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Microlending Programme

A programme aimed at improving access to microloans for microenterprises and self-employed individuals for business setup and development. Providing microloans up to 10,000 LVL and grants for loan repayment. Beneficiaries include microenterprises with up to 10 employees. Implemented since September 2011, with 83% of the total budget allocated. Various sectors and regions benefit from the programme, creating and saving jobs in Latvia. The programme plans to continue allocating funds and supporting microprojects.

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Microlending Programme

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  1. MicrolendingProgramme Aleksejs Kanejevs Deputy Head, Programmes’ Development Department 25.04.2013

  2. MicrolendingProgramme • Overallobjective:to improveaccessto microloans to microenterprisesandselfemployedpersonsforsetupanddevelopmentofbusinessactivities • Support: • Microloanup to 10 thsd. LVL (17.3 thsd. CHF); • Grantforrepaymentoftheloan- 500/750 LVL (867/ 1300 CHF) • Beneficiaries: microenterprisesup to 10 employees • Budget: 5.1 mln. LVL (8.9 mln. CHF), ofwhich: • Microloans - 4.6 mln. LVL (8.1 mln. CHF) - 80% financedbytheSwissside; 20% - Hipoteku Banka • Grants – 0.44 mln. LVL (0.77 mln. CHF) – solelyfinancedbytheSwissside • Duration: allocationofloansand grants - untiltheendof 2013 (disbursementof grants – untilJune 2015) • Plannedresults:- up to 650 microbusinessessupported; - up to 900 jobs(bothcreatedand saved)

  3. Results(asof 23.04.2013) TheProgrammewaslaunchedinSeptember 2011 Microloans: • allocated672microloansforthetotalamountof3.9 mln. LVL (6.8 mln. CHF), incl.,: • 656 contractssignedfor 3.8 mln. LVL (6.6 mln. CHF), • 641 disbursedfor 3.6 mln. LVL (6.2 mln. CHF) Implementation status:83% (ofthetotalbudget) Grants: • allocated561grantfor 382 thsd. LVL (662 thsd. CHF) or 87% ofthetotalbudget • disbursed23 grants for15 thsd. LVL (27 thsd. CHF)

  4. SizeofMicroloans • Averageloansize – 5.9 thsd. LVL (10.1 thsd. CHF) • Microentreprisesrequestinvestmentandworkingcapitalloanmainly. 15% ofloansareforworkingcapitalonly (no grantavailable) • 20% of loans have been applied for the maximum amount • Loansup to 1.5 thsd. LVL (2.6 thsd. CHF) arenotwidelyrequested (7%), smallestloans - 650 LVL/ 1127 CHF (2 cases)

  5. SectoralBreakdown • Almosthalfofmicroloansareallocatedfortheprojectsofagriculture(cereal, dairy, vegetables, meetproductionetc.) • 28% ofloansareprovidedforservices(tourism, catering, training, accounting, beautyservices, repairingetc.) • 15% – fortrade(food, wear, shoes, stationery, flowers, sports inventaryetc.) • 8% - formanufacturingindustry (mainly: woodworking, food), 5% - forestry

  6. RegionalBreakdown • The Programme meets its regional targets – micro loans are well balanced in all the regions of Latvia, less demand in Riga region • Micro loans are channeled through Bank branches throughout the whole territory of Latvia (the most active branches in allocating the micro loans are Gulbene (92 loans), Jekabpils (82), Rezekne (78), Daugavpils (68) • A positive feature: micro loans are well demanded also in remote border regions and small sized municipalities, e.g., 8 micro loans are allocated in Rozupe, 7 – Iecava, 6 – Belava

  7. JobsCreatedand Saved Numberofjobs: • 1241– prior to implementaionofbusinessprojects (inaverage1.9 per enterprise) • 1572 – estimatedafterimplementationofbusinessprojects (inaverage2.4) TheProgrammeforesees 900 jobscreatedandsaved

  8. Project Example • Individualenterprisein Codes county, Bauskas region • Specializedtransportservicesforpeoplewithdisabilities • Theclienthaspreviousexperienceinsocialcare (workedatassistanceserviceofOrderof Malta) • Investmentloan – 5 thsd. LVL/ 8.7 thsd. CHF + grant 750 LVL/ 1300 CHF (purchaseofspecializedmicrobusequipedwith a lift)

  9. Project Example(2) • EnterpriseinGailisucounty, Bauskas region • Familybusiness (motherand 2 sons) • Planting, processinganddistributionofcucumbers, cabbage, tomato(distributionthrough a retailchain, cateringcompanies) • Loanforinvestmentandworkingcapital – 8.2 thsd LVL/ 14.2 thsd. CHF + grant 750 LVL/ 1300 CHF (renovationofproductpackingpremises)

  10. Project Example(3) • Enterprise in Ventspils • Female owned business (education in music pedagogy and business management) • Production of singing toy bears (components come from abroad while the 7 lullabies are recorded by the owner of enterprise) • Distribution through toy shops (plans to start exporting to Baltic countries and Scandinavia) • Working capital loan – 5 thsd LVL/ 8.7 thsd. CHF (purchase of relatively large stock of components in order to cut production costs)

  11. Publicity Advertisementcampaigns(bannersinthebusinessnewspaper «Dienas Bizness», 2012) Billboards (30 placesinRiga, Aug./Sept. 2012) Pressreleaseonachievements(Sept.2012) Regularinformationonconditionsoftheprogramme (www.hipo.lv; leafletsinthepremisesofthebranches) Disseminationofinformationinevents(seminars / conferencesorganizedbyotherinstitutions) Shortfilm(arrangedbytheSwissEmbassy, to bepresentedattheAnnualSwissAmbassadorsMeetinginBern, 31.05.2013)

  12. Perspectives The funds available will be allocated by July, 2013 Re-allocation from the Latvian – Swiss Cooperation Programme: In May, 2013 the Bank will allocate additional 99 thsd. CHF in the Loan Fund asBank’sco-financingand submit Advance Reimbursement Request for additional 444 thsd. CHF Additional funding (543 thsd. CHF) allows to continue allocation of micro loans / grants in July/August, 2013 (at least 50 more micro projects to be financed) Afterwards new micro loans will be provided from repayments only (no allocation of grants) 2014 – disbursement of allocated grants; monitoringofprojectsetc.

  13. Conclusions In the frame of previous and current micro lending programmes the Bank has already supported more than 1000 micro businesses! TheBankhasobtainedcompetenceandgatheredexperienceinmicrolending process andinexaminationofneedsofmicroenterprises Thepresenceofregionalbrancheshasensuredavailability to be near theclients– microenterprisesthroughoutthecountry Intheframeofcurrentprogrammemicroloansarepermanentlywelldemanded, includingremoteborderregionsandsmallsizedmunicipality(thustheprogrammepositivelycontributes to thesocio-economicneeds: creationormaintanenceofjobs; developmentofeconomicactivities; increaseofincomes) Commercialbanksarerelucatant to dealwithmicroloansegment(relativelyhighadministrativecosts; additionalbureaucracyrelated to programmes, specialreportingreq. etc.). Also non-bank lending towards micro businesses (e.g., credit unions) is not developed yet The Microlending Programme should be continued in the future years!

  14. Thankyou! Aleksejs.Kanejevs@hipo.lv +371 6777 4091

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