Episode 2: The SIH Anti-Corona Guarantee in Slovakia
Main topics: the SIH Anti-Corona Guarantee, the first ESIF financial instrument in the country to help SMEs overcome the financial difficulties caused by the COVID-19 crisis and help preserve jobs.
A discussion with Ivan Lesay, CEO of SIH and a member of the EIB Board of Directors, hosted by Fatima Tair from the fi-compass team at EIB.
Welcome to a new episode of the Fi Compass Jam Session podcast. I am Fatima Tair and I will be your host today.
Today’s guest is Ivan Lesay. Chief Executive Officer of the Slovak Investment Holding, the Financial Promotional Institutions in Slovakia. Welcome Ivan and thanks for joining us.
Thank you for inviting me.
Ivan, we are here today to discuss your response to the Corona Virus in Slovakia – the Anti-Corona Guarantee. What is this Guarantee and how does it use European Structural and Investment Funds to support local businesses affected by the pandemic?
The Anti Corona Guarantee is a special instrument that we decided to introduce right at the beginning of the corona crisis. We - at the Slovak Investment Holding - we actually sat down very early to discuss the possible impact of the lockdown that was just being introduced and the impact on businesses. We talked about how Slovak Investment Holding could step in, so we decided to introduce a financial instrument that would help Small and Medium Enterprises to carry over the period with difficulties by the necessary health and safety measures.
Can you specify more about this Guarantee? Can you give us more details?
Yes, absolutely, this is a guarantee up to 80% of individual loans, with up to 50% Portfolio Cap. It is aimed to all SMEs that are eligible under the European Structural and Investment Fund. We work with commercial banks that further pass this help to the SMEs.
You managed to introduce this instrument very quickly in Slovakia. Several banks have been proposing this product to their clients for two months now. Can you let us know how successful it is?
Very quickly after the first signs of difficult times to come, we tried to organize ourselves and had our first internal tele-conference on March 16. A week after we launched market consultations with the banks, and by the end of March, we had the minimis scheme approved by the Anti-Monopoly Office, which was a record speed. On March 30, we published the call for expression of interest for the banks. In a week’s time – so by April the 5th – we got nine banks expressing their interest and the first contract with the quickest of the banks was signed on April the 17th . From the very beginning until the first signature with the bank, it took exactly one month.
A very quick process indeed. Moreover, what were the challenges encountered in this process?
Everything was a bit of a challenge, including internally in the Slovak Investment Holding; publishing the call and going through this procedure of selecting banks was a new things for us, because we previously only did tenders, which was a different story. However, these are all unprecedented times not only internally but also for the financial intermediaries, the banks. There were problems because the implementation of this kind of financial instrument, financial product, has not been easy for banks either. They needed to set up new procedures to provide loans to their customers as effectively as possible, while also following the minimis scheme. This was not easy for them and has affected the overall speed. It was challenging for the banks and for us, but still we managed.
Good. Can you please share with us some expected results, in terms of loans uptake and give us an example of a final recipient?
Regarding the number of the Banks, we signed contracts with eight of them; two of them started very quickly – as they are one of the biggest SMEs finance providers and have already reached out to us regarding the increase of the original allocation, which is very good. We can share the number, that is however not precise; it is about dozens of loans that have been already provided to SMEs. In the contract we signed with the banks there is quarterly reporting requirement, so we will know more in, let’s say, July or in August. I think it is difficult to assess the overall success, but we can see that most of the companies that have managed to get a loan are still working and they are alive. One example to share is the one of the first loan, provided by the first bank - which carries some symbolism with it – is a company called UTEX Slovakia. They received a €600.000 loan. It is a company that sells carpets and parquets. They had to close down because of the lockdown in April and hopefully this loan will help them bridge this difficult time until they are able to open again. We believe and have episodic evidence of other companies having the same troubles, but being offered help in the form of Bridge Loans and managing to survive.
I know you are planning other measures as well, which will target Mid-Caps and Large-Caps, where are your discussions up to with the Ministry of Finance and other government authorities as regards another potential financial instrument?
This new financial instrument is currently in the process of finalization. We are waiting for the European Commission to approve the State Aid scheme. The difference from the previous guarantee is that this one will work on the new regime, the so-called Temporary Framework for State Aid. In the meantime, while waiting we opened market consultations again. The purpose of this procedure was - in the case of the first guarantee instrument - to receive feedback from banks and to try to accommodate to the relevant contracts. We plan to publish a call very soon. This new guarantee will be available also to large companies; that is the difference from previous one. In addition, some parameters will change: loans up to €2 million will be covered 90% and loans above €2 million will benefit from an 80% guarantee and there will be no portfolio cap.
For the last question, you informed us in a previous interview that you decided to impose a teleworking mode as early as the beginning of March. Now that everyone is speaking about Exit Strategies, can you tell us a few words about how you see the future at work in the coming months.
It is true that we decided to introduce voluntary home office for our employees since 9 March. I must say that things here in Slovakia are slowly getting back to normal. The protective measures are slowly being lifted. We have even discussed in the board the possible return to our offices. We are not in a hurry, it all worked quite ok even on a teleworking mode. I believe that we should be back to a perfect normal only after the summer holidays. Regarding your second question, I think that the crisis we are going through will or might have an impact on the future of office environment, in many Slovak companies including ours and not only in Slovakia, but I think it will similar in all Europe and in the world. My key assumption is that remote work is probably going to stay and that there might be a demand for an improved and more efficient virtual workspace. This is my assumption but it is not only, but wiser people are probably saying this as well.
Thanks Ivan for your time today. I hope you enjoyed this short interview. I am sure our listeners will find this episode of the Fi Compass Jam Sessions Podcast useful and interesting.
Thank you very much, thanks for having me here. It was a pleasure to share my experience with you.
Stay tuned for the next episode of the Fi Compass Jam Sessions. If you have any questions or want to suggest a new podcast topic, send us an email at firstname.lastname@example.org. Have a good day everybody.