Guarantee Schemes response to the financial crisis
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Guarantee Schemes response to the financial crisis APEC Symposium on SME strategies to manage the impact of the Global Financial Crisis – Session II: Managing the liquidity crisis and the credit crunch. Marcel Roy Secretary General AECM Rue Washington 40, 1050 Brussels, Belgium

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Marcel Roy Secretary General AECM Rue Washington 40, 1050 Brussels, Belgium

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Marcel roy secretary general aecm rue washington 40 1050 brussels belgium

Guarantee Schemes response to the financial crisis APEC Symposium on SME strategies to manage the impact of the Global Financial Crisis – Session II: Managing the liquidity crisis and the credit crunch

Marcel Roy

Secretary General

AECM

Rue Washington 40, 1050 Brussels, Belgium

Tel/Fax: 00 32 / 2 640 51 77 – [email protected] / www.aecm.be


Aecm background

AECM Background

34 active schemes in 18 countries

Key figures (31.12.2007, in €1.000.000)

Own Funds € 6.125

Guarantees issued in 2007 € 23.972

Outstanding commitments € 55.423 Leverage Cap / commitments > 10 x

SMEs beneficiaries > 1,7 Million


Strong market demand for guarantees

Strong market demand for guarantees

2000 - 2007: Portfolio growth by 89,8 %


Impact of the crisis

Impact of the crisis

SME financial situation:

SMEs are impacted in various ways:

Banks need to manage balance sheets and increase regulatory capital positions => risk of credit rationing

SMEs are affected as suppliers to large companies, particularly in problem sectors (automotive and building)

Increase of payment delays => risk default of otherwise healthy SMEs


Impact of the crisis1

Impact of the crisis

Access to finance situation:

Contrasted picture according to MS:

Intensity of crisis impact very different, from very low (Czech Rep., Slovakia) to very pronounced (Hungary, Estonia)

Supply: More difficult access to finance for SMEs (credit conditions tightened, more selective credit policy according to creditworthiness, reduction or cancellation of credit lines)

Demand: Decreasing demand for investment loans, increasing demand for working capital loans


Guarantee schemes s strength in crisis

Guarantee schemes’s strength in crisis

Unique intermediary function between SMEs, lenders and Public authorities, based on consensus, added value and shared responsibility for all parties involved


Types of guarantee products offered

Types of Guarantee products offered

Generally: Straight-forward loan guarantees for SMEs:

Guarantee issued on behalf of SME to bank to substitute missing collateral

In case of default, GS pays out amount of loan covered by guarantee (usually between 50 – 80% to lender

Offered for all stages of SME life-cycle (Start-up – Transfer)

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, etc.


Guarantee schemes response

Guarantee schemes’ response

High degree of added value of guarantees for banks:

Risk sharing: Up to 80% of credit amount

Reliable partner: Specialized entities subject to supervision and prudently managed

First class collateral: Often payable on first demand and for face value of guarantee amount

Mitigation effect: Presence of guarantee can lower regulatory funds requirements (subject to conditions)

Specific credit assessment: Knowledge of local context and SME sector (qual. Factors), individual assessment process

Development of new lending business: Build-up of SME portfolio with cross-selling opportunities


Guarantee schemes response1

Guarantee schemes’ response

High degree of added value of guarantees for SMEs:

Access to finance for economically sound projects

Recognition of qualitative factors in MGS risk analysis

Support services and third party analysis by sectoral specialists of business plan and model

Non-profit orientation of Guarantee scheme

Intermediary function of Scheme towards lender

In mutual schemes, participation in management of scheme


Guarantee schemes response2

Guarantee schemes’ response

High degree of added value of guarantees for public authorities:

Individual risk assessment and follow-up

Financial intermediary for public policy:

Counter-guarantee element (reg., nat., EIF-CIP)

=> Cost effective leverage effect of MGS’ regulatory own funds:

Leverage effect of 10 x € 1 with e.g. a 50% coverage :

€ 10 of guarantees

€ 20 of bank loans

even higher amount of final investment


Contact

Contact

AECM

Rue Washington 40

1050 Brussels

Belgium

Tel/Fax: 00 32 / 2 640 51 77

E-mail: [email protected]

Website:www.aecm.be


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