Gari s.a. Guarantee Fund for Private Investments in West Africa

Transcription

1 Gari s.a. Guarantee Fund for Private Investments in West Africa Contents Introduction.4 Objectives 5 Services 5 Eligible companies...5 Beneficiary establishments..6 Guaranteed operations.6 Rules of interventions..6 Guarantee fees.7 Compensation.7 Countries of intervention 7 Procedures..8 Appendix 1: Elements of the guarantee request letter 9 Appendix 2: Elements of the risk assessment...10

2 INTRODUCTION Ecowas State officials and member States unanimously admit that the private sector is the real driving force behind growth, and hence, development. Thus, since the early 90s, they have adopted policies geared towards the promotion of the private sector and have endeavoured to develop an enabling environment for business. Unfortunately, the States are still faced to many challenges, and one of them is the problem of private investment financing. Since the death of national development banks and specialised institutions, the role of private investment financing has fallen to international financial and commercials banks. These banks have to face difficulties for medium and long terms financing of companies specifically for medium enterprises (SME). The banks are very often reluctant for long term commitments due to lack of long term resources. In addition, the lack of vitality or inexistence of a second-hand market for equipment goods, by the instability of the housing markets as well as the administrative burden in realizing the securities. The Financial guarantees seen to be the tool which could protect the lender against the unpredictable elements that could happen during the investments project life. These guarantees are very useful for the banks on account of the following reasons: - They could take risks in secured financial conditions, - They could take advantage of immediate cash provided by the guarantee fund in case of default of payment of their clients, - The bank could also improve it s solvency ratio, which allows for more loans. The financial institution-gari partnership must help improve the selection, assessment and supervision practises of investments funded, order to enable the private sector, through the investments achieved, to actually stand as the driving behind the growth of the ECOWAS member States. The GARI Fund was established on the initiative of development agencies, international financial institutions and 23 commercial banks operating in the Economic Community of West African States (ECOWAS).

3 It s capital is of CFA F 12.9 billion distributed as follows: - Agence F Agence française de développement (AFD) 27 % - European Investment Bank (BEI) 19 % - Deutsche Entwicklungsgesellschatt (DEG) 18 % - Secrétariat d Etat à l Economie (SECO) 16 % - West African Bank for Development (WABD) 12 % - 23 commercial banks and various private investors 8 % The GARI Fund Head Office is located in Lomé (TOGO) OBJECTIVES GARI means to facilitate the access of ECOWAS private companies to medium and long term financing in sharing with credit institutions the risk related to these operations. ADVANTAGES FOR CREDIT INSTITUTIONS Protection against the unpredictable elements. Improvement for its solvency ratio. Provision of immediate cash by guarantee fund in case of default of payment of the borrower. SERVICES Medium and long-term credits guarantee. Guarantee of resource mobilisation operations (debenture bonds, interbanking loans, treasury bonds, credit establishments bonds, deposits certificates). Counter-guarantee. ELIGIBLE COMPANIES Private sector companies operating in the following fields: Manufacturing industry. Agro-industry. Fishing. Mining. Tourism. Telecommunication. Building and public works. Transport. Hotel industry. Agriculture. Production sector related services.

4 BENEFICIARY ESTABLISHMENTS GUARANTEE OF MEDIUM AND LONG-TERMS LOANS National and international banks and financial institutions GUARANTEE OF RESOURCE MOBILISATION OPERATIONS Operation developing establishments (banks, financial establishments, companies) COUNTER-GUARANTEE Counter-guarantee OPERATIONS GARANTIES Start-up Modernisation Privatisation Transfer of ownership Productivity improvement Production capacity building Restructuring RULES OF INTERVENTION The guarantee is provided in the currency of the loan for a maximum term of 10 years. The maximum coverage rate is set at 50 % of the funding granted. To be eligible, the loans guaranteed must reach a minimum amount equal to the counter value of F CFA 50 millions.

5 GUARANTEE FEES LOAN GUARANTEE AND COUNTER-GUARANTEE Contribution proportionate to the amount of the guarantee or the counterguarantee perceived as heading: 2 % for shareholder institutions; 3 % for non-shareholder institutions; 30 % of this contribution is perceived upon notification of the guarantee. 70 % the balance is paid at the first disbursement of the loan. Commission 1, 5 % per annum calculated on the successive guaranteed outstanding amount. This commission is payable semi-annually. GUARANTEE OF RESOURCE MOBILISATIONS OPERATIONS The beneficiary company pays: - A contribution of 1 % of the total guarantee amount payable upon the notification of the guarantee. - A semi-annual commission calculated on the successive guaranteed outstanding amount. The rate is variable and estimated at 1 % minimum per year. COMPENSATION Medium and long-term credit The indemnity covers the principal outstanding amount of the guarantee amount, at expiration date. The beneficiary establishment is immediately granted an advance equal to 85 % of the calculated amount ; and the final loss supported by GARI, is paid one year later. Resource mobilisation operations The outstanding amount of the guarantee is immediately paid at 100 %

6 COUNTRIES OF INTERVENTION All the ECOWAS member States: Benin, Burkina Faso, Cape Verde, Côte d Ivoire, Gambia, Ghana, Guinea- Bissau, Guinea (Conakry), Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo (the GARI Fund head office is located in Lomé). PROCEDURES A- THE REQUEST The request for guarantee must be submitted through the bank or the financial institution that grants the credit. In case of resource mobilisation operations, the request is submitted by the initiator of the operation. B- EVALUATION The institution wishing to share risk with GARI shall undertake a risk investigation. The fund has the right to proceed to on site checking and seek additional information Any application for guarantee should include the following : The element of the guarantee request letter (see appendix n 1) ; The investigation report on the loan for which the guarantee is requested ; The report must include all the relevant information for a risk assessment ; A general but not limited list of this information is attached in appendix n 2 ; A personalised and critical summary outlining the major risk, the advantages and possible weaknesses of the operation. C- NOTIFICATION Any decision by the fund to provide a guarantee will conveyed through a notification to the beneficiary, outlining the main features of the guaranteed loan and the special conditions of the guarantee provided. Any amendment to the characteristics of the guaranteed loan requires the prior consent of the Fund and a corrective notification to maintain the validity of the guarantee. The establishment receiving the notification informs of its acceptance of the special and general conditions contained therein by returning, before the first disbursement, a copy of the document bearing its formal agreement.

7 APPENDIX 1 ELEMENTS OF THE GUARANTEE REQUEST LETTER - The financial institution requesting the guarantee - Borrower - Purpose of operation - Country of implementation - Financing plan and total project cost - Amount of financing - Financing Currency - Overall term (in month), grace period (in month) - Amount of guarantee required - Guarantee coverage - Co-guarantor - Real securities or collaterals (type, rank, valuation, site) Mortgages on land and constructions Pledge on goodwill, equipment and shares Escrow accounts - Other guarantees - Particular or suspensive conditions

8 APPENDIX 2 ELEMENTS OF THE RISK ASSESSMENT A- DESCRIPTION OF THE BORROWER - Corporate name - Activity - Legal from of the company - Distribution of the capital and shareholding - Date of creation SHAREHOLDING : - Description of the main sponsors (professional experience and background, competence and education of the sponsors, age, nationality) - Situation of the industry sector - Reputation and solvency of the sponsors - Financial and operational performances of the principal shareholders and / or companies of the prinicipal shareholders and / or companies groups - Significant shares held and related liabilities MANAGEMENT : - Description of the managerial team (organisation and staff policy) - Professional experience, background and education of senior management (or job description) - Information system (accounting, management control, internal audit, data processing) - Banking relations (nature, ceilings, regulary of reimbursements) B- THE PROJECT - Justifications and objectives of the project - Site, localization - Total project cost and detail of the investments - Financing plan (equity, approval of the banks financing, financing agreement, pending financing request ) - Equity origin (in nature, cash) - Equity availability - Evaluation of the contributions in kind

9 GUARANTEES OFFERED AND OTHER CONDITIONS - Real securities or collateral (mortgages on land and constructions, pledge on goodwill, equipment and shares) - Escrow accounts - Delegation of insurance OTHER GUARANTEES : - Particular or suspensive conditions - Legal framework and regulatory Environment (authority of regulation, investment code, advantages, tax exemptions) C- TECHNICAL ASPECTS OF THE PROJECT - Project site - Supply sources, network and policy - Technical and industrial processes - Choice of the equipment and selection of the suppliers - Controls of implementation - Tentative project management schedule - Technical assistance and maintenance - Technical partnership D- COMMERCIAL ASPECTS - The market : quantified analysis of supply and demand, competition - Order book and market share, volumes of sales, structures of the customers - Constraints and comparative advantages - Product definition and quality, the pricing policy (cost pricing, selling price and comparison with competition), distribution network, the communication policy - The marketing strategy and policy E- PROJECT EXPECTED IMPACTS - On the company s staff and qualification level - On the company organization - On the national and / or regional economy

10 F- RISK OF THE PROJECT Commercial Managerial Technical Supply Environmental Financial Concentration Lack of equity High borrowing Reduction of activity Margins and returns reduction Problems of solvency Etc G- FINANCIAL STUDY - Past 3 years performance review (profit and loss accounts, balance sheet, reliability of accounting documents, quality of debt). - Analysis of financial projections with detail of the main assumptions (projected profit and loss accounts, projected balance sheet) - Financing plan and financing terms provided for the annual cashflow requirements - Financial analysis (evolution and comments of the characteristic ratios : financial independence, liquidity, debt service coverage, profitability) - Internal Rate of Return of projected investment - Sensitivity analysis