Q-Lana left an indelible mark at the CEE23 annual conference...
READ MORESME Lending Fund
Leverage your strengths through risk sharing
The SME Lending Fund addresses the funding gap which exists globally for Small and medium-sized enterprises. It provides an attractive solution at a low cost. It solves the challenges of SME lending by combining the strengths of the existing local banks and investors (Risk Sharing Mechanism). In this model, local financial institutions are the competent finance partners to SMEs, providing both funding and financial advisory. This leverages the in-depth knowledge about SMEs, accumulated by the local banks.
By collecting funds from international and domestic investors and investing them in loan participations, originated by local financial institutions, investors have direct access to the credit risk, while leaving the origination and monitoring to the local institution.
By engaging in a risk-sharing mechanism through arrangements like silent participation or club transactions, the interest in monitoring the loans and collecting outstanding amounts is aligned between the financial institutions and the investor.
Highlights
Benefits for Financial Institutions
Risk sharing of SME lending exposure with SME Lending Fund
Access to off balance sheet term funding, no impact on capital adequacy ratios
Additional earnings through fees on co-lending activity
Improvement of relations with SME
clients
Access to Q-Lana for loan management and risk monitoring
Assessment, Approval and Monitoring using the established platform Q-Lana
In comparison to traditional balance sheet funding: direct risk exposure sharing rather than balance sheet financing
Benefits for Investors
- Access to growing market of SME loans in developing countries
- Co-Investment and risk sharing with local banks on pari-passu basis to bridge information asymmetries (including recoveries)
- Attractive return through co-lending
- FX risk can be excluded based on investor preference
- High quality risk management though Investment Partner
- Benefitting from local work-out knowledge and participating on recoveries
- Benefiting from support of Equity/First Loss tranche, mitigating losses with 99.9% probability, applying methodologies derived from Basel 2 rules (Foundation – Internal Rating Base)
- Exposure without building costly infrastructure for local investment
- On-Boarding: The SME Lending Fund will start operating in 2023
