AECM European Association of Guarantee Institutions JLGC 20 th anniversary conference SME s Financing and Loan Guarantees José Fernando Figueiredo, President of AECM 24 November 2014

I.AECM Facts & Figures II.Typologies of Guarantee schemes in EU III.Example of risk model using EU/EIF guarantee facility IV.Final remarks Content

I.Facts & figures about AECM members Content

 founded in 1992 by 6 Members  In 2014: 42 Members 20 EU-countries + Bosnia and Herzegovina, Kyrgyzstan, Montenegro, Russia & Turkey  Volume of Outstanding Guarantees in portfolio 2013: over 76.9 bn. EUR  Number of Outstanding Guarantees in portfolio 2013: over 2.17 mn. active guarantees AECM: Today

 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

AECM members performance in using the SME Guarantee Facility (CIP – counter-guarantee) AECM members and EU/EIF Programmes  AECM members represent 65% of Maximum Portfolio Volume (approx. 10,95 billion EUR )  Financial intermediaries member of AECM have supported SMEs, until the 31st of December 2012/since the start of the programme,  According to the European Commission from 2007 until the 31st December 2012: small firms benefited from this guarantee facility,  which means that AECM members have covered 59% ( / ) of all beneficiaries. * Source: AECM Counter-guarantee systems in Europe report: AECM Members: Issuing or receiving counter-guarantees – June 2013

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 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. Example of risk model using EU/EIF guarantee facility Content

 SPGM / Portuguese MGS- Portugal:  Acting Model: Risk Sharing between different entities: 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. PORTUGUESE MODEL

 SPGM / Portuguese MGS- Portugal:  Acting Model: Risk Sharing between different entities: 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: PORTUGUESE MODEL

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:  Instruments facilitating SME access to financing crucial 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

Final Remarks  Last but not least knowledge and partnership are the main success conditions for projects being of a company or a Guarantee Institution: If we don’t know we don’t have ideas, and even more we are not capable to develop them Guarantee institutions don’t work alone, they have to cooperate with banks and governments

Thank you for your attention