MSME Employment Promotion Loan Program II (Loan Guarantee)

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The Covid-19 shock is exacerbating the financial fragility of the majority of MSMEs. Simulations of the impact of Covid-19 on the financial vulnerability of companies show strong regional and activity-related differences. Faced with a sharp decline in demand and sales, 10.8% of all private companies have been temporarily closed, especially micro-enterprises. Over 50% are threatened with permanent closure or are uncertain about the future of their operations under the current conditions. This results in increased inequalities in terms of income and opportunities for companies. The SARE credit guarantee mechanism counteracts this by enabling MSMEs to meet their pandemic-related liquidity needs, maintain their operations and secure jobs. The aim of the credit guarantee mechanism is to maintain and create additional access to loans for MSMEs and start-ups in Tunisia affected by the COVID-19 pandemic. The project is part of the Covid-19 package of measures for Tunisia. The Soutien et Appui à la Résilience des Entreprises (SARE) mechanism was launched in March 2020 as a measure to support the economy in the context of the Covid-19 pandemic and established by decree in April. The management of the fund was transferred by the Ministry of Finance to the state-owned Sociéte Tunisienne de Garantie SOTUGAR. The guarantee mechanism supports companies through 16 partner banks by providing credit guarantees for working capital loans. The credit guarantees are aimed at companies or legal entities that have suffered a drop in turnover of at least 25% or 40% between 2019 and 2020 (March and April respectively), provided that this drop is directly related to the Covid-19 pandemic. The guaranteed loans can be used to cover operating costs and debts that are essential for maintaining staff and resuming activity. These include wages, rent, maintenance, water, energy, gas and telecommunications costs. The FC project will increase the existing guarantee capital for the state mechanism by EUR 25 million (grant).