Банкеръ Weekly

Briefs

PROMOTION BANK WANTS EUROPEAN GUARANTEES FOR CREDITS

Promotion Bank is the first Bulgarian institution that is ready to become a financial mediator of the European Investment Fund (EIF). The news was broken by the Chairman of the Agency for Small and Medium-sized Enterprises (ASMEs) Angel Despotov during the Fourth Roundtable of bank institutions and SMEs, held on May 8 and 9 at the Boyana residence.In the words of Albrecht Mulfinger from the European Commission (EC) the forum's aim is to popularize the successful practices for financing micro-companies.The participants in this meeting will share their experience and specific decisions, which have resulted in cheapening of financial resources and reducing the risk for banks. In other words, how could crediting of small-sized enterprises be rendered more efficient, Mr. Despotov explained to the BANKER weekly. The EIF is one of the financial instruments with which the European Union (EU) assists the development of SMEs in Eastern Europe. It does not finance companies directly, but uses the mediation of credit institutions, based in the candiate countries for EU membership. These could be banks, gurantee funds, and venture capital funds. EUROPEAN INVESTMENT FUND UNDERTAKES 70% OF THE RISKAlbrecht Mulfinger, Head of Unit, Access to Finance, EC Enterprises Directorate-General, to the BANKER weeklyMr. Mulfinger, during the forum in Boyana you presented a long-term programme for assisting SMEs. What are its main parameters?- This is a programme of the EC for SMEs that has been implemented since 2001 and will be completed till 2005. All canidate countries for accession to the EU can participate in it. Its financial instruments account for 70% of the programme's entire budget of EUR323MN. They are managed by the EIF, which is within the European Investment Bank.What financial instruments does the fund operate with?- Two kinds of instruments. There are instruments directed to businesses which are making their first steps. The aim is to provide capital for setting up a new business through funds for enterprises beginners, business incubators, or other similar organisations. The requirement here is that the respective small or medium-sized enterprise should be established in the last five years. Other financial instruments are collected in the so-called guarantee window, intended to secure micro credits. The EIF grants part of the guarantees to a bank, which extends credits to SMEs. Thus, the fund takes part in the risk which the bank takes when releasing the loans. Has the EIF already begun carrying out any operations in Bulgaria?- No, it hasn't. Bulgaria signed the Memorandum on understanding with the EU and joined the programme only last year.On what conditions would the EIF go guarantee for SMEs' projects?- Principally, the so-called gurantee window secures loans for projects, implemented in the course of ten to twelve years. But everything depends on the terms of the banks which play the part of financial mediators. You mentioned that the companies should had been set up in the last five years in order to take part in the fund's guarantee schemes. What other requirements should potential receievrs of credits satisfy?- There are various possibilities. The already mentioned quarantee window offers four products. The first one is intended for new companies with opprtunites for growth. The second one is orientated to encouraging financial institutions to extend micro loans to existing enterprises with no more than ten employees. We also offer an opportunity for joint guarantees under schemes, covering investments in companies with no more than 250 employees. The fourth product are guarantees, covering portfolio loans earmarked for IT equipment, software and training. Companies with personnel up to 50 people enjoy preferences here. But as rule the conditions are specifeid by teh local bank. In case of failure the fund undertakes up to 70% of these laons' risk. Therefore, the repsective local credit institution is motivated to release the loan as the risk for it is insignificant.

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