ProCredit Moldova Portfolio Guarantee - MSMEs and Green Investments

Micro and small and medium-sized enterprises (MSMEs) in Moldova play a large and important role in the country's economy and account for the majority of employment in the country. However, the MSME sector faces challenges often linked to a large informal market and low productivity in a number of sectors. These challenges hinder the competitiveness of Moldova's Micro, Small and Medium Enterprises, not least in regional and international markets. MSMEs also play a crucial role in Moldova's green transition. They are well positioned to implement various energy solutions, such as decentralized renewable energy projects tailored to local needs. Companies are increasingly realizing the benefits of energy-efficient operations and circular business models, which can lead to cost savings and improved competitiveness. The goals are in line with Sweden's strategies that govern Swedish reform cooperation with Moldova: - Promote the partner countries' ability to gain access to international trade and to strengthen the participation of small-scale companies in local and regional markets. - Sida's new internal strategy for cooperation with business 2024-2026: The guarantee contributes to the goal of supporting trade and inclusive sustainable markets for small and medium-sized enterprises. - Sweden's reform cooperation with Eastern Europe 2021-2027: The guarantee contributes to the following goals; Inclusive Economic Development; Improved opportunities for work; Strengthened conditions for free, fair and sustainable trade; Environmentally and climate-adapted sustainable development; and, Reduced climate impact, including increased access to renewable energy and higher energy efficiency. The proposed re-guarantee from Sida amounts to EUR 6,000,000, however a maximum of SEK 71,640,000 (guarantee ceiling) at a SEK/EUR exchange rate of 11.94 step 3 in Sida's exchange rate model for guarantee ceilings. The guarantee will enable lending up to EUR 30,000,000 (maximum aggregated lending for the guaranteed portfolio), which constitutes the mobilized capital that the guarantee generates. This corresponds in SEK 346 260 000 with a SEK/EUR exchange rate of 11,542 on date 2024-11-14. Collaboration partner ProCredit Bank S.A. Moldova received a banking license in Moldova in 2007. The bank is part of the ProCredit Group, an international banking group with 100% foreign capital. Its sole shareholder is ProCredit Holding, headquartered in Frankfurt, Germany. The group operates in Eastern Europe, Latin America and Germany. On a consolidated level, ProCredit Group is regulated and supervised by the German Federal Financial Supervisory Authority (BaFin) and the Bundesbank. The due diligence assessment of Pro Credit Bank Moldova, which was carried out in May 2024 by Sida, confirmed that Pro Credit has satisfactory routines, processes and methods for good financial management. Furthermore, Pro Credit is judged to be a creditworthy organization with a sound financial position. Pro Credit is deemed to comply with the policies and guidelines that exist for managing credit risks and has systems for monitoring risks linked to credit, financial transactions, corruption and money laundering. Agreement structure and financial flows The contribution consists of a standardized loan portfolio guarantee with Pro Credit in Moldova, where the risk is shared pari passu between Sida and Pro Credit and where any recoveries are shared pro-rata. Follow-up A format for reporting development results and Guarantee technical data has been implemented in the Guarantee agreement. The format and content of the reporting have been tailored based on the specific Guarantee.