Sustainable Rural Livelihood Project

1
Support to Rural Investment and Services Project
Loan Guarantee Fund SME and
Entrepreneurship Support in Rural Area of
Moldova Nov 2002-February 2006 Presenter
Viorel Gherciu Local Team Leader

2
Strategic Objectives

• Economic growth and poverty reduction
• Increased income of rural citizens
• Increased employment
• Improved business activity
• Scale up of pilot models

3
Project Components

• Rural Businesses Development
• Support to Saving and Credit Associations
• Access to legal advice
• Social Infrastructure
• Crop Diversification (Good Agricultural Practices
  )

4
Rural Business Development component

• 4 Development Agencies
• 20 mobile teams
• 40 development officers
• Support group
• Legal specialist
• Financial specialist
• Other consultants (local and international) on
  request

5
Partners

• Government of Moldova
• World Bank
• 5 Commercial Local Banks
• Rural Finance Corporation

6
Objectives

• Promote opportunities show advantages in
  developing private businesses
• Support in selecting Legal type of the Business
  registration
• Develop sustainable business models and scaling
  them up
• Creation of employment and increase in income
• Improve livelihood standards of the population in
  rural area

7
Activities Supported by RBDC

• Investment in any sustainable agricultural or non
  agricultural business in the Rural Area, like
• Agricultural processing, packing, marketing,
  machinery services, etc..
• Rural tourism, handcrafts, TV radio stations,
  community infrastructure (public bath housing
  hairdressing), etc..

8
Beneficiaries

• Entrepreneurs from Rural Area
• - Legal Entities
• Business Cooperatives, LML,etc..
• Individual Enterprises

9
ProRuralInvest

• Support to the creation of the Interbank
  Guarantee Society
• September 2004 February 2006

10
Usefulness of the creation of the Interbank
Guarantee Society

• Improved access to finance of the enterprises
  with insufficient collateral
• Increased number of private entrepreneurs who are
  eligible to apply for a loan.
• Feasibility study
• 60 of loan applications, submitted in November
  2002 May 2003, were rejected for the reason of
  insufficient collateral.

11
The rationale of banks participationas founders

• Increased number of viable clients
• Increased volume of loans provided
• Reduced risk of loans not to be reimbursed by
  sharing these risks with the IGS
• Perspective of increased profitability of
  investment activities of the financial
  institutions through creation of new banking
  services.

12
The rationale of banks participationas founders

• Lack of loan guarantee services provided by a
  specialized institution
• A niche market for loan guarantee services is
  available.

13
Establishment of the Interbank Guarantee Society

• Constituent meeting of
• the Interbank Guarantee Society
• GarantInvest
• 3 February 2005
• Date of legal registration 24 February 2005

14
Founders

• B.C. Moldova-Agroindbank S.A.
• B.C. Banca Sociala S.A.
• B.C. Victoriabank S.A.
• S.A. Banca de Economii
• B.C. Eximbank S.A.
• B.C. EnergBank S.A.
• B.C. MobiasBanca S.A.
• Rural Finance Corporation S.A.
• A.O. ProRuralInvest.

15
Finance

• Share capital - 350000 EURO
• Technical assistance, contributions to share
  capital of the Interbank Guarantee Society and
  covering operational costs, including information
  campaign by February 2006 DFID.

16
The first year of activity

• Loans up to 10 thousand EURO
• IGS guarantee 50 of the loan value
• Commission 2,5-3 from the guarantees sum of the
  loan.

17
Services of the Society

• Financial guarantee and portfolio investment
  services
• Guarantees for loans provided by the PFI to
  eligible beneficiaries
• Portfolio investment guarantees
• Portable guarantees
• Export guarantees.

18
First guarantee

• 29 August 2005
• 30 of amount of loan of 10 thousand EURO

19
What we achieved

• Applications submitted - 4800
• Businesses registered - 1211
• -individual - 810
• -group - 401
• Businesses received credit - 1060
• Out of them received grants - 197
• New Jobs created - 4700

20
Investment loans received by Rural Businesses

• Total investment projects costs
• 15 M EURO
• Of which
• Loan portion 9 M EURO
• Matching Grant 0.5 M EURO
• Personal contribution 5,5M EURO

21
Range of businesses (average loan is 8000 euro)
22
Impediments in Rural Business development

• Difficult to convince people to form group
  businesses
• Insufficient collateral
• Banks conservative attitude to new businesses

23
Sustainability prospects

• Project supports Institutional development (3
  regional offices (NGOs) plus 4 Development
  Agencies)
• Viable businesses developed
• Post-creation assistance
• Future opportunities
• Expanding activities (Development of the Rural
  Credit Guarantee Fund)

24
Summary of lessons

• Develop pilot activities, models
• Scaling up successful models
• Capacity building (advice, training, resources)
• Create new specialised organisations
• Cooperation among different organisations
• Complex approach
• Assistance from the DA to the clients

25
ProRuralInvest

• THANK YOU
• for your time and
• looking forward to a fruitful COLLABORATION!