What is FDI’s Credit Guarantee?
FDI’s Guarantee is a commitment made by FDI to repay a Financial Intermediary’s loan, whenever the borrower defaults. Thus, it is a credit risk reducer. Three key words characterize FDI’s guarantee: Specificity, Proportionality and Long Maturity.
It is a specific guarantee, because it is related to a specific credit granted to a specific enterprise for a specific purpose.
Its proportionality stems from the fact that a) it represents a maximum percentage of 65% of the underlying FI’s loan, with however no possibility to exceed USD 300,000 for a single final beneficiary; b) it’s amortized on a pari-passu basis.
It is a long-term guarantee, because it can be maintained for up to 18 consecutive years.
On what conditions FDI guarantees a bank loan?
For FDI to guarantee a bank loan, the borrower must be an investment enterprise, undertaking an eligible investment project, and not have a bad credit standing.
How is a FDI’s guarantee remunerated?
FDI receives, for its risk-taking a guarantee fee calculated according to an internally developed model, taking into account the overall portfolio quality of the Financial Intermediary, and the perceived risk of the final beneficiary. The guarantee fee generally varies from 2 to 6% per year of validity of the guarantee
What are the restrictions to FDI’s Guarantee?
There are some restrictions to FDI’s Guarantee. For example:
Only enterprises undertaking a creation, expansion or modernization project in one of the priority sectors set forth by the « Declaration of Policy and Procedures » and having a « debt/equity ratio » less than 3 :1, can get access to FDI’s guarantee. In this case, loans granted to finance working investment (working capital needs) or to redeem other debts, are not eligible to FDI’s Guarantee.
Enterprises and managers having a bad credit standing don’t have any access to FDI’s guarantee.
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