guarantee systems in africa setting up effective development finance instruments j. garson
DESCRIPTION
GUARANTEE SYSTEMS IN AFRICA SETTING UP EFFECTIVE DEVELOPMENT FINANCE INSTRUMENTS J. Garson. Definition. Guarantor. (3). (2). B A N K. (1). A lost cause ?. “All GFs did fail in Africa” Levitsky: GFs are bound to fail Anyway: Moral hazard Free rider Logic. Yet. - PowerPoint PPT PresentationTRANSCRIPT
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NOVEMBER 2006 JGARSON 1
GUARANTEE SYSTEMSIN AFRICA
SETTING UP EFFECTIVE
DEVELOPMENT FINANCE INSTRUMENTS
J. Garson
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NOVEMBER 2006 JGARSON 2
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NOVEMBER 2006 JGARSON 3
Definition
Guarantor
B A N K(1)
(2)(3)
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NOVEMBER 2006 JGARSON 4
A lost cause ?
1. “All GFs did fail in Africa”2. Levitsky: GFs are bound to fail3. Anyway:
– Moral hazard– Free rider– Logic
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NOVEMBER 2006 JGARSON 5
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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NOVEMBER 2006 JGARSON 6
Revisiting the issue
1. Clarify the objective of GSs2. Designing GSs is a science, not a
(political) art3. Managing GSs is a science, not...4. Setting up/Rehabilitating GSs: a
not too easy
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NOVEMBER 2006 JGARSON 7
1. Objectives of GSs
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NOVEMBER 2006 JGARSON 8
GUARANTEE SYSTEMS
GUARANTEE FUNDS MUTUALGUARANTEE
ASSOCIATIONS
GOVERNMENTSWANT TO HELP
ECONOMIC ACTORSWANT TO HELPTHEMSELVES
GOVERNMENTSWANT TO HELP
2a
2b
1
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NOVEMBER 2006 JGARSON 9
Guarantee Funds
G F
B A N K(1)
(2)(3)
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NOVEMBER 2006 JGARSON 10
Mutual Guarantee Associations
RF
B A N K(1)
(2)(3)
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NOVEMBER 2006 JGARSON 11
MGAs
1. More than 120 years2. Self-managed “club”3. RF = members (+ Govt + Donors)4. Cottage enterprises, SMEs,
dentists, housing5. Levitsky ???
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NOVEMBER 2006 JGARSON 12
The replenishment issue
Guarantee funds
1. Rely on Budget2. One-year barrier3. Transparency4. Problem?
MGA
1. Membership fees2. Self-blocking
mechanism3. Transparency
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NOVEMBER 2006 JGARSON 13
1. Objective of GSs
2. What is a good design?
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NOVEMBER 2006 JGARSON 14
Key Parameters
1. Percentage of coverage2. First-demand guarantee3. Speedy bilateral procedures4. Check additionnality5. Maintain separate assessments
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NOVEMBER 2006 JGARSON 15
Know Who You Are
1. GSs only clients: banks2. GSs only asset: credibility vis-à-
vis banks3. GSs only obsession: keep that
credibility as high as possible
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NOVEMBER 2006 JGARSON 16
Know How You Impact Banks
1. Donors mistake: “they want it”2. A loss is a loss, even with a GS3. GSs additionnality: just tilt the
balance for “grey area” cases4. Help convince Banking
Commissions
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NOVEMBER 2006 JGARSON 17
1. Objective of the GSs ?
2. What is a good GS design ?
3. What is a good GS management ?
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NOVEMBER 2006 JGARSON 18
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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NOVEMBER 2006 JGARSON 19
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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NOVEMBER 2006 JGARSON 20
Setting up/Rehabilitating GFs
1. Continental GF: FSA2. Sub-Regional GFs
– GARI– Fagace
3. National GFs– FODEX
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NOVEMBER 2006 JGARSON 21
GUARANTEE SYSTEMS
MUTUALGUARANTEE
ASSOCIATIONS
ECONOMIC ACTORSWANT TO HELPTHEMSELVES
GOVERNMENTSWANT TO HELP
2a
2b
BANKS WANT TODEVELOP MLT
LENDING
2c
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NOVEMBER 2006 JGARSON 22
Setting up MGAs
1. Governments (Turkey, Spain…) 2. Donors (Philppines)3. Members themselves (France,
Germany)4. Banks (West Africa, Cameroon)