Transcript Internationalization of SMEs

Guarantee Schemes in
Europe: the cooperation with
the banking sector
BGK International Seminar
Guarantee Schemes in European Union Countries
– searching for the best model
Warsaw, 9 February 2011
José Fernando Figueiredo
President AECM
Why guarantees ?
–
SME are key actors in the EU economy (also worldwide):
–
–
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They represent an important part of employment and GDP and
are generally important for maintaining the economic and social
fabric throughout the territory.
Credit finance is important to SME in the EU, as they:
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have no or little access to venture capital, mezzanine capital,
bond issues, etc.
–
Have weak own funds positions => limited capability to autofinance investment or working capital needs
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Rely predominantly on loan finance
–
Usually have a relative lack of bankable collateral
Due to the relative lack of collateral, loan finance is more
difficult to obtain than for larger companies
Savings
SME
WHY GUARANTEES?
...STRENGTHEN MARKET MECHANISMS...
Why guarantees ?
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–
Guarantee schemes facilitate access to finance by
providing credit default guarantees for SME that :
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Are economically healthy
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Have an economically meaningful project but at the
same time do not dispose of sufficient collateral to
access bank credit
Guarantee schemes’ philosophy:
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“Help for self help” principle and “risk sharing” with
other financial partners, specially banks, in order to
support SME development
What Guarantee products are offered in
Europe?
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Generally: Credit default guarantees for SME:
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Guarantee issued on behalf of SME to banks to
substitute missing collateral
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Offered for all stages of SME life cycle (from the
financing of start-ups to business transfers)
But also other types of guarantee products offered
by some Guarantee schemes:
Guarantees for:
Micro loans, leasing, factoring, mezzanine finance, risk
capital, internationalization, projects, EU funding, fiscal
authorities, public procurement, etc.
... PRESENCE OVER THE LIFE CYCLE OF THE COMPANY
Business Angels
Venture Capital
guarantees
Maturity
Private Equity
Loans
guarantees
6
M&A
Venture Capital
guarantees
Added value of Guarantee schemes
Advantages to SME:
–
The first and most relevant is obviously the providing of an
alternative way to access the financing need to develop
their projects (naturally for economically sound projects)
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At appropriate prices and for adequate term
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Recognition of qualitative factors in MGS risk
analysis
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Support services and third party analysis by sector
analysis of business plan and model
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Non-profit orientation of Guarantee scheme
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Intermediary function of Scheme towards lender
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In mutual schemes, participation in management of
scheme
Added value of Guarantee schemes
Advantages to Public authorities :
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Helpful tool while designing public policies
• the specialized knowledge can help the authorities in the SME
financing area
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Financial intermediary for public policies:
• Directly or through the Counter-guarantee element (regional, national,
euroepan level EIF-CIP)
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It is an highly cost/effective leverage mechanism:
Example:
Leverage effect of € 1 public investment in counter-guarantee scheme that
has 10 times multiplier, with e.g. a 50% coverage both at counterguarantee and guarantee level:
– € 10 of counter-guarantees
– € 20 of guarantees
– € 40 of bank loans
– even higher amount of final investment
–
Individual risk assessment and follow-up
Added value of Guarantee schemes
Advantages to banks:
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Reduction of bank’s risk exposure, improvement of
credit quality
• The loss given default ration is reduced in the presence of a
guarantee
• Guarantee issuers are private or public financial institutions
(that normally are covered by a public counter-guarantee
mechanism, national or european like EIF), thus increasing the
banks willingness to lend
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The can build up an SME portfolio
• The bank can focus on this specific sector as the guarantee
turns these loans more interesting and profitable
• Risk analysis can be individual or shared between banks and
guarantee entities
Added value of Guarantee schemes
Advantages to banks:
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Financial supervision of the Guarantee Entity
• The guarantee entity will also carry out the follow up of the
SME evolution so giving additional trust and sustainability vis-avis lending partners
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Mutual Guarantee Schemes provides specific
sector knowledge of SME customer in addition to
traditional Banking Sector analysis
• In the particular case of the Mutual Guarantee Societies there
is a special knowledge of the borrowers so an even higher level
of information to the banks regarding risk analysis
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The Guarantee Entities are specialized
• Special knowledge and no competition with the banks
(partners on behalf of the SME)
Added value of Guarantee schemes
Advantages to banks:
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Mitigation effect on risk-asset ratio
• thus reduction on capital consumption by the banks
(depending of the qualification of the guarantee scheme)
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High level of liquidity of guarantee in
contrast to other types of collateral
• most of the times guarantees are first demand and paid
to banks in short time
after claiming
Typologies of Guarantee Schemes
In general, we can observe a great variety of different legal
and operational frameworks for guarantee schemes, reflecting
local needs.
Nevertheless it is possible to identify three main models:
1.
Mixed model of with Private Guarantee entities and Public
counter-guarantee (a sort of PPP) – very frequent in older EU
member states and the more significant in volumes and number
of SME supported;
2. Public Guarantee Scheme or Guarantee Fund – also very
frequent, mainly in new EU member states;
3. Fully Private (Mutual) Guarantee Scheme, without any kind of
support from public authorities – not very frequent - the remaining
existing situations try to find counterguarantee at national or EU
level, for example through the EIF.
Typologies of Guarantee schemes
Main differences between public and private schemes:
PUBLIC GUARANTEE SOCIETIES
PRIVATE GUARANTEE SOCIETIES
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Initiative taken by Public Authorities (State,
Region..)
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Initiative from SMEs and representative
organizations, also banks
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Mainly public shareholding
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Mainly private shareholding
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Directory Board elected or nominated by
state authorities
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Directory Board composed of SMEs,
bankers, private managers …
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Mission: SME support
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Mutuality principles
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Solvency: responsibility through own
funds + public umbrella
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Mission: support member SME
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Self protected solvency through own
funds and provisions + public support
(normally) through counterguarantee
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Cooperative or Ltd Company normally
under financial regulation
•
Other goal: no
•
Ltd company with majority from state or
endowment from public budget
•
Other goal: sometimes the management of
public subsidies
About AECM
35 active schemes in 19 countries
AECM Key figures (provisional 31.12.2009, in €1.000.000)
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Own Funds
€ 7.000
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Guarantees issued in 2009
€ 33.601
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Outstanding commitments
€ 70.000
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Leverage Cap / commitments
> 10 x
SMEs beneficiaries
~ 2,2 Million
Evolution of portfolio of AECM members
SME Finance Days for SMEs – Vilnius - Lithuania – 16
June 2010
The particular case of the
portuguese mutual
guarantee scheme
Protocols with banks
 Special Credit Lines negotiated between government, banks and MGS
 Purpose: financing investment and working capital
Amounts: Max 1,5 million € per SME (positive discrimination for the best SME)
 Maturity : Up to 5 years with 18 month grace period
 Guarantee: 50% to 75%
 Decision time: 3 to 7 working days
 Interest rate: according to rating, from 0,9% to 4% spread
 Guarantee fee: also according to rating, from 0,75% to 2%
 State gives counter-guarantee through the national
counter-guarantee fund up to 80% (90% in certain cases under
Special measures for crisis)
 Guarantee fees subsiized under “minimis”
Evolution of activity
19
Multiplying effects of public + private
allocations to the scheme
Million Euro
Public
Investment
€ 708
€ 132
Private
Investment
Counter
guarantees
issued
Guarantees
issued
€ 4 984
Bank
financing to
SME
€ 9 779
Investment
made by the
SME that got
guarantees
€ 10 226
€ 3 796
Mutual SME:
Employment:
Nº Students:
> 47 000
> 605 000
> 11 300
Thank you for your attention!
Contacts
AECM
Rue Washington 40
1050 Brussels
Belgium
Tel/Fax:
E-mail:
Website:
00 32 / 2 640 51 77
[email protected]
www.aecm.be