Guarantee Fund for Cultural Industries

Background

Within the scope of the implementation of the decisions of the Hanoi (1997) and Moncton (1999) Francophone Summits and the 3rd Ministerial Conference on Culture held in Cotonou on 14 and 15 June 2001, the International Organisation of the Francophonie (IOF), in accordance with its mission of development and promotion of cultural activities in its member countries, decided in 2003, to set up a guarantee mechanism for companies operating in the cultural activities sector. The intention of the Francophonie was to use the guarantee fund to facilitate bank financing of cultural industries, which could constitute the basis for the sustainable economic development for these countries.

One realises that the strategic plans of EBID and IOF both make provision for the setting up of a guarantee fund. The IOF therefore set up the Cultural Industries Guarantee Fund, the management of which was entrusted to EBID.

An agreement governing the establishment of a Cultural Industries Guarantee Fund (CIGF) was signed to this effect on 13 May 2003 between the Inter-governmental Organisation of the Francophonie (IOF) and ECOWAS Bank for Investment and Development (EBID), which is responsible for its management. The Organisation of the Francophonie, which has already set up CIGFs in Morocco and Tunisia since in 2002, is thus the first to partner EBID in this area of guarantee mechanism for cultural industries in West Africa.

Having been designed to facilitate access to bank financing for cultural industries of West African countries and to stimulate ECOWAS regional economic integration, the CIGF has been set up, for the time being, in eight (8) francophone West African countries: Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, and Togo. The CIGF will gradually be extended to other ECOWAS countries.
This mechanism is designed to be sustained by the beneficiary countries. It is at the pilot phase and will be extended to all ECOWAS countries.

Justification

The creation of a guarantee mechanism for cultural enterprise is a means of facilitating the access of cultural enterprises to financing facility by reducing the exposure of the lending institution that finances a transaction of an enterprise that is eligible under the Fund.
By taking up a portion of the risk cost of the transaction financed, the guarantee Fund makes it possible for the lending institutions (banks, specialised institutions) to finance projects which would have otherwise be considered too risky to be financed within the scope of a business transaction. This risk cost is often a deterrent due to the poor financial structure of SMEs in general and cultural enterprises in particular.
By taking up a portion of this cost, the CIGF encourages lending institutions to finance transactions which would otherwise not be financed in the absence of an outside donor.  

Conditions for intervention

Eligible enterprises for the guarantee are SMEs and SMIs with an annual turnover not exceeding FCFA 1.000.000.000; legally constituted private corporate bodies, irrespective of their legal form, operating mainly in the following sectors:

  • films and audio visual production and distribution;
  • cinema, audiovisual and music technical industries;
  • radio and television;
  • print media;
  • publishing, production, and distribution books and audio recording;
  • music;
  • production and distribution of books and sound recordings;
  • production of multi-media, cultural and educational contents;
  • theatre and live entertainments;
  • operation of cinema, theatre and entertainment halls;
  • visual arts and plastic arts;
  • fashion, handicraft and design with artistic or cultural connotation.

Eligible transactions

The eligible transactions are credit, financial leasing and bank guarantee transactions.
The eligible projects shall be equipment or intangible investment, production or business acquisition projects.

Rules of intervention

  • The rate of coverage and the guarantee base is 80% of the principal amount of the transaction guaranteed.
  • Where other guarantee funds are used simultaneously, the total rate of coverage will be limited to 85%.
  • The minimum intervention: FCFA 1.000.000 per transaction.
  •  The amount of the intervention: 20% of the uncommitted resources of CIGF
  • Cost of guarantee: 1% commission per annum on the full exposure amount guaranteed.
  • Duration: 7 years maximum.
  • Compensation for failure of the transaction: payment to the intervening lending institution, of an advance of 80% of the principal amount of the outstanding guaranteed. The balance of the compensation within a period of one (1) year from the date of the advance.
Contacts :
In charge of FGIC : Mohamed DIALLO ; email : mdiallo@bidc - ebid.org
Assistant : Rodrigue P. TAKOUGNADI ; email: ptakougnadi@bidc-ebid.org