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ISMEA – SGFA Rural Credit Guarantee Funds

ISMEA – SGFA Rural Credit Guarantee Funds. January 13 th 2006 – Budapest. Current Situation. Ministry of Agriculture. Supervision. ISMEA. 100%. Subsidiary guarantee. SGFA. Direct guarantee. The Direct Guarantee Fund. Still in progress Three products First Call Guarantee Co-Guarantee

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ISMEA – SGFA Rural Credit Guarantee Funds

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  1. ISMEA – SGFARural Credit Guarantee Funds January 13th 2006 – Budapest

  2. Current Situation Ministry of Agriculture Supervision ISMEA 100% Subsidiary guarantee SGFA Direct guarantee

  3. The Direct Guarantee Fund • Still in progress • Three products • First Call Guarantee • Co-Guarantee • Counter Guarantee

  4. First Call Guarantee Enterprise guarantee SGFA First call guarantee Loan • Increases the capacity of enterprises to access guaranteed loans

  5. Co-Guarantee Enterprise guarantee Local Guarantor Direct guarantee SGFA Co- guarantee Loan Loan • With local guarantors (guarantee consortia) • Co-guarantee: Increases the first guarantor’s capacity to offer guarantees to enterprises

  6. CounterGuarantee SGFA Counter guarantee Enterprise guarantee Local Guarantor Directguarantee Loan Loan • With local guarantors (guarantee consortia) • Counter guarantee: improves the benefit of the local guarantor’s guarantee in terms of risk mitigation

  7. Direct guarantee • Up to 70% of the loan amount • Only long term loans disbursed to small or medium enterprises

  8. Purpose of the loans • Start up • Innovation • Enterprise development • Debt consolidation

  9. 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?

  10. 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

  11. 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

  12. 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

  13. Profitability • Incomes from • Interests on risk allowances for guarantees • Portfolio management • Interests from bank deposits

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

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