Local Guarantee Funds Warmia Mazury

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Local Guarantee FundsWarmia Mazury

• Innovation Financing on Regional Level
• IRE Workshop
• November 15-16th, 2004
• Prague

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Warmia and Mazury basic data

• Population 1469 274 inh.
• No. of companies 99 429
• No. of SMEs 98 316
• 96, 23 - microcompanies (0-9)
• Ratio of financial obligations to tangible assets
  0,233
• Main industries food processing, furniture
  manufacturing, wood and timber processing,
  electrical machinery, tyre production and the
  clothing industry

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Some history

• First local guarantee fund in Poland
• Nidzica (Warmia Mazury) 1994
• Operated by The Foundation for Development of
  Nidzica Area
• Unemployment rate exceeded 33
• Goal to assist in creation jobs for former
  employees of local state-owned farms (PGRs)
• Now 60 guarantee funds in Poland, 7 in the
  region

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Why guarantee funds?

• Banks are reluctant to give loans to SMEs due to
  very bad experiences from early 90s
• Huge intetrnal dept gives banks an opportunity to
  make profit withouot risk state competes with
  private sector
• Bank - traditionally the only way to look for
  money
• Very few other financing tools available for SME,
  (VCs, BAs are practically absent)
• The result
• More than 80 of money spent on investments come
  from the pocket of enterpreneur strong limiting
  factor for development

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Guarantee funds in the region

• Dzialdowo (local and regional)
• Ostróda
• Ketrzyn
• Goldap
• Nidzica
• Olsztyn
• Ilawa

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Guarantee funds in the region-basic information
(June 2004)
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Where do the money come from?(Example Ostróda
Local Guarentee Fund)

• Operational since March 2002
• Initial capital 20 000 provided by local
  governments of Ostróda area (7)
• May 2002 additional capital (75 000 ) from
  National Rural Properties Agency
• Additional financing (95 000 ) from National
  Agency for Enterpreneurship Development
• June 2004 capital ab. 190 000
• Guarantee can not cover more than 60 of the loan
• Single guarantee not larger than 5 of the
  capital (9 500 )

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Who can apply

• SMEs

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Criteria and decisionmaking process (typical)

• Application
• Banks loan promise and information about banks
  financing conditions
• Information about proposed co-guaranting scheme
• Approval of the bank fund cooperation and
  sharing information
• Basic documents of the firm
• Others (financial and legal situatin of the
  applicant)
• Pre - assesment
• Formal
• Meritoric
• Risk assesment
• Guarantee Commitee decision
• Impact on enterpreneurship situation of the area
• Number of new job creation or maintaining
• Environmental frendliness
• Innovativness of the project
• Coherence with the strategic planning documents
• Financing scheme
• Decision in 15 days

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The future of guarantee funds in the region

• National scheme Capital for enteurpreneurs
• Regional guarantee fund supported by the Ministry
  of Economy
• Capital 4 000 000 Euro (Dzialdowo)
• Stakeholders Regional Govt, Dzialdowo RDA,
  other local govts, state
• Regional network of local and regional guarantee
  funds

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The Warmia-Mazury Guarantee Fund Ltd

• November 2003 decision of Warmia Mazury
  Regional Govt to create a limited company to
  operate the regional guarentee fund
• September 2004 General Assembly approves basic
  documnets
• December 2004 Regional Fund operational

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guarantee funds in Poland - Structure and scale

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guarantee funds in Poland cont. capital in
funds countrywide

• 2004 10 years of local guarantee funds in
  Poland
• Joint capital 37,8M
• Balanced regional/local guarantee funds scheme

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guarantee funds in Poland cont. guarantees
granted

• Total number 6006
• Monthly in last 12 months 2,87 (0,74 19,6)
• Average usage of the capital 75,7
• (16 funds exceed 100)

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guarantee funds in Poland cont. - risk

• Total of guarantees paid - 145
• Total value of g. payed ab 900K
• G. paid vs g. granted (value) 1,2

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guarantee funds in Poland cont. purpose of the
loan, sector

• Purpose
• Working capital 57
• Purchase of immobilities or reconstruction of
  buildings 11
• Purchase of equipment 23
• Purchase of vechicle 9
• Sector
• Trade 39
• Services 35
• Production 17
• Agriculture 2
• Construction 5

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Regional Innovation Strategy Warmia Mazury

• Main Goal Building Regional Innvation Support
  System (RISS)
• providing regional SMEs the information about
  available source of financing for innovative
  projects
• work with financing institutions to make existing
  tools more innvative SME friendly
• work with financing institutions to develop new
  ways of financing innovation
• Integrated operational Program
• for Regional Development ofor Warmia Mazury
  secures for 2004 2006 3,9M

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Strengths and weaknesses of local guarantee funds

• Strengths
• Guarantee decisions based on local social capital
  minimization of the failure risk
• Good cooperation with local banks
• In-depth knowledge of local entrepreneurs
• Weaknesses
• Not specific for financing innovation innovators
  compete with traditionals
• Low capital
• Lack of expertise and coperation with other risk
  capital sources

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• Thank You for your attention
• Andrzej Szeniawski RIS Project Manager
• Andrzej.Szeniawski_at_ris.warmia.mazury.pl