New Guarantee Trust to improve access to credit by Argentine SMEs and microenterprises

(Caracas, July 6, 2008).- An innovative Guarantee Trust (FIGA) was today set up by the Andean Development Corporation and the Buenos Aires Province Guarantee Fund (Fogaba), helping to solve one of the most serious difficulties faced by the SME sector which is access to credit.

The agreement to create FIGA was signed in Buenos Aires between CAF and Fogaba, with the presence of honor of the Minister of Production and Agrarian Affairs Débora Giorgi. FIGA will be formed with an initial contribution of US$3 million (approximately 9 million Argentine pesos), of which the CAF contribution is US$1 million and Fogaba US$2 million.

"This operation is a very significant event in our strategy of creating innovative instruments to strengthen the productive model of our country, with local and regional development," said Giorgi at the end of the meeting in the city of Buenos Aires.

As CAF representative in Argentina Mariángela Holguín explained, "the support and strengthening of the SMEs is a fundamental challenge for the CAF action plan, so we are continuously developing innovative mechanisms for this sector." "SMEs are an important part of the business sphere of our countries and make a significant contribution to generation of employment."

Guarantee systems managed efficiently and sustainably have proved to be an excellent mechanism for supporting access by SMEs to financing on better conditions, because in many cases the absence of a guarantee limits their capacity to access credit on optimal conditions.

The agreement marks a defined line of work in the search for financing alternatives which improve conditions of access to credit for SMEs and the institutions that finance them. In Buenos Aires province about 10,000 microenterprises have obtained microcredits - ranging from 150,000 to 5,000 pesos - largely in the provincial conurbation.

About FIGA

The objective of the Trust is to grant guarantees to a range of segments, including productive chains - companies in the automotive, tanning and other sectors have been identified, microfinance institutions and SMEs in the health and education sectors.

For example, in the case of finance institutions for microenterprises in the traditional sense and for cooperatives, the guarantee cannot exceed 50% of the amount of the loan. The maximum amount of credit that can be guaranteed in the former case is 500,000 pesos, and US$500,000 for cooperatives with a 48-month term in both cases. For guarantees for commercial, leasing, education and health SMEs, the maximum amount is 150,000 pesos.

With the start of Fund, other multilateral organizations are expected to participate as contributors, such as OIKOCREDIT which has already guaranteed an investment of US$500,000.

The Fund will also guarantee foreign lines of finance with the objective of providing credit for SMEs for projects related to investment and incorporation of technology, with special focus on value chains. This initiative is the first regional experience of a joint guarantee (aval) fund between CAF and an existing guarantee fund. In fact, it is the first time that CAF has constituted an instrument to give guarantees under a trust scheme.

Fogaba is a Corporation with Majority State Interest (SAPEM) set up in 1994 attached to the Ministry of Agrarian Affairs and Production of Buenos Aires province. It is the first body of this type in the country whose objective is to grant guarantees to SMEs so that they can access credit on more favorable conditions.