMEs require special attention to assure their
access to finance
 Finance is better supplied by banks and other
financial entities
 SME intrinsic risk is often very high in the
viewpoint of lenders / Even higher in the case of
agriculture SMEs
 Guarantee Schemes help overcome this SME
problem
6
Berlin, 5 May 2006
M. Sousa Branca
European Credit Guarantee Schemes
 Private / public initiatives
 National / regional schemes
 Entrepreneurs and SME directly or indirectly involved in
 the shareholding
 credit decision making process
 scheme or MGS daily / strategical management
7
Berlin, 5 May 2006
M. Sousa Branca
European Credit Guarantee Schemes
 Public support provides equity and protection
higher leverage and efficiency
 Counter guarantee
 national / supra national
 provided and funded by the EU Commission and managed by the
European Investment Fund (EIF)
8
Berlin, 5 May 2006
M. Sousa Branca
European Different Models
Guarantee Funds
 Initiative taken by Public Authorities (State, Region...)
 Mainly public shareholding
 Management selected by public majority
 Solvency related to public umbrella
9
Berlin, 5 May 2006
M. Sousa Branca
European Different Models
Mutual Guarantee Schemes
 Initiative of SMEs and SME representative organisations
(such as Chambers of Commerce, Industry and Regional SME Associations...)
 Mainly private shareholding
 Management as a partnership between
SME representatives and bankers
 Mutualism as a core idea
 Self protected solvency with public support
10
Berlin, 5 May 2006
M. Sousa Branca
Guarantee Triangular Relationship
Bank loan
Banks
SMEs
Guarantee
commission
(fee)
Guarantee
Sheme
Guarantee
State
Counter Guarantee
Financial Support
Legal environment and framework
11
Berlin, 5 May 2006
M. Sousa Branca
Benefits for SMEs
 Access to finance and
Access to better credit conditions:
lower interest rates and better maturity terms
Thanks to the compensation of SME collaterals shortage
 Promotion of entrepreneurship (start-ups, take-overs)
 Provision of instruments for SME and their product life cycles
 Availability of advice and coaching
12
Berlin, 5 May 2006
M. Sousa Branca
Benefits for Banks
 Partial outsourcing of credit risk
Guarantee as a clear instrument for risk mitigation
 Guarantees may be combined with several financial products
 Reduction of banks’ capital requirements on SME loan
portfolio (importance of guarantee quality)
 Reduction of banks’ provisions on SME loans
 Possibility for the bank to leverage its assets
13
Berlin, 5 May 2006
M. Sousa Branca
Benefits / Relevance for Public Authorities
 Guarantee Schemes are used as a vehicle for
SME economic policy and SME support
 Possibility to design instruments for macroeconomic
strategy and SME needs
 Subsidy of SME cost of capital (guarantee fee below market levels…)
 Possibility to sit at the Scheme Board (being a Scheme stakeholder)
 Usually responsible for financial funds availability or
Scheme solvency assurance
14
Berlin, 5 May 2006
M. Sousa Branca
Challenges to Guarantee Schemes
General
 Improve SME access to finance in countries with
relatively low rate of financial intermediation
 Particularly within industries with stronger acess to
finance difficulties
 Product diversification in order to guarantee:




15
start-ups
innovative instruments
internationalization
micro-guarantees…
Berlin, 5 May 2006
M. Sousa Branca
Challenges to European Guarantee Schemes
Basel II
 Increase SME credit worthiness
 Strengthen SME equity base (together with venture capital)
 Qualify guarantee so that it may reduce bank
capital requirements
 Improve / develop internal rating (scoring)
methodologies
16
Berlin, 5 May 2006
M. Sousa Branca
Performance Indicators
 Market Relevance
 Additionality
 Effectiveness
 Leverage
 Efficiency
 Sustainability
17
Berlin, 5 May 2006
M. Sousa Branca
Portuguese Mutual Guarantee Scheme
- Counter Guarantee Fund Management
- Portuguese Mutual Guarantee Scheme development and
marketing (“umbrella”)
- Several Back-Office services to Mutual Guarantee Societies
- First level control of the Scheme
- Minority Participations in the MGS share capital
SPGM
EIF
Scheme “holding”
COUNTER
GUARANTEE
Mutual Guarantee
Societies (MGS)
Guarantees
Automatic Counter
Guarantee
FUND
-NORGARANTE
Banks and other
guarantee
beneficiaries
Interest
(FCGM)
- LISGARANTE
Counter
Guarantee fees
Guaranteed
loans
and loan
repayments
- GARVAL
Guarantee fees
- AGROGARANTE
Counter Guarantee held by public entities
SME
MGS shares - mutualism
Mutual Guarantee Societies mainly privately held
All MGS apply a homogeneous credit assessment, according to principles and
rules discussed and approved by all entities of the scheme
18
Berlin, 5 May 2006
M. Sousa Branca
Thank you very much for your attention.
M. Sousa Branca
SPGM – Sociedade de Investimento, S. A.
Porto, Portugal
Managing Director
AECM – European Mutual Guarantee Association
Brussels, Belgium
Vice President
19
Berlin, 5 May 2006
M. Sousa Branca