3rd Annual JEREMIE & JESSICA Conference Warsaw, 28 October 2011 Results in the JEREMIE implementation from a national development bank perspective CSABA HARSÁNYI Brussels Representative Ministry for National Development
Hungarian Development Bank Plc. Foundation in 1991 Banking license received in 1993 Status specialised credit institution 100 % of shares owned by the State statutory repayment guarantee provided by the State MFB Group includes EU and government related funds intermediators Financial Intermediary experience in FEI: Phare-HYFERP: COP 1995! JEREMIE (through our daughter company, since 2007) MFB is a strategic institution in Hungary, as it is the only official institution fully dedicated to promoting and supporting the economy and the social development of the country
JEREMIE in Hungary JEREMIE in Hungary is financed from two Operational Programs in 2007-2013: 30 billion HUF (Measure 1.3; app. MEUR 107; 6% of OP) from The Central Hungary Regional Operational Program (CHOP), and 200 billion HUF (Priority 4.; app. MEUR 714; 24% of OP) from the Economic Development Operational Program (EDOP) Objectives in both OPs: increase access to finance for SMEs by supporting Microfinancing Guarantees Venture capital
Overview of JEREMIE financing structure MANAGING AUTHORITY National Development Agency Funding Agreement EU (85%) HOLDING FUND MANAGER = National contribution (15%) Venture Finance Hungary Plc Member of MFB group Intermediary Agreements FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIARY Loan; Guarantee; Investment SME SME SME SME SME SME Agreements SME SME SME Efficiently working structure that can reach easily financial intermediaries and final recipients also.
Goals of JEREMIE program in Hungary Repayable forms of assistance for SME s by improving the accessibility of: Credits: to provide loans for companies that otherwise would not receive loans or not in adequate quantity combined micro loan, investment loan, SME investment loan cooperation with Hungarian Development Bank Guarantees: To draw in other sources in order to reach desired leverage effect portfolio guarantee, counter guarantee Capital: To support innovative companies or companies that are able to show a rapid growth that would not achieve such growth without assistance venture capital On a portfolio level the desired leverage effect is to be reached
JEREMIE programs in Hungary Instrument Product Objectives Financial beneficiaries SME Loan (MV-MFB cooperation) Refinancing of investment loans small and medium companies Credit New Széchenyi Loan (earlier Micro Loan and Small Loan) Combined Micro Loan (launched in 2011) A combination of refundable fund and grant Financing of capital expenditures and/or current assets Investments by supply of machines, softwares, real-estates micro-, small and medium companies microcompanies (sales revenue up to cca. EUR 700) Portfolio Guarantee Max. 80% guarantee on investment loans, working capital loans (in case of business activity expansion) micro-, small and medium companies Guarantee Counter-guarantee Max. 85% counter-guarantee on guarantees on investment loans, working capital loans (in case of business activity expansion) small and medium companies Venture Capital Venture Capital Early-stage and extension equity financing of - mainly innovative - projects having a high micro-, small and medium growth potential, but not suitable for debt companies financing
Results of the Operational program Refundable funds Contracts with intermediaries Exchange rate: 280 HUF/EUR Based on 27 Sept, 2011 data Contracts with final recipients 2011 number TOTAL number 2011 m EUR TOTAL M EUR 2011 number Total number 2011 m EUR Total M EUR Loan 25 172 73 478 1295 4 570 53 160 Guarantee 4 56 93 294 74 452 12 33 Venture capital 0 8 0 98 16 34 18 33 Total 29 236 166 872 1385 5 056 83 226 Continuous growth of the JEREMIE program: Contracted amount of 22626 million Euro More than 5 000 final recipients Reaching the goal of JEREMIE program: 97% of final recipients are micro enterprises More than 5 000 final recipients from JEREMIE funds 7
Distribution of intermediaries contracts by products Financial program Number of intermediaries contracts 30.06.2010 31.12.2010 27.09.2011 EDOP CHOP EDOP CHOP EDOP CHOP Combined Micro Loan - - - - 22 12 Investment Micro Loan New Széchenyi 52 21 55 22 58 24 SME Loan 19-19 - 19 - Portfolio Guarantee 32 15 36 17 38 18 SME Working Capital 19 16 19 16 19 16 Counter-guarantee - - - - 1 1 Venture Capital 7 1 7 1 7 1 Total OP: 129 53 136 56 164 72 TOTAL: 182 192 236
Results of JEREMIE program by products (cumulated) M EUR 200 Micro loan - New Széchenyi C ombined micro-loan Portfolio guarantee 181,5 226,9 160 120 80 40 0 34,5 24,6 3,8 2,5 V enture capital Credit guarantee SME loan SME working capital 68,1 37,3 4,9 1,6 12,9 94,7 49,1 2,9 19,8 64,4 15,1 9,0 3,6 23,7 85,2 23,8 21,8 27,1 31,5 11,4 14,5 18,1 19,9 19,9 3,7 100,9 June 2009 December 2009 June 2010 December 2010 June 2011 September 2011 133,9 8,6 33,2 3,7 Results show a continuous growth
Final Beneficiaries of JEREMIE program by size of companies Small ent erprise 3% Medium ent erprise 0% 97% of final recipients are micro enterprises in accordance with JEREMIE program goals Micro ent erprise 97% Based on 27 Sept, 2011 data JEREMIE program has reached its goal in supporting micro-companies
Innovative products Combined Micro-loan Own source Min.10% Micro-loan EUR 3 500-28 500 Grant EUR 3 500-14 000 At launch, 50% of applications received funding, after having introduced changes in product, now 67% of applications are approved. Permanently increasing interest on the side of enterprises; since March 2011, 1 600 applications have been received. 9 8 7 6 M EUR Combined micro-loan 5 4 8,6 3 2 4,9 1 0 2,1 0,1 0,5 May 2011 June 2011 July 2011 August 2011 September 2011 An innovative product with an increasing interest on companies side providing a solution for microcompanies investment ideas
Innovative products Combined loan with guarantee Own source Min.25% Commercial loan 80% guarantee and 85% counter-guarantee Own source Min.25% Grant Commercial loan 80% guarantee 85% counter-guarante (JEREMIE program) 6 banks have joined the procedure already 3 (2+1) special calls are being announced in October 2011; Advantages of procedure: Significant multiplication effect Wide economical sphere may be reached quickly SME supporting set up - Easier access to grants and loans for SMEs Banks may disburse loans with limited risk Limited interest rate and guarantee costs Projects analysed by market players; bank and guarantee institution 50% of market share is covered by banks that already joined the procedure
Innovative products Venture Capital Aim: to improve the capital status of Hungarian SMEs in the early ( seed and startup) and growth stage. Facility: financial resources for venture capital funds allocated EUR 161 million 1 Co-investment Fund in the Central-Hungarian Region (CHOP) 7 Joint Funds outside the Central-Hungarian Region (EDOP) Results (as of October 2011): All the 8 venture capital funds were set up in the first half of 2010 Value & no. of investments contracted: EUR 33 M - 34 investee companies Goal is to promote companies that are innovative and are able to produce a quick growth through financial assistance
Venture Capital results and status (end of Sept. 2011) Sectoral breakdown by no. of deals Sectoral breakdown by invested amount
Changes in 2010-11 in JEREMIE Investment Loan Program was launched micro credit through financial intermediaries, Amount of credit available increased from EUR 35 000 to EUR 178 000, Expansion of the eligibility sphere to the entire SME sector Combined MicroLoan oan product have been launched New Széchenyi Counter-guarantee Program The holding fund provides counter-guarantee (85%) for guarantee undertaken by guarantee institutions (max. 80%), From October 2011 this product will be involved in a combined process New Venture Capital Programs To launch two tenders in November 2011, also to promote seed capital for innovative start-ups Changes introduced facilitated the access of assistance for financial intermediaries and for enterprises too
Overview of the main results Disbursed amount exceeded EUR 225 million by September 2011 Number of agreements concluded with final recipients exceeds 5000 Number of financial intermediaries 89 with contracts over 230 Development of new products (Combined Micro Loan, Combined Loan with Guarantee)
Annexes I. Regional and product breakdown of Hungarian JEREMIE program recipients II. Regional breakdown of JEREMIE program of final beneficiaries III.Number of financial intermediaries by sector
Annex. I. Regional and product breakdown of Hungarian JEREMIE program recipients (EDOP) A Regional breakdown of the contracts with final recipients shows a relatively equal distribution of loan, guarantee and venture capital products among Hungarian regions.
Annex II. Regional breakdown of JEREMIE program of final beneficiaries (EDOP) Total m EUR 32,7 28,9 23,8 27,2 25,6 23,3 All regions in Hungary benefit equally from JEREMIE funds in accordance with Cohesion policy measures Based on 27 Sept, 2011 data
Annex III. Number of financial intermediaries by sector Number of financial intermediaries almost 90 with contracts over 230 Financial intermediaries Number of intermediaries 30.06.2010 31.12.2010 01.10.2011 Banks 16 16 19 Saving cooperatives 31 34 35 Microfinancing institutions 20 21 26 Venture capital fund managers 8 8 8 Guarantee institutions 0 0 1 Total: 75 79 89 Financial assistance offered by JEREMIE program may be reached at growing number of financial intermediaries