4 million Euros in the business ?Warranty Fund?

They held a round table meeting today at the Department of Budget to finalize an agreement between the Malagasy government and the French Agency for Development (FAD). Bank CEO?s, the president of the association of banking professionals, the Central Bank governor, the Treasury director, and France?s Ambassador to Madagascar all stood next to the Malagasy Minister in charge of the Economy, Budget, and Finances. In Madagascar, for the most part, at least, these individuals handle the money. They control the purse strings. And from an economic standpoint, too bad for anyone who does not manage to convince them to loose the purse string some, and hand over some of that money. This, unfortunately, is the case for the majority of Malagasy enterprises that have wanted a fresh start since the end of the crisis.

A glimmer of hope, this time, seems to reappear. On November 27, 2002, Mr. Radavidson, the Malagasy Minister in charge of the Economy, has signed an agreement with Mr. François Rivière, the FAD director. This resolution, at long last, provides for the creation of a warranty fund. Thus, 3.8 million Euros has been made available to the Malagasy government for the creation of this fund, through a newly created corporation called “Warranty Fund”. The only problem is, bureaucratic inefficiency oblige, the Banking and Financial oversight committee has yet to sign off on the agreement. The institution will be established as a financial one, but its headquarters have yet to be determined. What this means is that, for now, this project has only been realized on paper. Nonetheless, there is no doubt as to everyone?s willingness to go forward. The French ambassador insisted on pointing out, and justifiably so, that the French Agency for Development?s contribution is a subsidy, and that “Madagascar is not going into debt”. Naturally the Malagasy government, for its part, has agreed to keep a low profile by allowing the private sector to hold a controlling interest (51%).

Once the Warranty fund is established, it will be called in to intervene, in various ways, in helping the Malagasy enterprises, the majority of which became insolvent following the crisis. The political authorities understand that the private sector has every right to be short on patience, at this point. The financial requirements are enormous in all sectors. The Warranty fund will help alleviate this situation. It will allow the institution to back bank credits, to resupply the cash flow of enterprises established in Madagascar, and to finance investments. The credit lines allowed in local currency will vary between 7,500 Euros and 250,000 Euros. This is what the Malagasy entrepreneurs have been waiting for, all along. As to which enterprises would be selected to benefit from these credit lines, that is another story, altogether. Let us not forget that this is a country where the absolute majority of foreign investments is made up of French capitals.