Country:

Albania

Title:

Credit Guarantee Pilot

Objective:

To enable American Albanian Bank to take an increased (but cautious) level of SME client risk that it would otherwise be unwilling to take, thereby facilitating credit to to the SME sector.

Description:

EBRD, working with the World Bank, to help develop a local credit insurance scheme. The project would help create a grant fund backed credit insurance scheme to assist ABA take client risk for trade finance, SME and construction lending. Each insured loan (which must be credit-worthy in its own right) will be carefully vetted by a World Bank Project Implementation Unit (PIU) to resolve the moral hazard issue.

Preparation Status:

The World Bank is establishing PIUs in the region and is progressing with plans for the domestic credit insurance scheme.

Rationale for Donor Support:

Short credit histories of SMEs and an unreliable framework for credit securities, combined with limited risk-taking ability of local banks, are key constraints to SME lending. Support at early stages can have positive externalities by improving the information and skills base for subsequent lending. These externalities are not fully reflected as benefits in the banks’ accounts. This provides an economic justification for temporary risk-mitigation with the help of grant funds. The structure will seek to ensure that moral hazard is limited and acceptable due diligence is conducted on borrowers.

Amount Required:

EUR 3 million First Loss fund (Pilot Scheme) and USD$ 1 million of T/A to work with the World Bank to help establish the agencies and structure the product.

Financing Plan:

First Loss grant funds would be leveraged two or three times. EUR 3 million will provide for credit insurance of nearly EUR 10 million on a rolling basis.

Final Beneficiary

ABA

Major Sector/Project Issues:

High risk of lending in the region.
Poor levels of security assignment.
Small balance sheet of ABA.
Difficult local scenario.

Contact numbers:

Funding enquiries:

Project enquiries: