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Financial Engineering Instruments

Financial Engineering Instruments. 5 December , 2012. Current implementation status. SME. 97% of final recipients in all activities are SMEs Additional resources at SME level: 2.2.1.3.activity more than 180 mil. LVL issued in loans due to guarantees 2.2.1.4.1.activity

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Financial Engineering Instruments

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  1. Financial Engineering Instruments 5December, 2012

  2. Currentimplementation status

  3. SME 97% of final recipients in all activities are SMEs Additional resources at SME level: 2.2.1.3.activity • more than 180 mil. LVL issued in loans due to guarantees 2.2.1.4.1.activity • at least 25% of loan amount must be added to the project by company

  4. Non-performinginvestments 2.2.1.3.activity • 9 credit guarantees, 0,58 mil. LVL (0,78% from total) • 2 export credit guarantees, 0,047 mil. LVL (0,74% from total) 2.2.1.4.1.activity • 6 loans with delayed payments of 90 days in amount of 1,16 mil. LVL (3% from total) • Recovery process for 2 loans in amount of 1,18 mil. LVL (3% from total)

  5. Exitstrategy • Agreements with intermediaries foresees that revolving resources must be used for similar purposes • After implementation responsible bodies will specifically decide on further use of revolving resources

  6. Further activities Growth capital fund to provide venture capital finance for growth and expansion of companies, improvement of venture capital market in Latvia Micro loan fund to facilitate access to micro loans for Latvian micro and small enterprises via wider network of financial intermediaries Accelerator funding to improve availability of finance for early stage companies in Latvia

  7. development stages business idea start-up early stage Expansion growth Maturity Finance Market gaps (1) Entrepreneur, family, friends, grants, seed capital funds High Private investors (business angels) Venture capital funds Profitability Subordinated debt (mezzanine) The earlier the stage, the less developed private market Commercial banks (loans, leasing, factoring) Low High Risk Low

  8. Marketgaps (2) • Micro and small companies access to finance • High administrative costs for small investments, unstable cash flow, lack of collateral • Newly created companies access to finance • Unstable cash flow, high business risk, lack of collateral • Export oriented, innovative and technological companies access to finance • High business risk, hard to evaluate, specific project analysis, specific collaterals, unpredictable export market • Export risk insurance • Limited possibility to control business and political risks in export markets • Innovative and hi-tech product development • High business risk, information asymmetry, specific analysis, necessary large amounts of working capital • Equity and quasi-equity instruments • Specific analysis required, informationn asymmetry, high business risk, overleveraged • Lack of collateral, illiquid collateral

  9. Capacityof LatvianGuarantee Agency • LGA has attracted employee from EIF • ProfessionalBoard of LGA (new board member attracted) • Tender completed and agreement on audit signed in November 2012 • Final report of LGA capacity assessment sent to EC by first quarter 2013

  10. Thank you! Adress: Brīvības iela 55, Rīga, LV-1519Phone: 67013101Fax: 67280882E-mail: pasts@em.gov.lv Web: www.em.gov.lv Twitter: @EM_gov_lv, @siltinam Youtube: http://www.youtube.com/ekonomikasministrija

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