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Bank Austria Creditanstalt (BA-CA) is establishing a Fund for Credit Guarantee with the equivalent of USD 15.4 million in capital. The bank will initially use the capital to launch the fund and then, to facilitate credit guarantees, which will be directed in part towards Bulgarian microfinance institutions (MFIs).
The bank has launched the project to cover bank issued guarantees for a four year term ending in 2012. Financial details of possible investments in the fund are not yet available. The bank has outlined a two-part project proposal of how to delegate funds: The first initiative of the fund will be to refinance loans given to MFIs by banks in Bulgaria. BA-CA plans to have the fund cover 90 percent of the risk for the MFIs. For the second initiative, the funds will refinance loans that were initially given by international companies. The fund will also cover 75 percent of the risk accumulated by the debtor from local financing institutions. Further specifications of the necessary qualifications for the type of debtor that will be serviced in the second part are not available.
No further information is available on other possible fund investors. Additionally, it is not clear whether or not BA-CA expects a return on capital or if the fund is nonprofit.
Headquartered in Vienna, Bank Austria Creditanstalt (BA-CA) was founded in 1880. In 2006 BA-CA became a member of UniCredit Group, a USD 1,572 billion group that offers financial services throughout Europe. BA-CA is a sub-holding for the Central and Eastern European (CEE) region. UniCredit, as a whole, reports its total loans in the CEE region as of December 31st 2007 to be 62,169.
The importance of the CEE region to BA-CA centers on the limited size of the Austrian banking market. BA-CA admits that the CEE region is integral for its growth and expansion, even considering the region part of their “domestic market”. BA-CA notes specific worries about the Bulgarian market, and in May 2008 predicted a slowdown in the Bulgarian economy. BA-CA indicates that there is a chance of foreign investors withdrawing, and of a decrease in credit loans. In light of this prediction, support for Bulgarian institutions grows in importance to BA-CA.
In its 2007 Annual Report, BA-CA reports total assets held to be the equivalent of USD 321.8 billion and a return on equity of 17 percent. BA-CA first extended financial services to Bulgaria in 2007.
By Sarah Knapp
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