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Local financing in rural areas

[ Summary ]


Chapter 3:
Achievements and limitations
of LEADER experiences


3.2 Local partnership, a lever for
securing bank finance


Apart from getting closer to project promoters by decentralizing financing, LEADER groups have been able to highlight some of their special features and possibilities in order to influence banks and to act as an interface between financial institutions and funding applicants. The local partnership formula intrinsic to LEADER has been instrumental in creating a privileged relationship with financial institutions.

This has led numerous LAGs to include in their partnership representatives from the banking sector, with whom it has been possible to negotiate undertakings to support project promoters.

One particularly interesting case is that of the Presila Krotonese LAG (Calabria, Italy), which included a bank guarantee cooperative in its local partnership, enabling it to have a direct influence on banks to secure bank loans on behalf of its beneficiaries.

“FinCoop” is a collective guarantee cooperative (Cooperativa di garanzia collettiva fidi ar.l.), founded in 1997 by the Christian association of Italian craftsmen (ACAI) to help small and medium- sized businesses in the Calabria region. In addition to being a founder member of the Presila Krotonese LAG, FinCoop has signed agreements with six other LEADER groups in Calabria. The cooperative concludes agreements with the banking sector to provide loans accompanied by either direct guarantees or guarantees conferred by a regional Single Guarantee Consortium.

The agreement concluded between FinCoop and five banks (four national and one regional bank) enables SMEs and farm businesses in the Presila Krotonese area and in six other LEADER areas in Calabria to:

  • increase their bank credit whilst keeping the same guarantee capacity;
  • improve their access to credit in cases where there are insufficient guarantees;
  • secure interest rates equal to those granted to larger enterprises and to good customers;
  • speed up the examination of the funding application and thus get a faster loan;
  • receive advice on the most suitable financing formulas for their specific needs.

Thanks to this agreement, the LEADER groups have succeeded in establishing a dialogue between the banking system and local businesses, channelling homogenous flows of customers (in terms of categories and requirements) towards the banks and facilitating administrative procedures: FinCoop evaluates the viability of projects. Collaboration with the LEADER groups has also made it possible to develop strategies for local public administrations to participate in setting up venture capital funds.

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