ISMEA – SGFA Rural Credit Guarantee Funds

January 13th 2006 – Budapest

Current Situation

Direct guarantee

ISMEA

SGFA

100%

Ministry of Agriculture

Supervision

Subsidiary guarantee

The Direct Guarantee Fund

Still in progress Three products

First Call Guarantee Co-Guarantee Counter Guarantee

First Call Guarantee

Increases the capacity of enterprises to access guaranteed loans

Enterpriseguarantee

SGFAFirst call

guaranteeLoan

Co-Guarantee With local guarantors

(guarantee consortia) Co-guarantee:

Increases the first guarantor’s capacity to offer guarantees to enterprises

Loan

Enterpriseguarantee

SGFACo-

guarantee

Loan

Local Guarantor

Directguarantee

Counter Guarantee With local guarantors

(guarantee consortia) Counter guarantee:

improves the benefit of the local guarantor’s guarantee in terms of risk mitigation

Loan

Enterpriseguarantee

SGFACounter guarantee

Loan

Local GuarantorDirect guarantee

Direct guarantee

Up to 70% of the loan amount Only long term loans disbursed to small

or medium enterprises

Purpose of the loans

Start up Innovation Enterprise development Debt consolidation

Main points

Risk fee Is it sufficient to offset the risk?

Administrative expenses How to recover the administrative

expenses? Profitability of the activity

How to get a return from the activity?

Risk fee

Basic average fee Increase up to 200% of the basic

value according to the risk evaluation Calculated on the outstanding

guaranteed principal Paid by the farmer once at the loan

disbursement Tuned with historical default rates

Risk calculation

Partnership ISMEA – Moody’s KMV Cooperatives Middle market Farmers

Main elements Purpose of the loan State of the enterprise Quality of the collaterals

Administrative expenses

Administrative fee Charged on the risk fees Calculated on the outstanding

guaranteed principal Paid by the farmer once at the loan

disbursement Recover administrative expenses Generate a positive cash flow

Profitability

Incomes from Interests on risk allowances for

guarantees Portfolio management Interests from bank deposits

Thank you

Giorgio Venceslai venceslai@sgfa.it SGFA Via In Lucina, n.17 00186 – Rome – Italy Tel. +390668406430