The Financing of SME:The model of Confidi for the Districts. Dott. Luciano Consolati coordinatore Fe

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The Financing of SMEThe model of Confidi for the
Districts.Dott. Luciano Consolati coordinatore
Fedartfidi
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FINANCIAL Structure of SME

• -Leverage quite high
• Rate between banking debts to financial debts too
  high (sometimes it is greater than 80)
• High dependency from the banking debt in the
  short term (often on account current) in
  comparison to the total bank debts
• High incidence of the financial burdens
• High implicit cost of the debt

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The Italian model of Confidi

• The mutual guarantee system in Italy is very
  active
• 500 Confidi-mutual guarantee societies- operating
  in different sectors (industry, handicraft,
  commerce, agriculture)
• 941.000 small and medium enterprises
• 18.200 million credit guaranteed by Confidi
  with an average insolvency of slightly more than
  1,5

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Definition of Confidi

• Private institutions
• Consortia or co-operative companies (as defined
  legally) without purpose of profit
• Created by small entrepreneurs and sponsored by
  association of them
• Carries out an activity of mutual guarantee of
  credit

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Mutual guarantee activity

• Financing activity, in the form of a guarantee
  service, developed by a Confidi, to facilitate
  the granting of credit to member enterprises
• Obtaining additional credits further to the
  amounts of credit automatically received by each
  enterprise
• Obtaining lower interest rates as well as more
  transparent additional terms
• Making by banks focus the credit analysis on
  corporate profitability, rather than on the mere
  assessment of estate
• To practice this activity it is necessary to
  have
• A guarantee fund
• An agreement with one or more banks

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Framework
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Legal Form Cooperative or Consortium

• The co-operative is a form of association that is
  almost exclusively chosen by handicraft
  enterprises and is very common among traders.
  Conversely, the majority of "Confidi" among
  industrial enterprises is organised in consortia
• Currently, the choice between one form or another
  of association is up to the enterprises
• The regulation of co-operatives is more complex,
  they are governed by equal terms each affiliate
  is entitled to one vote independently of its
  share value.

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Structure of the confidi

• Consortia and collective guarantee co-operatives
  are established directly by SMEs, which pay a
  share of the co-operative fund or share capital
  and participate in the establishment of
  guarantees
• The decision-making and administrative bodies of
  the consortia and co-operatives follow the lines
  of associative forms shareholders meetings and
  board of governors or directors. Within these
  bodies, affiliate enterprises play a fundamental
  role, since they directly or indirectly through
  their representatives have the decision-making
  and administrative powers over the organisation

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The risk fund The power of Confidi

• The mutual guarantee that "Confidi" furnish to
  the banks with which they co-operate is governed
  by special agreements and is not based upon share
  capital (in the case of co-operatives) or
  co-operative funds (in the case of consortia),
  but rather on a monetary guarantee, called risk
  fund
• The "risk fund" consists of money deposits in one
  or more banks that have signed an agreement

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Public support to Confidi

• The most common form of intervention consists in
  assigning contributions aimed at increasing
  monetary guarantees ("risk fund")
• The interventions taken at a local level, within
  the framework of autonomous decision-making
  powers of the Regions as well as of Chambers of
  Commerce and other public entities, seem to be
  more consistent and more efficient than the
  national public support
• In addition some regional authorities have
  provided for the "Confidi" involvement in the
  development of support programmes aimed at
  enterprises and co-financed by EC structural funds

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The Regional Confidi

• In each region, Confidi are connected to their
  regional confidi that can offer
• Counter-Guarantee
• Co-guarantee
• (EIF initiative Facility, growth and jobs,
  which was taken advantage of by our regional
  Confidi in Lombardy, Emilia Romagna, Tuscany and
  Umbria. This facility is being extended in 2004
  to consortia in Piedmont, Marches and Calabria)
• Direct guarantee

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The strenghts of Confidi

• The confidi have
• information about enterprises
• funding of mutual guarantees
• they make preliminary investigations (less work
  for the banks less costs)
• In exchange the bank
• reduces costs of interest rate for the
  enterprises 
• gives an easyer access to credit
• keeps the same conditions for the duration of the
  financing 
• It is important the bank takes on some of the
  risk 

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Benefits
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Handicraft Credit 2007

• Handicraft Credit . 50.000 million ( 4,9 of
  total credit in Italy)
• Handicraft Confidi Credit (Fedart) .9.600
  million (19)

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Handicraft Confidi Report 2007(by Fedart Fidi-
Artigiancassa Spa)

• Number of confidi 251
• Number of member enterprises 693.000
• Total loans existing at 31.12.2007
• . 9.600 million
• Total mutual guarantees at 31.12.2007
• . 5.400 million

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PERCENTAGE LEVEL OF HANDICRAFT SMEs WITHIN THE
CONFIDI SYSTEM