On June 10, 2024, the Mutual Guarantee Funds, Public Fund (MGF, PF) was created, and the Legal Framework for Mutual Guarantee Fund Management Companies were approved, through Decrees No. 37/2024 and 38/2024 of June 10, 2024, respectively.
Decree No. 37/2024 created the MGF, PF, and approved its operating rules, while Decree No. 38/2024 establishes the legal framework for loan guarantee management companies, establishing rules and guidelines applicable to the entities responsible for managing loan guarantee funds.
1. Context
The approval of these decrees is due to the need to create a Loan Guarantee Fund to facilitate access to financing for Micro, Small and Medium-sized Enterprises (MSME).
In this sense, the MGF, PF, aims to promote access to finance for the country’s MSMEs, and to facilitate credit for these businesses that are essential to the local economy. It promotes a flexible system of loan guarantees, in line with the best standards of administration and management, with the aim of issuing guarantees and counter-guarantees for the credit obtained by MSMEs from national banks.
2. Scope
The decrees apply to MSMEs in productive sectors with high potential for boosting the national economy, which are the main final beneficiaries of the MGF, PF, and the Mutual Guarantee Fund Management Companies, which are entities authorized to carry out the administration of Mutual Guarantee Funds on a professional basis.
3. Creation and nature of the MGF, PF
The Decree No. 37/2024 establishes that the MGF, PF, is created in the form and nature of a bank account integrated into the Public Treasury, aimed exclusively at ensuring easy access to financing for MSMEs, by issuing guarantees and counter-guarantees to the credit contracted by these companies with the national financial system.
The MGF, PF will be implemented by the National Investment Bank (NIB).
3.1. Purpose of the MGF, PF
The main purposes of the MGF, PF are:
• Facilitate and improve access to financing and the granting of credit to MSMEs;
• Provide counter-guarantees for the operations of mutual guarantee companies and other financial institutions dedicated to providing guarantees to MSMEs.
3.2. Management of the MGF, PF
The MGF shall be administered by a management company owned by the State, which shall be responsible for carrying out all the acts and operations necessary or convenient for its proper administration.
3.3. Management principles MGF, PF
1. The Fund management company must ensure that an up-to-date information system is in place so that information of the Fund’s guarantees and counter-guarantees, or any other information required, can be made available at any time
2. The MGF, PF is not allowed to provide guarantees to entities directly or indirectly owned by the State.
3.4. Auditing
The accounts of the MGF, PF are subject to an internal audit to be carried out by the General Inspectorate of Finance, or to an external audit, carried out by independent auditors hired under the terms of the applicable legislation.
The MGF’s annual audit report must be submitted for approval to the Minister who oversees the Finance sector and must be published in the country’s most widely circulated newspaper, as well as on the website.
4. Mutual guarantee company
A mutual guarantee company is a financial company whose main purpose is to issue mutual guarantees. Mutual guarantees are understood to be a mutual support system for MSMEs, which involves providing guarantees to facilitate obtaining credit, as well as other types of guarantees necessary for business development.
Borrower Guarantee Fund Management Companies are responsible for:
- Managing Loan Guarantee Funds.
- Manage, on behalf of third parties, other guarantee or counter-guarantee funds aimed at improving access to financing.
- To provide counter-guarantees, through loan guarantee funds, for the operations of mutual guarantee companies.
4.1. Conflicts of interest:
Regarding Conflicts of Interest, the Legal Framework for Borrower Guarantee Fund Management Companies establishes the obligation to identify potential or actual situations of conflicts of interest that could compromise the analysis of financing proposals, as well as to approve internal policies and controls to mitigate and manage conflicts of interest. The same regime establishes that, in the case of participation in companies proposed for financing by the Fund under its administration or management, it must disclose the nature of its interest to the Fund’s management or supervisory body.
4.2. Regulation and supervision
The Bank of Mozambique is responsible for regulating and supervising the management companies of Mutual Guarantee Funds, as well as their accounting.
4.3. Fees
Mutual Guarantee Fund Management Companies are required to pay the licensing fee and the annual fee.
5. Entry into force
The aforementioned decrees entered into force on the date of their publication, June 10, 2024.
For further information and updates please contact JLA Advogados, the LEX Africa member in Mozambique, on maputo@jlaadvogados.com or visit www.jlaadvogados.com.
