integrated territorial development
Loans on trust for project proposals:
"LEADERFIDI" for “rural start-ups”
Created by the Anglona-Monte Acuto LAG, the “LEADERFIDI”
cooperative guarantee fund encourages the creation and development
of local small businesses by helping them obtain loans in a region
where interest rates are high and the loan applicants are not very
The economic fabric of the Anglona-Monte Acuto LEADER area is
characterised by the presence of a multitude of small productive
units and by a rather high death rate for new businesses.
One of the major difficulties business owners face is the banking
system in Sardinia which acts like a monopoly: 70% of savings are
channelled by a single financial group, the Banca di Sardegna. All
the financial institutions on the island also charge interest on
loans that is 2% to 4% higher than on the mainland while at the
same time requiring guarantees that few entrepreneurs - mostly
young people - are able to provide. The banks claim that the reason
for this is the high level of investment risk in Sardinia.
The LEADER group decided to tackle the problem and in November 1996
commissioned a specialised company to do a feasibility study on the
creation of a guarantee fund enabling local small entrepreneurs to
be granted loans on trust. The study concluded that the project was
Intense coordinating work began. Meetings were organised in the 25
towns of the LEADER area, which led to the creation of a financial
cooperative responsible for managing a guarantee fund. All the
municipalities joined the project and became founding members,
contributing in proportion to the population of their respective
municipality (about 1 euro per inhabitant). Other public structures
also helped set up the fund: thus the Chamber of Commerce of
Sassari contributed some 15 000 euros to the fund.
The limited liability cooperative, “LEADERFIDI”, was officially set
up in August 1998. It had 29 founding members, public and private,
all located in the rural parts of the Anglona-Monte Acuto area.
In the first quarter of 1999, when the cooperative was approved by
the Italian board responsible for overseeing financial institutions
(UIC), LEADERFIDI already had 100 members. The long process of
consultation launched by the LAG brought in new partners, including
several insurance companies and a number of local businesses.
Membership was open to all interested persons or organisations at
an initial fee of EUR 50.
On 13 May 1999, an agreement was signed between the Banca di
Sardegna and LEADERFIDI. A collective guarantee fund was created to
cover the risk of the loans on trust granted. If the money lent is
not paid back, 50% of the debt is covered by LEADERFIDI and 50% by
the bank. In addition, the setting-up of an “interest fund” enables
LEADERFIDI to pay the interest of all the loans granted.
The total amount of financing to be granted cannot exceed the
equivalent of 4 times the sum deposited by LEADERFIDI, about EUR 2
400 000. The amount lent is limited to 25 822 euros per company.
However, up to 51 645 euros can be lent in the case of projects of
special interest. The loans are repayable over a period of five
years. Interest is automatically debited from the “interest fund”
account opened by the LAG with the bank. A lending committee of 3
members appointed respectively by LEADERFIDI, the Anglona-Monte
Acuto LAG and the Banca di Sardegna is responsible for deciding
whether to grant the loan. Several criteria are used to decide
whether to grant the loan, the most important ones being the
innovative nature of the project to be funded, how this project can
serve as a demonstration and its potential impact in terms of job
creation, particularly for young people and women.
The Anglona-Monte Acuto LAG invested EUR 609 419 of its LEADER
budget in this action, dividing it equally between the guarantee
fund and the interest fund. Moreover, 35 000 euros were used to do
the feasibility study and develop the mechanism.
In May 2000, 30 entrepreneurs, mostly young people, were benefiting
from a LEADERFIDI loan. For some of the project holders, the
mechanism is complementary to the LEADER programme, particularly in
the non-food sector, because it can be used to finance the part of
the investments in equipment which is not covered by public funds.
An absolute innovation in the area, the LEADERFIDI cooperative
should continue its activities beyond LEADER II. The cooperative’s
by-laws already stipulate that LEADERFIDI can, after 2001, continue
to facilitate access to loans and provide technical and financial
assistance to its members. But it does not necessarily have to
cover the interest, because the interest fund will probably be
depleted by that time. LEADERFIDI will then at least become a
permanent structure lending support and advice to the companies and
economic activities of Anglona-Monte Acuto.
source: LEADER Magazine nr.24 - Autumn 2000