Establishment of a successful partnership between a public authority and a business incubator specialized in the delivery of microcredit to support start-ups.
A partnership between SODEBUR (Provincial Governmental Agency) and CEEI Burgos was developed in order to offer rural entrepreneurs credits under EUR 25,000 without the request of a guarantee and at a favorable interest rate (1,5%-3%). This product is exclusive to the Burgos province which counts with 361.021 citizens and it also intends to reduce youth migration to other bigger cities.
CEEI Burgos designed the specific features of the product, in line with the social objectives pursued by a public organization like SODEBUR that in 2013 allocated a budget of EUR 125,000 for the disbursement of microloans. Public funds from the province are used by CEEI Burgos which is in charge of the management of the loans. Loan officers from CEEI Burgos after receiving the loan application and doing an analysis of the proposal, schedule an in situ visits to entrepreneurs. Once the assessment of the client’s project is complete it is presented to the credit committee that is composed by representatives of SODEBUR, Burgos Chamber of Commerce, Burgos young Managers Association, Burgos Federation of Business Associations and the Provincial Government of Burgos to ensure that social objectives set by the partners are met. After the decision of the credit committee CEEI Burgos contacts’ the entrepreneur to notify the decision and do the necessary follow up. CEEI-Burgos carries out the management and follow-up of the whole operation.
Thanks to the success of the partnership and the results attained budget available to CEEI Burgos for the disbursement of microloans passed from EUR 125,000 in 2013 to EUR 800,000 in 2016. These funds are progressively increasing only due to proper risk management and re-investment.
Evidence of success
Since its inception in January 2013 until June 2017, 120 applications were received of which 59 were approved for a total amount of loans granted EUR 1,097,354.88. In addition, thanks to the innovativeness of the risk assessment, the program has an extremely low PAR30 (1,21% in 2016) which ensures the sustainability and efficiency of the program.
Potential for learning or transfer
CEEI Burgos committed to periodically report to SODEBUR on the performance of the portfolio and social goals. This is done during at every credit committee. In the current partnership, SODEBUR did not fix a target in terms of number of loans that need to be disbursed annually by CEEI Burgos. The Province is available to augment the budget according to the needs and demands observed in the field. Given the current portfolio quality and scale of operations, the current low interest applied by CEEI Burgos which is a non-profit institution, ensures the operational sustainability of the program.
This experience can be replicated and tranferred to other communities/regions due to the hig level of standarization of its proceedings.