Piero CrivellaroColdiretti Economic Department
Berlin, 5° May 2006
The Public and Private Partnership in the agricultural
Guarantee Scheme in Italy
Coldiretti is an AECM Member
(European Mutual Guarantee Societies and Guarantee Funds)
IndexIndex1. Italian Guarantee Scheme and the PPP
at local level
2. Coldiretti and its Guarantee Consortia
3. The Basle 2 Accord and agricultural enterprises
4. What is the role of the Agri-Guarantee Consortia?
5. The PPP at National level together with ISMEA in respect of Basle 2
Italian Guarantee Scheme and Italian Guarantee Scheme and the PPP at local levelthe PPP at local level
PrivatePrivate
PublicPublic
Mutual Guarantee Societies: “Confidi”
National and Regional Funds for counterguarantees / co-guarantees
More than 1,000 Confidi
Confidi and their rolesConfidi and their roles
MUTUAL ASSISTANCEMUTUAL ASSISTANCE
Our objectives are to by-pass the inherent Our objectives are to by-pass the inherent historical disadvantages within the credit historical disadvantages within the credit
system and the relationship with bankssystem and the relationship with banks
Created on a voluntary basis Confidi are mutual guarantee societies whose stockholders are
SMEs
SMEs become members of a Confidi in order to create risk funds and to spread the risk among
members.
Confidi and their risk Confidi and their risk fundsfunds
Risk funds, which provide direct guarantees, are generated by:
•Private resources provided by entrepreneurs who remain the owner of the Confidi
•Public resources provided by local institutions which want to support local SMEs in their access to credit
The first form of Public and Private Partnership is created at local level to
issue guarantees and to support enterprises in their access to credit.
At this level, local institutions provide non-repayable funds which are fundamental for:
• The strengthening of the Confidi’s action;
• The capitalization of their structure;• And for the increase in volume of risk
funds.
Italian Guarantee Scheme and Italian Guarantee Scheme and the PPP at local levelthe PPP at local level
Confidi and their rolesConfidi and their roles
Confidi support SMEs in their Confidi support SMEs in their access to creditaccess to credit
Thanks to guarantees offered by Confidi, SMEs can obtain loans at more equitable
conditions in terms of cost and volume, compared with loans that individual SMEs may
obtain on the basis of their own securities.
Value of Confidi’s Value of Confidi’s guaranteesguarantees
The value of Confidi’s guarantees depends upon:
• READY LIQUIDITY and AMOUNT of risk funds dedicated to the release of guarantees
• DIRECT KNOWLEDGE of SMEs which apply for guarantees
• CLOSE RELATIONSHIP WITH LOCAL ECONOMIES (Confidi are widespread all over Italy)
Basle 2 is changing the above situationConfidi will need new “strengths”
Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia
What is Coldiretti?What is Coldiretti?Coldiretti is the most representative Italian
agricultural organization.
It was created in 1944 and represents 54% of all Italian farmers.
1.4 1.4 Million Members
115115 Regional/Subregional Federations724724 Local offices 5,6685,668 Sections
Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia
“To regenerate agriculture” means to discover
once again the core function of agriculture in a
new society, where the relationship between
consumers and farmers becomes more and
more relevant, above all concerning the quality
of food and the integration of farms within the
countryside.
Our project spreads from the agricultural sector to all of society
MULTIFUNCTIONALITYMULTIFUNCTIONALITY
The AIM of COLDIRETTIThe AIM of COLDIRETTI
Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia
The Pillars of Coldiretti’s The Pillars of Coldiretti’s project project
To build a constructive dialogue between producers and consumers
To help agricultural enterprises grow and become more competitive
In Italy there are almost 70 Agri-Guarantee Consortia
Coldiretti represents 38 consortia that provide guarantees for agricultural and
agri-business enterprises
These Consortia are constituted as a Cooperative or Consortium of
agriculture enterprises and have a recent history compared to the consortia
of other sectors in Italy.
Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia
[email protected] – Budapest 12-13 Jan ‘06
Cuneo
Torino
Novara
Valle d’AostaVeneto
Ragusa
Siracusa
BasilicataCampania
ChietiPescara
Teramo
L’Aquila
Marche
Viterbo
ArezzoPisa
Forlì - Cesena
RavennaFerrara
BolognaModena
Parma
Reggio Emilia
Piacenza
VeneziaRovigo
Vicenza
Treviso
Pordenone
Mantova
Cremona
Brescia
Sondrio
Milano - Lodi
Como
Bergamo
Sardegna
Pavia
Regional Level
Provincial Level
Coldiretti and its Guarantee ConsortiaColdiretti and its Guarantee Consortia
Agricultural enterprises that would like to invest, will be able to count not only on regional, national and European funds but also will have to build a new relationship with banks.
This is particularly true if we consider the impact of:
• Basle 2 Accord
• The reformed CAP
• The new EU rural development framework for the period 2007-2013
The Basle 2 Accord and agricultural The Basle 2 Accord and agricultural enterprisesenterprises
Agricultural enterprises will have to develop a new partnership with
banks to understand the methodology which banks use to evaluate and which new elements are to be considered for
rating.
At the base of the relationship, if both subjects want to have mutual
advantages, there will have to be more transparency and cooperation.
The Basle 2 Accord and agricultural The Basle 2 Accord and agricultural enterprisesenterprises
Will agricultural enterprises be able to do this?
The Basle 2 Accord and agricultural The Basle 2 Accord and agricultural enterprisesenterprises
What is the role of the Agri-What is the role of the Agri-Guarantee Consortia?Guarantee Consortia?
Guarantee
Consortium
Bank
Bank
BankFarmers provide
information
It converts the information provided by
farmers in a B.P.
The Guarantee Consortium has agreements with
various Banks
For banks – new and more precise information from enterprises will allow banks to understand the
degree of risk and, above all, to supply adequate financial products
The Basle 2 Accord and agricultural The Basle 2 Accord and agricultural enterprisesenterprises
For agricultural enterprises who will be able to transfer their
goal/investments to banks, they will receive greater advantages in terms
of credit conditions
The Mission of Agri-Guarantee Consortia for agriculture and for the new EU Rural Development is:To increase the money supplyTo reduce the cost of borrowingTo advise enterprises about their investments
To assist enterprises in their dealings with banks
To develop with enterprises and banks new financial risk models, adequate for the analysis of the structure of agricultural enterprises
What is the role of the Agri-What is the role of the Agri-Guarantee Consortia?Guarantee Consortia?
The guarantee issued by Confidi is not Basle 2 compliant, because Confidi are not able:
• To quantify at any moment the total value of guarantees released;
• to verify – even on the basis of information provided by credit institutions – the status of individual guarantees released in terms of the outstanding total, the quality of the credit, the debtor’s solvency
Confidi are also not supervised financial intermediaries
And, above all, its guarante is a Subsidiary Guarantee
Eligibility of guarantees in Basle 2 and Eligibility of guarantees in Basle 2 and EU Directive on “Capital Adequacy”EU Directive on “Capital Adequacy”
The PPP at National level together The PPP at National level together with ISMEA in respect of Basle 2 with ISMEA in respect of Basle 2
ISMEA – Rural Market Services Government Agency (Supervised by Ministry of Agriculture)
In 2005, ISMEA’s guarantee activities passed to SGFA (company 100% owned by ISMEA) which now provides:
•First-Call Guarantees•Co-Guarantees•(State) Counter Guarantees
Counter-guarantees are realised by public institutions which provide indirect protection to the lenders (Banks) through the sharing of the losses of
the main guarantor (Confidi). They represent a system of public support to a guarantee scheme because of the recognition of their social role in
assisting SMEs to access loan finance.
The State/Public counter-guarantee is also fundamental, especially in Italy, for the recognition of the first guarantee issued by Confidi with respect
to the Basle 2 guarantee requirements.
The PPP at National level together The PPP at National level together with ISMEA in respect of Basle 2 with ISMEA in respect of Basle 2
The counter-guarantee released by ISMEA is there:
•To Protect the banks on the disbursement of the loan
•To Cover the bank in case of Agri-Consortia bankruptcy
•To Create validity for the first guarantee issued by Agri-Consortia
Thanks to this public service we can close the guarantee loop and, at the
same time, respect Basle 2 rules
The PPP at National level together The PPP at National level together with ISMEA in respect of Basle 2 with ISMEA in respect of Basle 2
Find out more about Find out more about COLDIRETTICOLDIRETTI
www.coldiretti.it
The official web site
www.campagnaamica.it
www.esportareilterritorio.coldiretti.it
The new web site on rural development
For further information:Piero CrivellaroEconomic Dept
[email protected] +39 064682321Fax +39 064743122