In Kyrgyzstan Guarantee Fund, created in November, 2016, to date issued 16 guarantees in the amount of KGS 11 million, – reported Deputy Minister of Economic Affairs of the Kyrgyz Republic Daniyar Imanaliev today on February 21 at a press conference “Business financial capabilities increase through OJSC “Guarantee Fund” and public-private partnership”. Press Service of the Government reported.
““Within anticrisis measures in 2016 the Government created Guarantee Fund to support small and medium-sized enterprises. It was created in a short period of time and nowadays fully operates. Capital of GF constitutes KGS 282 million. To date 16 guarantees were issued in the amount of KGS 11 million”, – informed Deputy Minister of Economic Affairs of the Kyrgyz Republic.
Chairman of the Board of OJSC “Guarantee Fund” Malik-Aidar Abakirov informed that the Fund had started its activity on November 1, 2016 and was issuing guarantees at 1,5% of the amount, and since March 1, 2017 will start issuing at 2,5%.
The priority sectors for guarantee issue are production and agro-processing (crop production, fruit-berry and fruit-vegetable clusters, meat-dairy industry, fisheries), industry (clothing and textile industry, construction materials production), tourism development, medical services, export, transportation and logistics services., export-oriented and import-substituting enterprises, also attention will be paid to women’s entrepreneurship.
Deputy Minister of Economic Affairs of the Kyrgyz Republic Daniyar Imanaliev noted, that within conditions of intensified global competition, entrepreneurship would take on a special significance. In this regard, the Government of the Kyrgyz Republic is undertaking different reforms, implementing new domestic business support and promotion mechanisms, one of them is the initiative of establishing OJSC “Guarantee Fund”.
Commissions of Guarantee Fund since March 1, 2017 are 2,5 % per annum on guarantee amount
Chairman of the Board of recently created Guarantee Fund Malik Abakirov during a press conference reported that the Fund from March 2017 increases commissions up to 2,5 % per annum on guarantee amount. He told about procedure for guarantee issue as well.
“Entrepreneurs address banks and if they need a loan in the amount of KGS 1 million but collateral is insufficient, then with good loan history and business plan, the bank together with entrepreneur can address the Fund. We, considering the same criteria, can provide the borrower with that amount which is required. Meanwhile, there are commissions of the Fund. Until March 1, 2017 they constitute 1,5% and after March 1, 2017 they will constitute 2,5% per annum on amount”, – said Abakirov.
He noted that the Board of the Fund established minimum and maximum thresholds for providing guarantees. “Minimum loan amount must be not less than KGS 300 thousand. As for minimum threshold, it is 10% of the fund capital, i.e. KGS 28,2 million. But considering that the Fund has recently started its activity, we have established maximum threshold in the amount of KGS 7 million. However, in future, for good and promising projects we may extend maximum threshold and we will consider each case separately”, – he said.
We recall that Guarantee Fund was created on November 1, 2017. The main capital of the Fund to date constitutes KGS 282 million, USD 1 million was allocated from the republican budget, USD 3 million is granted by Asian Development Bank.
In four months Guarantee Fund issued 16 guarantees in the amount of KGS 11 million. Deputy Minister of Economic Affairs of the Kyrgyz Republic Daniyar Imanaliev reported at a press conference.
According to him, today one of the most challenging and outstanding issues is insufficient collateral for loans. About 40-50% of loan applications are rejected by commercial banks due to insufficient collateral. The most difficult situation is in regions.
Collateral is fully covered only in cities such as Bishkek and Osh. In regions collateral value is low and it is insufficient for loan.
“Within anticrisis measures in 2016 the Government created Guarantee Fund to support small and medium-sized enterprises. It was created in a short period of time and nowadays fully operates”, – said Daniyar Imanaliev.
Capital of GF constitutes KGS 282 million. KGS 1 million was allocated from the budget and KGS 210 million is a grant of Asian Development Bank. The Fund issues guarantees at 1,5% of the amount, and since March 1, 2017 – at 2,5%.
The priority sectors for support are production and agro-processing, meat cluster, meat-dairy industry, fisheries, clothing and textile industry, construction materials production, tourism development, medical services export and transportation and logistics services.
Besides, it is planned to use possibilities of Guarantee Fund while implementing the Cabinet of Ministers export-oriented and import-substituting productions support program.
One of the important issues of small and medium-sized enterprises (hereinafter SMEs) in the Kyrgyz Republic is limited access to finance. According to research of independent experts from 40% to 50%of potential borrowers, who address banks, cannot obtain loans due to insufficient collateral.
Thereby, OJSC “Guarantee Fund” (OJSC “GF”) with 100% of state share was created by order of the Government of the Kyrgyz Republic to assist entrepreneurs in access to finance. Capital of OJSC “Guarantee Fund” constitutes KGS 282 million of which KGS 210 million was allocated with financial support of Asian Development Bank.
OJSC “Guarantee Fund” was created as an institute for SME support and development by providing access to finance in case of insufficient collateral.
OJSC “Guarantee Fund” carries out its activity on the whole territory of the Kyrgyz Republic and in all sectors of economy. The priority directions for providing guarantees are:
- Production and processing of agricultural products (crop production, fruit-berry and fruit-vegetable clusters, meat-dairy sector, fisheries sector)
- Manufacturing industry (clothing and textile industry, construction materials production and other)
- Services (tourism development, medical services export, transportation services, trade);
- Women’s entrepreneurship support
- “Green” economy support
Special attention is paid to export-oriented and import-substituting enterprises.
The main goal of OJSC “Guarantee Fund” is support for SME financing applications related to:
- creation and modernization of production and processing
- harnessing financial leasing of fixed assets
- creation, modernization and reconstruction of existing import-substituting productions;
- Forming a chain of technologically related and promising export-oriented productions.
A client addresses a bank for loan and in case of insufficient collateral, the bank with the client apply for guarantee of OJSC “Guarantee Fund”.
OJSC “Guarantee Fund” signed cooperation agreement with OJSC “Aiyl Bank”, OJSC “CB Kyrgyzstan”, CJSC “Bank of Asia”, Bank “Kompanion” and Bank “Finca”. In a few days cooperation agreement will be signed with OJSC “RSK Bank”. OJSC “Guarantee Fund” signed another agreement with OJSC “Aiyl Bank” on the priority support for agroprocessing.
Despite the short period of activity, OJSC “Guarantee Fund” has already reached sustainable and profitable activity level. According to results of January 2017, net profit was KGS 645 thousand and on the basis of 2 months (January-February) 2017, net profit will be more than KGS 2 million.
Besides guarantees, OJSC “Guarantee Fund” provides consulting services for entrepreneurs in: 1) business plan development; 2) marketing; 3) entrepreneurs business plan promotion in obtaining loans in banks; 4) holding seminars on entrepreneurs financial literacy in business, business plan development, negotiating with banks and guarantee funds; 6) other entrepreneurship development services.
OJSC “Guarantee Fund” has started its activity since November 1, 2016 and as of February 21, 2017, the following results are achieved:
||Bank Loan amount
||2 000 000
||1 153 700
||4 354 801
||1 650 000
||6 150 000
||4 796 154
||16 641 210
||2 883 650
||6 861 850
||11 083 504
36 007 861