Piero Crivellaro Coldiretti Economic Department Berlin, 5° May 2006 The Public and Private Partnership in the agricultural Guarantee Scheme in Italy Coldiretti

Piero CrivellaroColdiretti Economic Department

Berlin, 5° May 2006

The Public and Private Partnership in the agricultural

Guarantee Scheme in Italy

Coldiretti is an AECM Member

(European Mutual Guarantee Societies and Guarantee Funds)

IndexIndex1. Italian Guarantee Scheme and the PPP

at local level

2. Coldiretti and its Guarantee Consortia

3. The Basle 2 Accord and agricultural enterprises

4. What is the role of the Agri-Guarantee Consortia?

5. The PPP at National level together with ISMEA in respect of Basle 2

Italian Guarantee Scheme and Italian Guarantee Scheme and the PPP at local levelthe PPP at local level

PrivatePrivate

PublicPublic

Mutual Guarantee Societies: “Confidi”

National and Regional Funds for counterguarantees / co-guarantees

More than 1,000 Confidi

Confidi and their rolesConfidi and their roles

MUTUAL ASSISTANCEMUTUAL ASSISTANCE

Our objectives are to by-pass the inherent Our objectives are to by-pass the inherent historical disadvantages within the credit historical disadvantages within the credit

system and the relationship with bankssystem and the relationship with banks

Created on a voluntary basis Confidi are mutual guarantee societies whose stockholders are

SMEs

SMEs become members of a Confidi in order to create risk funds and to spread the risk among

members.

Confidi and their risk Confidi and their risk fundsfunds

Risk funds, which provide direct guarantees, are generated by:

•Private resources provided by entrepreneurs who remain the owner of the Confidi

•Public resources provided by local institutions which want to support local SMEs in their access to credit

The first form of Public and Private Partnership is created at local level to

issue guarantees and to support enterprises in their access to credit.

At this level, local institutions provide non-repayable funds which are fundamental for:

• The strengthening of the Confidi’s action;

• The capitalization of their structure;• And for the increase in volume of risk

funds.

Italian Guarantee Scheme and Italian Guarantee Scheme and the PPP at local levelthe PPP at local level

Confidi and their rolesConfidi and their roles

Confidi support SMEs in their Confidi support SMEs in their access to creditaccess to credit

Thanks to guarantees offered by Confidi, SMEs can obtain loans at more equitable

conditions in terms of cost and volume, compared with loans that individual SMEs may

obtain on the basis of their own securities.

Value of Confidi’s Value of Confidi’s guaranteesguarantees

The value of Confidi’s guarantees depends upon:

• READY LIQUIDITY and AMOUNT of risk funds dedicated to the release of guarantees

• DIRECT KNOWLEDGE of SMEs which apply for guarantees

• CLOSE RELATIONSHIP WITH LOCAL ECONOMIES (Confidi are widespread all over Italy)

Basle 2 is changing the above situationConfidi will need new “strengths”

Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia

What is Coldiretti?What is Coldiretti?Coldiretti is the most representative Italian

agricultural organization.

It was created in 1944 and represents 54% of all Italian farmers.

1.4 1.4 Million Members

115115 Regional/Subregional Federations724724 Local offices 5,6685,668 Sections


“To regenerate agriculture” means to discover

once again the core function of agriculture in a

new society, where the relationship between

consumers and farmers becomes more and

more relevant, above all concerning the quality

of food and the integration of farms within the

countryside.

Our project spreads from the agricultural sector to all of society

MULTIFUNCTIONALITYMULTIFUNCTIONALITY

The AIM of COLDIRETTIThe AIM of COLDIRETTI


The Pillars of Coldiretti’s The Pillars of Coldiretti’s project project

To build a constructive dialogue between producers and consumers

To help agricultural enterprises grow and become more competitive

In Italy there are almost 70 Agri-Guarantee Consortia

Coldiretti represents 38 consortia that provide guarantees for agricultural and

agri-business enterprises

These Consortia are constituted as a Cooperative or Consortium of

agriculture enterprises and have a recent history compared to the consortia

of other sectors in Italy.


[email protected] – Budapest 12-13 Jan ‘06

Cuneo

Torino

Novara

Valle d’AostaVeneto

Ragusa

Siracusa

BasilicataCampania

ChietiPescara

Teramo

L’Aquila

Marche

Viterbo

ArezzoPisa

Forlì - Cesena

RavennaFerrara

BolognaModena

Parma

Reggio Emilia

Piacenza

VeneziaRovigo

Vicenza

Treviso

Pordenone

Mantova

Cremona

Brescia

Sondrio

Milano - Lodi

Como

Bergamo

Sardegna

Pavia

Regional Level

Provincial Level


Agricultural enterprises that would like to invest, will be able to count not only on regional, national and European funds but also will have to build a new relationship with banks.

This is particularly true if we consider the impact of:

• Basle 2 Accord

• The reformed CAP

• The new EU rural development framework for the period 2007-2013

The Basle 2 Accord and agricultural The Basle 2 Accord and agricultural enterprisesenterprises

Agricultural enterprises will have to develop a new partnership with

banks to understand the methodology which banks use to evaluate and which new elements are to be considered for

rating.

At the base of the relationship, if both subjects want to have mutual

advantages, there will have to be more transparency and cooperation.


Will agricultural enterprises be able to do this?


What is the role of the Agri-What is the role of the Agri-Guarantee Consortia?Guarantee Consortia?

Guarantee

Consortium

Bank

Bank

BankFarmers provide

information

It converts the information provided by

farmers in a B.P.

The Guarantee Consortium has agreements with

various Banks

For banks – new and more precise information from enterprises will allow banks to understand the

degree of risk and, above all, to supply adequate financial products


For agricultural enterprises who will be able to transfer their

goal/investments to banks, they will receive greater advantages in terms

of credit conditions

The Mission of Agri-Guarantee Consortia for agriculture and for the new EU Rural Development is:To increase the money supplyTo reduce the cost of borrowingTo advise enterprises about their investments

To assist enterprises in their dealings with banks

To develop with enterprises and banks new financial risk models, adequate for the analysis of the structure of agricultural enterprises

What is the role of the Agri-What is the role of the Agri-Guarantee Consortia?Guarantee Consortia?

The guarantee issued by Confidi is not Basle 2 compliant, because Confidi are not able:

• To quantify at any moment the total value of guarantees released;

• to verify – even on the basis of information provided by credit institutions – the status of individual guarantees released in terms of the outstanding total, the quality of the credit, the debtor’s solvency

Confidi are also not supervised financial intermediaries

And, above all, its guarante is a Subsidiary Guarantee

Eligibility of guarantees in Basle 2 and Eligibility of guarantees in Basle 2 and EU Directive on “Capital Adequacy”EU Directive on “Capital Adequacy”

The PPP at National level together The PPP at National level together with ISMEA in respect of Basle 2 with ISMEA in respect of Basle 2

ISMEA – Rural Market Services Government Agency (Supervised by Ministry of Agriculture)

In 2005, ISMEA’s guarantee activities passed to SGFA (company 100% owned by ISMEA) which now provides:

•First-Call Guarantees•Co-Guarantees•(State) Counter Guarantees

Counter-guarantees are realised by public institutions which provide indirect protection to the lenders (Banks) through the sharing of the losses of

the main guarantor (Confidi). They represent a system of public support to a guarantee scheme because of the recognition of their social role in

assisting SMEs to access loan finance.

The State/Public counter-guarantee is also fundamental, especially in Italy, for the recognition of the first guarantee issued by Confidi with respect

to the Basle 2 guarantee requirements.


The counter-guarantee released by ISMEA is there:

•To Protect the banks on the disbursement of the loan

•To Cover the bank in case of Agri-Consortia bankruptcy

•To Create validity for the first guarantee issued by Agri-Consortia

Thanks to this public service we can close the guarantee loop and, at the

same time, respect Basle 2 rules


Find out more about Find out more about COLDIRETTICOLDIRETTI

www.coldiretti.it

The official web site

www.campagnaamica.it

www.esportareilterritorio.coldiretti.it

The new web site on rural development

For further information:Piero CrivellaroEconomic Dept

[email protected] +39 064682321Fax +39 064743122

Documents

Piero Crivellaro Coldiretti Economic Department Berlin, 5° May 2006 The Public and Private Partnership in the agricultural Guarantee Scheme in Italy Coldiretti