Jalal-Abad - Public hearings on amendments to the Law on Guarantee Funds in the Kyrgyz Republic will be held on September 29, 2015 at 10 a.m. in Mol Mol hotel at 17 Lenin street, Jalal-Abad. The public hearings will be attended by representatives of all stakeholders including entrepreneurs, representatives of finance and banking system, Ministry of Economy (southern office), Jalal-Abad Mayor Office, neighboring ayil okmotus, and civil society sector.

Guarantee fund is a financial organization assisting entrepreneurs in obtaining loans by providing guarantees. According to the Law on Guarantee Funds in the Kyrgyz Republic, GF may only provide guarantees in the amount not exceeding 5 per cent of the GF capital and 30 per cent of the loan amount. Meanwhile, business is growing and so are entrepreneurs' need in loans and GF capital. Taking into consideration the significant support provided by the GF system to entrepreneurs, high quality of GF, banks and entrepreneurs performance, and 100% guarantee/loan repayment rate, business associations, SME entities and partner banks ask to increase guarantee rates. Taking into account recommendations on guarantee amount increase, the Association of Guarantee Funds believes it's necessary to raise guarantee rates/amounts from 5 to 10 per cent of capital and from 30 to 50 per cent of loan amount subject with maintained quality of loans/guarantees.

Furthermore, the existing Law contains a provision requiring to limit the share in newly established GFs by 20 per cent unless founders are government and its structures or municipalities. This situation hampers establishment of new GFs with private sector share. In this view, the Association of Guarantee Funds believes it's necessary to exclude this provision from the Law.
If accepted, the above recommendations on amendments to the Law on Guarantee Funds in the Kyrgyz Republic will allow establishing new GFs all over the Kyrgyz Republic and entrepreneurs will be able to take larger loans and increase the trade turnover. All this will allow them to enter new export markets, particularly in the EEU countries, increase tax remission, and create new jobs and maintain existing ones.

Guarantee funds were established with support of the USAID Local Development Program. In 2010, the study of access to financial resources for entrepreneurs showed that about 40 to 50 per cent of potential borrowers in the Kyrgyz Republic approaching banks were unable to obtain necessary loan amounts due to insufficient security.

To address the problem, a new financial system, i.e. that of guarantee funds, was established as a part of the USAID Local Development Program with a primary objective of providing entrepreneurs with guarantees for loans and lease contracts under insufficient security. Guarantee funds operate in accordance with the Law on Guarantee Funds in the Kyrgyz Republic passed in 2013.
There are 6 guarantee funds currently operating in Kyrgyzstan such as Osh, Jalal-Abad, Sarai, Kara-Balta, Karakol, and Kant. New GFs have been planned in Uzgen, Talas oblast, and other municipalities. The existing guarantee funds achieved the following during the period 2011 to June 30, 2015: (1) over 400 guarantees amounting to 35 million soms in total were provided; (2) banks provided loans in total amount of 172 million soms; (3) guarantees' revenues reached 290 million soms; (4) taxes in amount of 1.5 million soms were paid; (5) 330 new jobs were created and 840 existing ones supported; and (6) guarantee/loan repayment rate remained 100%. All this proves that the GF system is needed to support entrepreneurship. All guarantee funds have proven to be profitable and self-supported.

The Association of Guarantee Funds and its members will continue to promote entrepreneurship development and remain committed to maintaining the high guarantee/loan repayment rate.

The public hearings is made possible by the support of the American people through the US Agency for International Development (USAID) as a part of the USAID Collaborative Governance Program in cooperation with the grantee, the Association of Guarantee Funds of the Kyrgyz Republic.