The institutional guarantee of MSME financing has been undergoing a significant development in the MENA Region, following the example of developed and emerging economies in the rest of the world. This development, both quantitative (volume of activity and resources committed, SME beneficiaries, various additionalities) and qualitative (evolution of the economic model, diversification of the guarantee offer, digitalization…), observed at the level of guarantee structures, is due to the important role these institutions play as regards access to financing for SMEs, which is a major determinant of economic growth, employment, and social integration.
At the same time, our societies are also undergoing continuous evolution and transformation. The COVID-19 crisis, that has disrupted our daily lives and activities, has revealed the significant role played by guarantee institutions and programs. Similarly, energy, environmental and food shocks, as well as the increasing scarcity of resources, will pose new challenges in the coming years.
After decades of activity in the field of institutional credit guarantee in the MENA region, the 7th conference will attempt to take stock of the road travelled and the achievements that have marked, it as well as the areas for development and the challenges to be met, in order to enable public authorities and donors, to lay the foundations for a sustainable long-term activity.
Under the main theme “Guarantee Institutions, Decades of Activity; Realities and Challenges”,
The conference will discuss during four panels the following issues:
MENA guarantee institutions and programs are at different levels of maturity: The oldest institution was founded more than 80 years ago, while the most recent one has been in existence for less than 5 years. In addition, they are almost exclusively public bodies, each with a specific status: usually a non-profit publicly- owned financial or a credit institution working in the public interest.
Under the guidance of donors such as the World Bank, Kfw …. , the legal framework, the business models, the governance and the supervision of the credit guarantee institutions in the region have undergone several changes in recent years. However, in view of the public-interest mission entrusted to guarantee institutions and programs, their tax regime needs to be reviewed.
As risk-bearing institutions, guarantee schemes must benefit from an appropriate regulatory and supervisory framework. At present, the guarantee schemes are required to choose between applying IFRS or the Basel rules, in order to set up a prudential system designed to provide a better understanding of risks and capital requirements, and to ensure their financial soundness. It is worth asking whether they should comply with one or the other.
In light of the dwindling of public resources, and given that non-for profit institutional guarantee has been recognized as a lever of development, the issue of continuity of the activity and its credibility has become central to the debate on sustainability of guarantee for financing.
As the institutional guarantee provided by non-profit organizations is a lever for economic development, the question of financing and sustainability remains central. In the face of dwindling public resources, questions of continuity and sustainability of activity and the credibility of guarantee schemes remain at the heart of the debate.
This panel will discuss the sustainability of credit guarantee institutions which have played an enhanced role to better support SMEs’ access to finance. In this framework, various practices implemented by governments and financial institutions, as well as by credit guarantee schemes will be reviewed.
In addition, examples of institutions in the MENA region that have changed their structure and nature will be presented, as well as the desirability of setting up a counter-guarantee mechanism in the region. The mobilization of resources through public-private partnerships, with the involvement of international or bilateral institutions in the provision of this security layer, will reduce pressure on public resources and enable guarantee institutions to strengthen their security and credibility.
After decades of activity marked by several modifications and changes, guarantee institutions and programs as financial inclusion actors, with the support of public authorities and international donors, need to examine the economic and financial additionality effects, as well as the micro and macroeconomic effectiveness of institutional guarantee. The issues involved in measuring the impact and performance of these activities will be presented, and guidelines for better grasping such issues will be set. In addition, the themes of additionality and the added-value of the credit guarantee activity for the various stakeholders such as banks, businesses and the State will also be addressed. Discussions will allow to highlight the leading role of guarantee institutions, and a clear recognition by public authorities of their role in an economy of solidarity and inclusive finance.
As part of the implementation of the Paris Agreement, COP 27 included among its priorities the need to ensure the financing required to meet the demands of climate change and the challenges related to limited information, high risk, and innovative financial products, particularly for large-scale investments requiring long-term financing.. In this context, the credit guarantee sector is a major driver facilitating the access to finance for SMEs investing in green and low-carbon economic sectors through specific green loan guarantees.
As the conference is a follow-up to the MENA Climate Week held in Riyadh- Saudi Arabia- this panel will, therefore, provide an opportunity to present the experience of Kfw (German Development Bank) in financing and guaranteeing activities in the green and environmentally friendly economy. During the same session, the guidelines of the World Bank’s study on integrating climate change mitigation and adaptation into credit guarantee systems for SMEs will also be presented. The contribution of guarantee institutions and programs to the integration of green finance will be at the heart of the discussions.