National Microcredit Guarantee Fund
About this good practice
The Guarantee Fund allows the State to act as guarantor in 2 types of schemes:
-Entrepreneurial microcredit: to support individuals in conditions of temporary economic or social vulnerability, who are unable to provide the necessary guarantees for the repayment of the loan and aims to promote people's right to economic initiative. The credit granted can be up to a maximum of 40 thousand €euros, does not require real guarantees and is accompanied by the provision of auxiliary assistance and monitoring services for the financed entities. The loans can have a maximum duration of 7 years.
-Social microcredit: used for the consolidation of self-entrepreneurship and the development of local economic activities and aims to combat the phenomenon of poverty and social exclusion. The loan can be a maximum of 10 thousand € euros.
The coverage of the guarantee for all microcredit operations is the maximum foreseen according to the legislation in force: up to 80% of the loan amount granted. The granting of the guarantee is completely free, without involving the payment of any commission to the Fund. Eligible for the Fund's guarantee are loans aimed at the purchase of goods and services directly connected to the activity carried out (including the payment of leasing fees, financial micro leasing and the payment of expenses connected to the subscription of insurance policies), the payment of salaries of new employees or worker members and to cover the costs of training courses.
Resources needed
The Ministry of Economic Development manages the fund’s activities and requires resources for evaluation and monitoring. The fund’s operational support involves personnel overseeing applications, guarantees, and relationships with financial institutions. Public, EU resources are key.
Evidence of success
In recent years, the National Microcredit Guarantee Fund has provided guarantees for a large number of small loans, with data showing a substantial volume of credit being supported. A key success measure is that the default rate on these loans remains very low, below 1%, which speaks to the effectiveness of the accompanying financial education and mentoring services provided alongside the loans.
Potential for learning or transfer
This practice can be interesting for other regions, because of the cooperation that implies between public entities and banks. Microcredit is not granted directly by the state, but by banks and finance companies: you ask the bank for the loan and the state acts as your guarantor. This is exactly the purpose of microcredit. The state allocates sums every year to be able to act as a guarantor for companies. These sums are part of the State Guarantee Fund (also established by the Ministry of Business-MISE). The Mise acts as guarantor through the Guarantee Fund which, if you do not pay the credit instalments, reimburses the bank. In practice, when you go to the bank to ask for a microcredit, if your application is accepted, the state acts as your guarantor, through the fund. It is an interesting advantage, especially because many aspiring entrepreneurs are unable to obtain loans, not having a guarantor willing to help them.
