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Bank Fund Raising Guarantee

Definition

The Bank Fund Raising Guarantee (BFRG) guarantees bonds or any form of loans issued by a Partner Financing Institution to investors for whom the parameters have been defined but the individual investors may not be known for the purpose of raising long term resources to finance SMEs.

Limit

The indicative limit for Bank Fund Raising Guarantee is USD 20,000,000. However, AGF has the capacity to provide guarantee support for amounts higher than this limit, depending on among other considerations, the nature and type of support required

Coverage Rate

AGF’s guarantee coverage rate is based on the principle of having a balanced sharing of risks between the Guaranteed Party and the Guarantor rather than a transfer of all the risks. This risk sharing model translates into a guaranteed maximum coverage rate of 50% of the financing involved subject to the guarantee type limits.

Exceptions to this rule are co-guarantee arrangements whereby for BFRG total coverage rate can go up to 100% of total financing.

Tenor

BFRG for a Financial Institution are covered for their full life, subject to a maximum of 10 years.

Currency

To avoid currency exposure, AGF will issue its guarantees in the currency of the underlying financing.

Pricing

AGF uses a Price-to-Risk model in arriving at the actual pricing for a guarantee facility to be availed to a particular financial institution. Pricing may vary across banks depending on the quality of the portfolio as measured by among others, the default rate.

 

Guarantee Type  Bank Fund Raising Guarantee
Coverage* 50% can go to 100%
in case of co-guarantee
Origination Fees  [0.5%-1.0%] 
Utilisation fees  [2.0%-4%] 
Tenor  <= 10 years 
Limit  Flexible 
 

 * Complimentary Capacity development on a 50%-50% cost sharing basis

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