Page 41 - Annual Report 2010

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Guarantees & Credit Enhancement

provinces of Turkey. Home to 25% of the country’s SMEs, these provinces only receive a very small proportion of

Turkey’s SME lending. GAGF, which is a joint initiative of the EIB Group, the EU Commission and the Turkish Min-istry of Industry and Trade, utilises a combination of counter-guarantee, di-rect portfolio guarantees and funding, providing a risk sharing mechanism as well as capacity building to financial intermediaries providing access to finance to SMEs.

In October 2010, EIF signed one counter-guarantee agreement for micro- loans and five guarantee agree-ments with Turkish banks for an aggregate guarantee amount of EUR 27m and a corresponding aggregate loan por t folio volume of EUR 537.5m. As a joint EIB Group operation, EIB is providing funding to these five banks for a total amount of EUR 250m to finance the GAGF guaranteed portfolios.

EIF actively develops similar funded or unfunded guar-antees to the benefit of SMEs, meeting specific market needs by providing targeted products and endorsing a role of financial engineering provider especially in view of the Europe 2020 objectives which will require a wider scope in terms of geographies and sectors.

New guarantee products

EIF developed in 2010 new financial products in order to leverage EU structural funds with the view to enabling SME financing in countries less sup-ported by the traditional EIF products: a risk sharing loan and a port folio guarantee instrument under JEREMIE; a counter-guarantee and a portfolio guarantee combined with EIB global loans under the Greater Anatolia Guarantee Facility in Turkey.

Under the JEREMIE risk sharing loan facility (FRSP), the EIF provides funding to financial institutions for the financing of a new port folio of SME loans (such loans to be co-financed by the financial institution) and shares part of the credit risk relating to the portfolio. EIF signed six JEREMIE risk sharing loan facilities in 2010.

Under the JEREMIE First Loss Portfolio Guarantee (FLPG), EIF covers part of the credit risk relating to a new portfolio of loans and/or leases granted by a financial intermedi-ary to SMEs. The first two JEREMIE portfolio guarantees were signed in Romania in December 2010.

An example of a high value-added joint operation signed in 2010 was the Greater Anatolia Guarantee Facility (GAGF) to support SMEs in some of the less developed

Targeted

products meeting specific market needs