International Seminar on Guarantees SME and Medium Business Condition in Europe and the Role of Guarantee Schemes in There Access to Financing José Fernando Figueiredo, Special Honorary Chairman of AECM Chairman of SPGM CEO of Portuguese Development Institution - IFD Bali, 16 November 2015

I.AECM Facts & Figures II.Typologies of Guarantee schemes in EU III.Example of private/public guarantee schemes IV.Final remarks Content

I.Facts & figures about AECM members Content

 Founded in 1992 by 5 members from Belgium, France, Germany, Italy & Spain  In 2015 = 41 members in 25 countries  Total volume of outstanding guarantees in portfolio end of 2014: approximately 79.2 billion EUR  Number of outstanding guarantees in portfolio end of 2014: about 2.9 million active guarantees I. AECM - facts, figures & role:

 AECM mission consists of :  Representation of interests of the member organizations towards the EU institutions and multilateral institutions (banking legislation, EU support programmes, SME policy, state aid regulation, etc.)  Platform of exchange of best practices between members (Working groups, Seminars, Training, etc.)  Promotion of guarantee instrument : In the EU towards EU member states and institutions (specially the European Commission and the EIF/EIB group), Outside EU in cooperation with multilateral bodies (e.g. OECD, World Bank/IFC) Networking with other Guarantee organizations outside EU (REGAR – latin america, ACSIC - asia, Mediterranean basin, Africa) Role of AECM

Proportion of outstanding guarantees in portfolio of each country towards AECM total (values in %) Figures about AECM members

Volume of Oustanding Guarantees (in portfolio) scaled by GDP at market price (values in %) AECM: Guarantee & Counter-guarantee activity in figures

II.Typologies of Counter-guarantee & Guarantee schemes in EU Content

In general, we can observe in Europe a great variety of different legal and operational frameworks for counter- and guarantee schemes, reflecting local needs. Nevertheless it is possible to identify some main models: 1.Ownership: Fully mutual (e.g. SOCAMA, Confidis) Private: funded by SME or banking associations (e.g. VDB) Fully public (e.g. Invega, KredEx Fund, AWS, etc.) Presence of mixed models (SPGM/SGM Portugal, SGR Spain) Typologies of Counter- and Guarantee Schemes in the EU Shown on the graphs on the next 2 slides

 In general, identified main models: Typologies of Counter- and Guarantee Schemes in the EU

1.State support: Counter-guarantees: regional, national level or EU–level Contributions to own funds (i.e. PMV-Belgium, etc.) Counter- & Co-guarantee mechanism, in general Typologies of Counter-Guarantee and Co-Guarantee Schemes in the EU On the next slide: Counter-guarantees received by AECM members

 AECM members benefiting counter-guarantees: Mutual and none mutual members: Typologies of Counter- and Guarantee Schemes in the EU

3.Legal form: Cooperative or mutual societies Limited companies Foundations Funds Development banks, agencies, others 4.Supervision: Mono-product banking licenses Financial intermediary statute Non-supervised (very few cases) Typologies of EU-Guarantee Schemes

5.Distribution: Banking partners Direct guarantees Individual approval Portfolio guarantees 6.Product types: Loan default guarantees Other guarantee types: VC, mezzanine, leasing, project guarantees, export, student loans, housing, etc. Other SME support instruments (subsidized loans, mezzanine finance, venture capital, coaching, mediation services, etc. ) Typologies of EU-Guarantee Schemes

III. Characteristics of private guarantee (with public counterguarantee) schemes Content

16 III. Characteristics of private guarantee (with public counterguarantee) schemes Like all members of AECM also the mutual / private ones are characterised by a diverse landscape of institutions due to different economic / historical backgrounds and legal contexts across the respective countries. Yet they all have in common the mission of providing loan guarantees for SMEs who have an economically sound project but cannot provide sufficient bankable collateral.

17 III. Characteristics of private guarantee (with public counterguarantee) schemes Their activity is based on a broad consensus between authorities, SME lenders and borrowers. Their particularity is that they always involve entrepreneurs / the private sector in one way or the other (shareholding, decision taking, management mechanisms). They are significantly more developed in OECD countries than in non-OECD economies. Mutual guarantee schemes are among the oldest existing guarantee schemes.

18 III. Characteristics of private guarantee (with public counterguarantee) schemes  Ownership:- fully mutual, i.e. entrepreneurs (ex. TESKOMB / Turkey) - private: funded by bodies who are representing businesses or have a strong interest in SMEs (ex. German guarantee banks) - mixte / private and public (ex. SGM/SPGM Portugal, MCAC / Luxembourg)  Public support: - some benefit from a public counter-guarantee (ex. Spanish guarantee societies) - some have no public support at all (ex. SIAGI / France)

19 III. Characteristics of private guarantee (with public counterguarantee) schemes  Legal form:- cooperative or mutual societies (ex. Confidi / Italy) - companies with limited liability (ex. German guarantee banks) - association (ex. SOCAMA / France) - funds (ex. Romanian Guarantee Fund for Private Entrepreneurs / FRGC)

20 III. Characteristics of private guarantee (with public counterguarantee) schemes  Banking supervision: - some are supervised (ex. SGM Portugal or 60 larger Confidis / Italy) - some are not (ex. 202 smaller Confidis / Italy )  Organisation:- some operate fully independently (ex. German guarantee banks) - others benefit from partly centralised services (ex. Portuguese guarantee societies have back office at SPGM

21 III. Characteristics of private guarantee (with public counterguarantee) schemes  Area of activity: - some work in a specific region only (ex. (ex. Belgian „société de cautionnement mutuel“) - some operate nationally (ex. SIAGI / France)  Beneficiaries:- in some cases = SMEs in general (ex. Romanian Guarantee Fund for Private Entrepreneurs / FRGC) - in some cases = certain group of companies (ex. Luxembourg – respective chamber related only) - in some cases = certain sector(s) (ex. OINARRI = Spanish guarantee society for the social economy)

22 III. Characteristics of private guarantee (with public counterguarantee) schemes  Partners:- all banks (ex. Belgian „société de cautionnement mutuel“) - mono-banking (ex. SOCAMA / France)  Profit:- some are non-profit (ex. TESKOMB / Turkey) - some are profit oriented (ex. Romanian Guarantee Fund for Private Entrepreneurs / FRGC)

23 III. Examples of private-public guarantee schemes: From Portugal – SPGM/SGM In Portugal there are  3 regional guarantee societies (Norgarante, Garval and Lisgarante)  1 national guarantee society for the agribusiness sector (Agrogarante) and  SPGM, which has the role of a holding society rendering a variety of services such as accounting, management of the accounts to be paid out and to be received, information technology, and contentious to the 4 guarantee societies. Moreover, SPGM manages the counter- guarantee fund – FCGM.

24 National regional distribution of the PMGS covers the whole national territory, being dedicated to the rural economy III. Examples of private-public guarantee schemes: From Portugal – SPGM/SGM

25 III. Examples of private-public guarantee schemes: From Portugal – SPGM/SGM  The social capital of the Mutual Guarantee Societies is owned amongst others by enterprises, enterprises associations, credit institutions and the SPGM.  The mutualism-based characteristic results from the fact that the companies which benefit from these guarantees are shareholders of the Mutual Guarantee Societies.

III. Examples of private-public guarantee schemes: From Portugal – SPGM/SGM EIF / EU guarantees the FCGM FCGM counter guarantees the MGS MGS guarantees the Banks Banks lend to SME SME use loans for investment or working capital Portfolio Guarantee: x% of each individual counter-guarantee issued by FCGM, with limit of y% of total counter- guarantees portfolio of FCGM Individual Guarantees : x% of each loan (principal). Limit for the global guarantees amount just the limit defined for the global credit line, if any. No cap. Counter-guarantees automatically the MGS portfolio: x% of each individual guarantee issued by the MGS. Uncapped. Limit only the one defined for the global credit line, if any defined Banks lend money to SME according to conditions defined at “Credit Line” Protocols: maximum amounts per loan, terms and interest rates (spreads), as well as guarantee fees and counter-guarantee percentage on each guarantee and delivery process defined in these Protocols. Prices according to rating.

III. Examples of private guarantee schemes: From Portugal - SPGM EIF / EU guarantees the FCGM FCGM counter guarantees the MGS MGS guarantees the Banks Banks lend to SME SME use loans for investment or working capital 50% of each counter- guarantee with “cap rate” of 8%: nominal EIF guarantee, limit of losses % of each loan (principal): % of each guarantee: Credit line of:

28 III. Examples of private guarantee schemes: from France - SIAGI Société de caution mutuelle de l’Artisanat et des activités de proximité.

29 III. SIAGI – Capital providers , increase of capital: Chambers of skilled crafts 61% Banks 24% Bpifrance 15% In 1966, founded by the chambers of skilled crafts In 2005, some banks join as capital provider

30 III. SIAGI, for whom?, for what? Eligible projects Purpose of the loan: Creation, Transfer, Development Medium- and long-term credits, leasing… Eligible projects Purpose of the loan: Creation, Transfer, Development Medium- and long-term credits, leasing…

31 III. SIAGI - Specificities  Unique status:  Private company, whose majority belongs to public entities  Non-consumptive regarding public funding  Mixed governance balancing the interests of banks and small enterprises  Self-financing: mutual guarantee fund  Solidarity among borrowers  Adjustment of contributions to the rules of risk mutualisation

32 III. SIAGI - Specificities  For 50 years, a double positioning:  Proximity in the territories  Analysis of files on a case by case basis: no scoring  A flexible structure that drives to innovating: the example of the measure of a pre-guarantee of a loan: analysis of the files prior to the bank

33 III. SIAGI – Pre-guarantee device  An existing circuit in other countries: Belgium and Croatia  A reversed circuit: economic and financial validation, prior to a meeting with a bank  An intermediate circuit: origination by local chambers and professional organisations

34 III. Conclusion: SIAGI and AECM Being member of AECM means for SIAGI:  Expose an economic French model which is mature  Public/private partnership, next to Bpifrance, the French Regions, the EIF, the Insurance branches of certain banks  Multi-banking functioning  Benefit from the experiences of other members and share our experiences (crowdfunding)

IV. Final remarks Content

Final Remarks  SMEs are extremely important as:  They are crucial for job creation and even in situations of crises they tend to be quite resilient  They are a platform for the renewal of the economic tissue in the countries young entrepreneurs, small micro, growing sme, they are all very important to bring modernity to the economies  They constitute an important tool to fix people in the regions the social fabrics can benefice of a solid SME structure

Final Remarks  Thus it is fundamental that policy makers consider this dimension of the economy of a country while designing public measures:  The guarantee instrument is crucial in facilitating SMEs’ access to finance both for debt and equity needs, as according to studies final result is positive for the tax payers  Coaching very important in many markets as young entrepreneurs and many micro firms need support to develop their ideas  Other initiatives such as red tape cutting, are also determinant an adequate legal and institutional framework (education / innovation / technology) framework essential to the creation of a real entrepreneurial ecosystem

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