25. April Role of Guarantee Funds The Role of Guarantee Funds in Microcredit Workshop EMN-Conference Nice, 9 th September 2008, – Moderator: Martin Jung, EVERS & JUNG

25. April 2007 Role of Guarantee Funds 2 Panelists José Fernando Figueiredo – President (SPGM - Portugal) and Chairman (AECM - European Association of Mutual Guarantee Funds) Nicolas Pirotte – Advisor (Sowalfin - Belgium) Karol Sachs – President (Febea - European Federation of Ethical and Alternative Banks and Financiers - Belgium) Anneli Soppi – Development Manager (FINVERA – Finland) Speaker Martin Jung – Managing Partner (EVERS & JUNG - Germany) Moderator

25. April 2007 Role of Guarantee Funds 3 Credit Guarantee Schemes (CGS) Guarantee Societies that have the sole purpose of providing loan guarantees (Counter-)Guarantee schemes/funds set up in institutions with a broader focus (development banks, regional development agencies etc.) Counter-Guarantee Facilities (EIF CIP SME guarantee facility for microcredits) Institutions providing guarantees Individual guarantees that provide case by case protection for loans where a guarantee scheme co-guarantees or counter-guarantees the risk taken by a lender (Bank or MFI) (e.g. CERSA, Spain) Portfolio guarantees where a counter-guarantee is provided for a specific portfolio of loans of a lender (EIF CIP SME guarantee facility for microcredits) Types of guarantees

25. April 2007 Role of Guarantee Funds 4 Credit Guarantees Guarantees do never cover 100 % of the risk. This would set the wrong incentives for the lender and would be against EU State Aid rules. Normally the guarantee only covers the risk for the lender, the borrower is still fully liable for the loan. Lengthy an costly decision procedures can become a major problem, if several institutions share the risk for a loan. General aspects

25. April 2007 Role of Guarantee Funds 5 EU BEST Report on Guarantees The Socama Express Loan does not require any pledge on the private assets of the entrepreneur. Decision criteria are simplified and the decision is made within three days. Confidi Sardegna is a guarantee society which is member of Fedartfidi. They have designed a microcredit guarantee based on a flexible decision process in which simplified decision criteria are taken into account. It is distributed by the network of Artigiancassa and regional banks. KredEx is also setting up a mechanism of microcredit loan guarantee with a delegation to the bank in order to speed up the procedure. In Spain, Sociedades de Garantía Recíproca has a product that receives a counter-guarantee of 75 %, allowing more risks to be taken. Some Spanish regions subsidise the interest rate to make the product more attractive. Socamut, a Sowalfin specialised subsidiary created with the support of the ERDF, reinsures guaranteed credits granted by the Walloon mutual guarantee societies with more favourable terms and a simplified process for microcredits. Source: European Commission, DG Enterprise and Industry: Best Report No 3 – 2006 – Guarantees and mutual guarantees Examples for Microcredits guarantee (for business loans up to EUR )

25. April 2007 Role of Guarantee Funds 6 Main Questions for the Workshop In all EU countries there are guarantee societies, often operating nation wide. What role do they play today in providing microcredit? How can microcredit programmes/MFIs co-operate with guarantee societies? What could be improved? Does the CIP micro-credit guarantee facility meet the needs of the MFIs? What should possibly be changed? How to use EU-structural funds to establish counter-guarantee instruments for microcredit? Who should be the final beneficiary of the guarantee, only the micro finance provider to reduce his risk costs or also the individual personally liable for the defaulted loan? Summary: Conclusions and Recommendations for the future Guarantees for micro credit

25. April 2007 Role of Guarantee Funds 7 Thank you! Tel