Goals and objectives: The solution offers access to finance for small and medium enterprises. About 40-50 percent of potential borrowers who approached banks did not obtain the required amount of loan for the development of their businesses due to insufficient collateral. Inadequate supply of credit resources of the banking system for a high demand did not allow cutting interest rates on loans.
Implementation: In 2010, the USAID Local Development Program addressed and resolved this issue by introducing a new financial structured Guarantee Fund, which provides a guarantee to an entrepreneur to obtain the required loan amount in case of insufficient collateral. The Guarantee Funds are designed to facilitate lending to small and medium enterprises and the core organizations supporting entrepreneurial activities. The main objective of the Guarantee Fund is to provide businesspeople guarantees to banks for loans and leasing contracts under insufficient collateral.
In 2013, the Law on the Guarantee Funds in the Kyrgyz Republic was adopted, governing activities of guarantee funds. Under the law, the Guarantee Fund (GF) may be established as a joint stock company, a limited liability company, a public fund or an institute, and depending on the founding members it can function throughout the republic or region. In Kyrgyzstan, GFs are regional (municipal), as the founders of the GFs are local governments and they operate in the region where they are established. GFs operate in five regions (Kara Balta, Karakol, Osh, Jalal-Abad cities and Sary Aiyl Okmot of Osh region) and on 23 March 2015, one more fund was registered in Kant city. The GF "Karakol" operates throughout the Issyk-Kul region, while all others do so within their municipality.
Association of Guarantee Funds of the Kyrgyz Republic coordinates the activities of all the GFs and all are members. The Association of Guarantee Funds of the Kyrgyz Republic has been a member of the European Association of Mutual Guarantee Societies (AECM) since October 2014.
Achievements: as of 30 June 2015 the solution has achieved the following:
- Established six guarantee funds in Kyrgyzstan;
- Guarantees issued reached 400;
- Capital of guarantee funds rose by 31 percent compared to 2013;
- Amount of guarantees issued to banks equals KGS 35.3 millions and amount of bank loansprovided to entrepreneurs accounts for KGS 172 million;
- Repayment of loans and guarantees is 100percent;
- From guarantees/loans received, entrepreneurs earned income in the amountof KGS 600 million;
- Created 332 new jobs and supported 887 existing jobs;
- Increased budget revenue of municipalities by 70 percent.
Replication: Tajikistan paid a study visit to Kyrgyzstan to learn from the experience of the Kyrgyz colleagues.
Budget: Required minimum capital for the operation of the guarantee fund (in various countries, the capital requirements may be different). In Kyrgyzstan the capital requirements for the guarantee fund is KGS 6 million, or $100,000.
Partners: USAID, municipalities of Kara-Balta, Jalal-Abad, Osh, Karakol, Kant, Saray and others.
Association of Guarantee Funds of the Kyrgyz Republic
Malik Abakirov, Chairman
Address: 209/1, Moskovskaya str., Bishkek, Kyrgyz Republic
Phone number: +996-557-574454