Transcript Rural Credit Guarantee Foundation (AVHA)

How to support SMEs with credit guarantees?
The case of the Hungarian Rural Credit Guarantee Foundation
László Tóth, Deputy CEO
20th of November, 2014
Rural Credit Guarantee Foundation (AVHA)
• Rural Credit Guarantee Foundation was established under the PHARE
Programme in 1991
• Initial capital: EU (PHARE) + Hungarian Ministry of Agriculture + 5
commercial banks
• Legal form: foundation, not-for-profit
• The mission of the Foundation is to help rural and agricultural SMEs to get
access to finance
• Since 2011 operating as a financial enterprise equivalent to banks
• The Foundation is in partnership with 150 financial institutions (banks,
saving cooperatives, leasing and factoring companies)
• Underlying transactions can be: loans, bank guarantees, factoring and
leasing
• 85% counter-guarantee by the Hungarian state budget
Rural Credit Guarantee Foundation |
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AVHA’s guarantee portfolio
AVHA guaranteed loans
Clients by SME segments, %
160
150
140
Billion HUF
EUR 497.8 million
Small
12%
Mediumsized
3%
130
120
110
100
EUR 336.3 million
90
80
Micro
85%
Since 2007 AVHA almost doubled its outstanding portfolio in HUF terms: from 85.2
billion HUF on 31.12.2007, guaranteed loan amount increased by 81% to 154.5 billion
HUF
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Focus on agriculture and rural development
• Pricing – fees actually payable by the SMEs
Investment loan guarantees
Guarantee rate: 50%
Guarantee rate: 80%
agriculture & agribusiness
0.1875%
0.3%
rural development
0.1875%
0.3%
Guarantee rate: 50%
Guarantee rate: 80%
0.25%
0.4%
0.3125%
0.5%
Working capital loan guarantees
agriculture & agribusiness
rural development
• 20-80% guarantee rate
• Collateral requirement: 10%-30% depending on loan amount and credit rating
• Duration: maximum 25 years
• Maximum guarantee amount per company: € 2.5 million (loan amount is not limited)
• Guarantee: state aid content (de minimis, agricultural de minimis etc.)
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Geographical coverage of current portfolio
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The Hungarian Guarantee Model
State
Counterguarantee
Guarantee societies
(GS)
Guarantee fee subsidy
Guarantee
Banks
Loan
SMEs
Rural Credit Guarantee Foundation |
State:
•Co-founder of the guarantee schemes
•Provider of counter-guarantee (85%)
•Provider of fee subsidy
•Regulator
Guarantee societies:
•2 main players, different legal forms
•Not-for-profit institutions
•No regional or sectorial focus (excl.
AVHGA)
•No physical network
•First call guarantee
•Risk taking up to 80 %
•No mutuality
•Individual guarantee vs portfolio
guarantee
•Main players are equivalent to banks
under Basel 2
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The Hungarian Guarantee Model
State
Counterguarantee
Guarantee societies
(GS)
Guarantee fee subsidy
Guarantee
Banks
Loan
SMEs
Rural Credit Guarantee Foundation |
Banks:
•Guarantee applications submitted
through banks
•Own products + government loan
programmes
•Bilateral cooperation agreement
with guarantee societies
SMEs:
•All SMEs are eligible for
guarantee in principle
•Clients to pay guarantee fee
•Clients to provide collateral
•No direct contact with the
guarantee societies
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The Hungarian Guarantee Model - Cash-flows
Guarantee premium
SME
State
2.fee
3.Guarantee
premium subsidy
Bank
In case of defaults
SME
State
3.Recovery
2.Counter-guarantee
Bank
4.Recovery
1.fee
Foundation (AVHA)
Rural Credit Guarantee Foundation |
5.Recovery
1. Call of guarantee
Foundation (AVHA)
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Legal framework
EU
regulations
on state aid
Banking
Act
Civil Code
AVHA
Agricultural and
rural focus
Bankruptcy
Law
Budget Law
Regulations
of Central
Bank
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Advantages of guarantee for stakeholders
• Advantages for SMEs:
Strengthens the negotiation power of the entrepreneur (state counter-guarantee )
Easier access to finance (lower collateral requirements, lower interest rates, higher
loan amount, longer term)
Subsidized guarantee fee at 50% guarantee rate: 0.1875-0.3125 % p.a.
• Advantages for Banks:
Risk sharing tool  it minimizes the potential loss for the bank
85% state counter-guarantee  lower capital requirements (Basel 2)
First call  immediate return in case of default
• Advantages for the State
Helping SMEs’ access to finance
Boosting economic growth
Rural Credit Guarantee Foundation |
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Outstanding guarantee amount by countries as a
percentage of GDP
8
7.3
7
6.2
6
% of GDP
5
4
3
2.28
2
1.78
1
0
1.4 1.35
0.76 0.66
0.57 0.56 0.54 0.53 0.52
0.41 0.41 0.3
0.22 0.2 0.14 0.13 0.1
0.01
Source: OECD, AECM
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Thank you for
your attention!
Mr. László Tóth, Deputy CEO
www.avhga.hu
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Rural Credit Guarantee Foundation | 22 Juni, 2010