New loan programmes for agricultural enterprises may be added to the current package, so almost 500 billion forints will be available for lending. In the optimistic scenario, the entire coordinated loan, capital and guarantee programme package with a total budget of 1,517 billion forints to help restart the economy can run out by the end of next year, said Levente Sipos-Tompa, President and CEO of the Hungarian Development Bank (MFB) in an interview with növekedés.hu.
The MFB Group is helping the restart of the economy with a nearly 1,500 billion forint harmonized loan, capital and guarantee programme. Is there a lot of interest from businesses and which sectors are most interested?
In the history of the MFB Group an unprecedentedly large financing package of 1,517 billion forints has been created which affects all the financing tools and product portfolios of the affiliates. The total package includes three loans, two guarantees and four capital programmes aimed at helping Hungarian businesses, and they are based both on the group’s own resources and on EU programmes managed by the group.
Our goal is to help all companies, regardless of their size, to maintain their operations, retain their employees, and implement their investment and development plans.
In terms of business goals, we see the biggest demand for help with liquidity problems, but there is also strong interest in loans for investment, acquisition and development plans. Since the programme was announced, more than 30 billion forints have been claimed in recent weeks, from more than seven hundred serious applicants.
It is important to note that this package not simply provides an opportunity for businesses to survive this period, but also to be successful during the restart and further development of the economy.
In the optimistic scenario, the available amount will run out by the end of next year.
How do support programmes of different institutions, such as Eximbank, MFB and MNB relate to each other?
We have a common goal: to alleviate the economic damage caused by the pandemic and to help and support primarily small and medium-sized businesses and to ensure that they remain viable. As the three institutions focus on different activities, their programmes may also be different. This is also a strength, however, as they can effectively complement each other.
Apart from this common goal, the three institutions share the same “interest”, namely to make sure that the structure of the economy and the SME sector remain as healthy as possible after the end of the pandemic.
How do you think the Hungarian packages, including MFB's loan, capital and guarantee programmes compare to international schemes?
The MFB Group is unique among European development institutions because it is able to provide credit, capital and guarantees in a coordinated manner.
The package has been designed so that any company that is struggling now but is viable otherwise can find a suitable solution in it. Perhaps the link between credit and guarantee does not need further clarification - although a government guarantee obviously provides great security for companies in the current situation, the link between capital and credit, however, is not typical although it can be very important for companies.
Have there been consultations between development banks in the Visegrad group or other countries about the assistance provided?
The member states of the Visegrad Group have been successful in their fight against the pandemic. This is not only true from the point of view of public health, but also in terms of the economy, as the economic rescue packages launched in these countries provide significant help in overcoming the economic crisis caused by the pandemic. In the V4 countries it is important to help small and medium-sized enterprises, reduce their tax burdens, take on government guarantees and keep jobs.
Relations between the V4 countries have been characterized in recent months by continuous consultations and cooperation, and this has also been the case between the development banks of the region. MFB also played an active role in designing the European instruments announced by the European Commission, the reallocation of existing structural resources, and it was also involved in lobbying activities. Finally, MFB, as an observer to the European Commission's COVID-19 Financing Working Group, attended negotiations aimed at increasing the role of financial instruments in support schemes to mitigate the impact of the pandemic.
There are Hungarian companies which are financially not strong enough yet, and this restricts their financing opportunities. To what extent can the programmes launched by MFB help the dynamics of borrowing?
One of the basic principles of development banks is that they offer loans to companies that are viable but have no or very little access to market resources.
Because of the pandemic, MFB has to take it a stage further and create opportunities for all Hungarian companies, therefore we also offer financing to companies that would not be able to survive without it.
There have been several estimations of the number of such companies, but it is difficult to say for sure. One thing is certain though: the number of businesses in need has increased significantly in recent months. In addition to smaller companies, we also offer loan programmes to large companies or medium-sized companies that are planning significant investments, so at MFB we strive to support operations or development plans in all lifecycles of companies.
How can the new loan programmes help to improve the competitiveness of the SME sector and help companies to grow?
The package has been put together in such a way that the guarantee provided by Garantiqa Hitelgarancia Zrt., the capital programmes available under the management of Hiventures Zrt. and the lending activities of MFB complement and strengthen each other - so we can significantly expand the opportunities for businesses.
Furthermore, MFB continues to work on new schemes so loan programmes for agricultural enterprises are expected to complete the current package, so it will mean almost 500 billion forints available for lending.
As I have said before the aim of these programmes is not only to provide temporary solutions for the daily operation of businesses in the current situation, but also to ensure that companies can grow and can implement their planned developments / investments.
The MFB Group is launching a 500 billion forint loan guarantee programme. What percent of companies involved in the programme may default, depending on the severity of the crisis situation?
Indeed, in addition to lending, the highest ever loan guarantee programme of 500 billion forints was launched under the name Crisis Guarantee Programme and it is managed by Garantiqa Hitelgarancia Zrt., which is part of the MFB Group.
In the programme lasting until the end of the year, companies can use the 90 percent government guarantee for overdrafts, current assets and investment loans. In addition, the state also supports the activities of Garantiqa Hitelgarancia Zrt. by increasing the budgetary guarantee limit by 130 billion forints. MFB launched the MFB Force Majeure Guarantee Programme to supplement the guarantee programmes of Garantiqa Zrt., offering loan-related guarantees starting from 5 billion forints.
In 2019 every fifth SME loan was granted with the guarantee of Garantiqa, which means that they helped 41,000 Hungarian businesses to get a loan.
As efforts have been made in recent years to finance Hungarian SME’s with longer-term transactions and to increase the number of transactions financed over one year, we hope that this structure can help companies avoid default.