Piero Crivellaro Coldiretti Economic Department Berlin, 5° May 2006

1. The Public and Private Partnership in the agricultural Guarantee Scheme in Italy Piero Crivellaro Coldiretti Economic Department Berlin, 5° May 2006 Coldiretti is an AECM Member (European Mutual Guarantee Societies and Guarantee Funds)

2. Index • Italian Guarantee Scheme and the PPP at local level • Coldiretti and its Guarantee Consortia • The Basle 2 Accord and agricultural enterprises • What is the role of the Agri-Guarantee Consortia? • The PPP at National level together with ISMEA in respect of Basle 2

3. Italian Guarantee Scheme and the PPP at local level Mutual Guarantee Societies: “Confidi” Private Public National and Regional Funds for counterguarantees / co-guarantees More than 1,000 Confidi

4. Confidi and their roles Created on a voluntary basis Confidi are mutual guarantee societies whose stockholders are SMEs SMEs become members of a Confidi in order to create risk funds and to spread the risk among members. MUTUAL ASSISTANCE Our objectives are to by-pass the inherent historical disadvantages within the credit system and the relationship with banks

5. Confidi and their risk funds Risk funds, which provide direct guarantees, are generated by: • Private resources provided by entrepreneurs who remain the owner of the Confidi • Public resources provided by local institutions which want to support local SMEs in their access to credit

6. Italian Guarantee Scheme and the PPP at local level The first form of Public and Private Partnership is created at local level to issue guarantees and to support enterprises in their access to credit. • At this level, local institutions provide non-repayable funds which are fundamental for: • The strengthening of the Confidi’s action; • The capitalization of their structure; • And for the increase in volume of risk funds.

7. Confidi and their roles Confidi support SMEs in their access to credit Thanks to guarantees offered by Confidi, SMEs can obtain loans at more equitable conditions in terms of cost and volume, compared with loans that individual SMEs may obtain on the basis of their own securities.

8. Value of Confidi’s guarantees The value of Confidi’s guarantees depends upon: • READY LIQUIDITY and AMOUNT of risk funds dedicated to the release of guarantees • DIRECT KNOWLEDGE of SMEs which apply for guarantees • CLOSE RELATIONSHIP WITH LOCAL ECONOMIES (Confidi are widespread all over Italy) Basle 2 is changing the above situation Confidi will need new “strengths”

9. Coldiretti and its Guarantee Consortia What is Coldiretti? Coldiretti is the most representative Italian agricultural organization. It was created in 1944 and represents 54% of all Italian farmers. 1.4 Million Members 115 Regional/Subregional Federations 724 Local offices 5,668Sections

10. Coldiretti and its Guarantee Consortia The AIM of COLDIRETTI “To regenerate agriculture” means to discover once again the core function of agriculture in a new society, where the relationship between consumers and farmers becomes more and more relevant, above all concerning the quality of food and the integration of farms within the countryside. MULTIFUNCTIONALITY Our project spreads from the agricultural sector to all of society

11. Coldiretti and its Guarantee Consortia The Pillars of Coldiretti’s project To build a constructive dialogue between producers and consumers To help agricultural enterprises grow and become more competitive

12. Coldiretti and its Guarantee Consortia In Italy there are almost 70 Agri-Guarantee Consortia Coldiretti represents 38 consortia that provide guarantees for agricultural and agri-business enterprises These Consortia are constituted as a Cooperative or Consortium of agriculture enterprises and have a recent history compared to the consortia of other sectors in Italy.

13. Coldiretti and its Guarantee Consortia Brescia Milano - Lodi Mantova Cremona Como Vicenza Pordenone Sondrio Bergamo Valle d’Aosta Veneto Treviso Venezia Rovigo Pavia Ferrara Torino Ravenna Bologna Piacenza Forlì - Cesena Modena Cuneo Parma Marche Arezzo Teramo Novara Reggio Emilia Pisa Pescara Chieti Viterbo L’Aquila Campania Basilicata Sardegna Siracusa Ragusa Regional Level Provincial Level p.crivellaro@coldiretti.it – Budapest 12-13 Jan ‘06

14. The Basle 2 Accord and agricultural enterprises • Agricultural enterprises that would like to invest, will be able to count not only on regional, national and European funds but also will have to build a new relationship with banks. • This is particularly true if we consider the impact of: • Basle 2 Accord • The reformed CAP • The new EU rural development framework for the period 2007-2013

15. The Basle 2 Accord and agricultural enterprises Agricultural enterprises will have to develop a new partnership with banks to understand the methodology which banks use to evaluate and which new elements are to be considered for rating. At the base of the relationship, if both subjects want to have mutual advantages, there will have to be more transparency and cooperation.

16. The Basle 2 Accord and agricultural enterprises Will agricultural enterprises be able to do this?

17. Guarantee Consortium What is the role of the Agri-Guarantee Consortia? Bank The Guarantee Consortium has agreements with various Banks Bank Farmers provide information Bank It converts the information provided by farmers in a B.P.

18. The Basle 2 Accord and agricultural enterprises For banks – new and more precise information from enterprises will allow banks to understand the degree of risk and, above all, to supply adequate financial products For agricultural enterprises who will be able to transfer their goal/investments to banks, they will receive greater advantages in terms of credit conditions

19. What is the role of the Agri-Guarantee Consortia? The Mission of Agri-Guarantee Consortia for agriculture and for the new EU Rural Development is: • To increase the money supply • To reduce the cost of borrowing • To advise enterprises about their investments • To assist enterprises in their dealings with banks • To develop with enterprises and banks new financial risk models, adequate for the analysis of the structure of agricultural enterprises

20. Eligibility of guarantees in Basle 2 and EU Directive on “Capital Adequacy” The guarantee issued by Confidi is not Basle 2 compliant, because Confidi are not able: • To quantify at any moment the total value of guarantees released; • to verify – even on the basis of information provided by credit institutions – the status of individual guarantees released in terms of the outstanding total, the quality of the credit, the debtor’s solvency Confidi are also not supervisedfinancial intermediaries And, above all, its guarante is a Subsidiary Guarantee

21. The PPP at National level together with ISMEA in respect of Basle 2 • ISMEA – Rural Market Services Government Agency (Supervised by Ministry of Agriculture) • In 2005, ISMEA’s guarantee activities passed to SGFA (company 100% owned by ISMEA) which now provides: • First-Call Guarantees • Co-Guarantees • (State) Counter Guarantees

22. The PPP at National level together with ISMEA in respect of Basle 2 Counter-guarantees are realised by public institutions which provide indirect protection to the lenders (Banks) through the sharing of the losses of the main guarantor (Confidi). They represent a system of public support to a guarantee scheme because of the recognition of their social role in assisting SMEs to access loan finance. The State/Public counter-guarantee is also fundamental, especially in Italy, for the recognition of the first guarantee issued by Confidi with respect to the Basle 2 guarantee requirements.

23. The PPP at National level together with ISMEA in respect of Basle 2 • The counter-guarantee released by ISMEA is there: • To Protect the banks on the disbursement of the loan • To Cover the bank in case of Agri-Consortia bankruptcy • To Create validity for the first guarantee issued by Agri-Consortia Thanks to this public service we can close the guarantee loop and, at the same time, respect Basle 2 rules

24. Find out more about COLDIRETTI • www.coldiretti.it • The official web site  • www.esportareilterritorio.coldiretti.it • The new web site on rural development • www.campagnaamica.it For further information: Piero Crivellaro Economic Dept p.crivellaro@coldiretti.it Tel +39 064682321 Fax +39 064743122