AECM: Guarantee schemes in support of SME finance during the recovery

On 7th October 2010 the European Association of Mutual Guarantee Societies (AECM, see annex), representing 34 member from 18 countries with a total of over €70 billion guarantees in portfolio, held its annual Seminar in Bled, Slovenia, on invitation by SEF and RRA-GIZ, its Slovenian Member Organizations.

The Seminar looked at the positive contribution of Guarantee schemes to support SME access to finance during the economic crisis, at the specific needs of SMEs for the recovery phase and at possible improvements for the framework conditions for SME finance and guarantees for the next years.

During the crisis, Guarantee societies have provided a major contribution to helping maintain SME access to finance and to avoid the worst case scenario in the crisis. Together with the financial support by their national governments and the EU institutions, they have been swift in setting up new guarantee instruments that were crucially needed in the economic slump. They have increased their annually granted guarantee volume by 58% in 2009 alone to reach a total of over € 70 billion in guarantee volume in portfolio by the end of the year.

One third of this volume has been dedicated to specifically designed anti-crisis measures, mostly guarantees for pure working capital loans, which have allowed many small and medium-sized enterprises (SMEs) to weather payment delays and liquidity problems. All in all, this has given more than 120.000 SMEs, employing about 851.000, the possibility to maintain their operations and now contribute to the economic and financial recovery of their national economies.

While there are signs of economic recovery, the financial situation of SMEs in general is still fragile. In the context of what risks being a slow upswing with interest rates rising on the long term, Guarantees continue to be of utmost importance to ensure that SMEs access vital funding. To ensure optimal framework conditions for SME guarantees and finance, AECM appeals to the national Member States and the European Institutions:

• To maintain the main aspects of Temporary State Aid Framework relevant forguarantee instruments for another year. The Framework provides temporary exemptions
  from state aid provisions and is the basis for most anti-crisis guarantee programmes of
  AECM member organisations. AECM welcomes the recent decision by the Commission to
  maintain the Framework for another year, however, uncertainty remains about the extent to
  which the different options under the Framework will be continued. The use of the
  Framework by guarantee institutions beyond the 31st of December 2010 will be crucial to
  avoid the relapse of many SMEs into financial difficulties.
   
• To maintain focused support for SME guarantee schemes in form of public
  guarantees/counter-guarantees. Over the years , guarantees have proven to be highly
  efficient and cost effective, having a much lower impact on public budgets than any other
  form of support. In particular, European funding via structural funds and Community
  programmes such as the Competitiveness and Innovation Programme (CIP), need to remain
  fully available to SME guarantee schemes.
   
• To ensure that the European implementations of the new Basel III accord has as
  little of a negative impact on SME finance as possible. AECM worries that taken
  together, the restriction of Tier 1 capital, the introduction of a leverage limit, pro-cyclical
  buffers, etc. will greatly reduce the availability of loan finance, in particular to SMEs. Also,
  the inclusion of cooperative shares in Tier-1 capital needs to be recognised, to ensure the
  continuity of the business model of Mutual Guarantee Schemes of the years to come.
  AECM, Rue Washington 40, Tel. / Fax. + 32 (0) 640 51 77 e-mail : info@aecm.be, www.aecm.eu

Annex/ About AECM

AECM has 36 member organizations operating in 18 EU countries and Turkey. Its members are mutual, private sector guarantee schemes as well as public institutions, which are either guarantee funds or Development banks with a guarantee division. They all have in common the mission of providing loan guarantees for SME who have an economically sound project but cannot provide sufficient bankable collateral. In 2009, AECM member organizations had a total guarantee volume in portfolio of € 70 billion and issued a total of € 34 billion in new guarantees.

AECM represents the political interest of its member organisations both towards the European Institutions, such as the European Commission, the European Parliament and Council, as well as towards other, multilateral bodies, among which the European Investment Bank (EIB), the European Investment Fund (EIF), the Bank for International Settlement (BIS), the World Bank, etc. It deals primarily with issues related to state aid regulation relevant for guarantee schemes within the internal market, to European support programmes and to prudential supervision.

KredEx is a member of AECM.