The U.S. DFC provides a 1 billion dollar guarantee for investment and working capital loans to small and medium-sized businesses.
Investment and working capital loans guaranteed by the US International Finance Development Corporation (DFC) could be available to SMEs in the middle of the year. The guarantee scheme in the amount of around one billion dollars will be harmonized by the end of the first quarter, and by the end of the second quarter, that money could be available to our companies and commercial banks.
This was announced by Sinisa Mali, Minister of Finance, after the signing of the Interstate Agreement on Investment Promotion, which is a precondition for the start of DFC activities (which opened an office in Belgrade in September) and confirmation that the Washington Agreement, which was signed in September.
Ljubodrag Savic, a professor at the Faculty of Economics, says that loans for ten years are a good thing because the economy in Serbia does not have such favorable loans with such a repayment period.
– I don’t know if a bank in Serbia gives loans to the economy for five years. These are mostly loans with a repayment period of one or two years. That first element of this agreement is good, because if it is a long-term loan by the nature of things, the interest rate should be low. The feature of long-term loans is a lower interest rate. It is not yet known what the guarantee will be and whether the state will have to guarantee it, as with the guarantee scheme that is currently available to the economy – says Savic.
The professor of the Faculty of Economics points out that the problem of our companies is that few of them have quality mortgages, and that mainly refers to small and medium enterprises. According to his assessment, this is a positive circumstance for the state and for the Serbian economy, because it is always better to have more sources.
– When there are more possibilities, it can even affect banks. It is not a small amount to invest a billion dollars in the Serbian economy. The American fund has a lot of money, and if everything goes as it should, who says that those funds will not be increased – Savic points out.
When asked if he expects the new US administration to continue consistently implementing the Washington Agreement, our interlocutor said that Biden did announce that he would reconsider Trump’s policy, that he would have a different policy towards Europe, global agreements and build different political and economic relations.
– The media reported that they would respect the Washington agreement for Kosovo. I do not believe that anything will change regarding the economy. I can’t say anything definite, I can only speculate. But I would not be surprised if they link the favorableness of the loan with resolving the situation in Kosovo. We do not know to what extent they will treat Serbia favorably. But if we look at the agreement itself, it is good for our country, although at this moment it did not have all the elements of the agreement – says Savic.
In Serbia, there is already a guarantee scheme that has been agreed with commercial banks, where the guarantor of the realization of part of the state loan and part of the package of assistance to the economy affected by the pandemic, from April last year. About 23,000 companies used 1.5 billion euros of the existing guarantee scheme out of a total of two billion euros, which was available. It was an incentive for liquidity, for investments and for working capital.
Liquidity loans under the guarantee scheme are approved for a period of up to three years, including a grace period of nine to 12 months. The interest rate is determined by the bank in accordance with its credit policy, and the maximum interest rate is the one-month Belibor increased by 2.5 percent for loans approved in dinars, and the three-month Euribor increased by three percent for loans approved in euros. This means that the annual interest rate is 3.2 percent for loans in dinars and about 2.5 percent in euros.
On July 20, the National Bank of Serbia made a decision by which it additionally reduced dinar loans from the liquidity scheme. If commercial banks decide to lower the interest rate on dinar loans by at least 0.5 percent, the NBS will pay them 0.5 percent more for the required reserve they hold with the central bank on as much funds as the loans approved under more favorable conditions, Politika reports.
