GUARANTEE SYSTEMS
IN AFRICA
SETTING UP EFFECTIVE
DEVELOPMENT FINANCE INSTRUMENTS
J. Garson
NOVEMBER 2006
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Definition
Guarantor
(3)
(2)
BAN K
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(1)
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A lost cause ?
1. “All GFs did fail in Africa”
2. Levitsky: GFs are bound to fail
3. Anyway:
– Moral hazard
– Free rider
– Logic
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Yet....
1. GFs worked well in Europe and
in many DCs
2. No other answer to the issue of
collateral
3. Cultural divide ?
4. Donors’ self interest ?
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Revisiting the issue
1. Clarify the objective of GSs
2. Designing GSs is a science, not a
(political) art
3. Managing GSs is a science, not...
4. Setting up/Rehabilitating GSs: a
not too easy
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1. Objectives of GSs
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GUARANTEE SYSTEMS
2b
2a
GOVERNMENTS
WANT TO HELP
ECONOMIC ACTORS
WANT TO HELP
THEMSELVES
1
GUARANTEE FUNDS
NOVEMBER 2006
GOVERNMENTS
WANT TO HELP
MUTUAL
GUARANTEE
ASSOCIATIONS
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Guarantee Funds
GF
(3)
(2)
BAN K
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(1)
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Mutual Guarantee Associations
(2)
(3)
RF
BANK
(1)
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MGAs
1.
2.
3.
4.
More than 120 years
Self-managed “club”
RF = members (+ Govt + Donors)
Cottage enterprises, SMEs,
dentists, housing
5. Levitsky ???
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The replenishment issue
Guarantee funds
1.
2.
3.
4.
Rely on Budget
One-year barrier
Transparency
Problem?
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MGA
1. Membership fees
2. Self-blocking
mechanism
3. Transparency
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1. Objective of GSs
2. What is a good design?
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Key Parameters
1.
2.
3.
4.
5.
Percentage of coverage
First-demand guarantee
Speedy bilateral procedures
Check additionnality
Maintain separate assessments
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Know Who You Are
1. GSs only clients: banks
2. GSs only asset: credibility vis-àvis banks
3. GSs only obsession: keep that
credibility as high as possible
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Know How You Impact Banks
1. Donors mistake: “they want it”
2. A loss is a loss, even with a GS
3. GSs additionnality: just tilt the
balance for “grey area” cases
4. Help convince Banking
Commissions
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1. Objective of the GSs ?
2. What is a good GS design ?
3. What is a good GS management ?
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Know Your Strength
1. Negotiate with Banking
Commission
2. Keep them competing for your
guarantee
3. Do use counterguarantees as
sanctions
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1. Objective of GSs
2. What is a good GS design ?
3. What is a good GS management ?
4. Setting up GSs
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Setting up/Rehabilitating GFs
1. Continental GF: FSA
2. Sub-Regional GFs
– GARI
– Fagace
3. National GFs
– FODEX
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GUARANTEE SYSTEMS
2b
2a
2c
BANKS WANT TO
DEVELOP MLT
LENDING
GOVERNMENTS
WANT TO HELP
ECONOMIC ACTORS
WANT TO HELP
THEMSELVES
MUTUAL
GUARANTEE
ASSOCIATIONS
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Setting up MGAs
1. Governments (Turkey, Spain…)
2. Donors (Philppines)
3. Members themselves (France,
Germany)
4. Banks (West Africa, Cameroon)
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THANK YOU !
jose.garson@bred.fr
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