As part of the preparations held for the official launch of the Loan Guarantee Institution of Syria (LGIS) in the Syria market, and in the aim to assist local banks to expand their credit capacities to SMEs, LGIS and Syria Gulf Bank (SGB) signed a cooperation agreement in Damascus on 13 January. The signing is considered the beginning of the activities of LGIS in preparation for its launching to be held early next February.

The cooperation agreement aims to enhance the bank’s credit capacities to SMEs through joint risk between LGIS and the SGB. LGIS will provide credit guarantees required by SGB from SMEs to acquire loans. The overall objective is to create a better business environment through better business opportunities and will contribute to achieve stability in the Syrian financial system.

President of the Board of Directors of LGIS, Dr Rateb al-Shallah said that “Establishing the Loan Guarantee Fund in Syria is considered a very important step towards activating the credit system in banks as they are the fundamental tools for private sector growth. This can be achieved through assisting SME in need of finance from local banks for business development”, explaining that LGIS provides guarantees to qualified companies (ie who meet certain criteria) which are not able to meet conditions set by banks.

General Manager of LGIS, M. Anas Noghnogh said that LGIS is currently working to complete similar signing procedures with all other banks in Syria, pointing out that activities of LGIS are being gradually launched until all funds for the institution are secured aiming to reach 20 million Euros from the Syrian government and other international donors.

General Manager of SGB, Khalil Marqa said that the agreement was signed as part of the banks expansion and development plans in the Syrian market. SGB will provide SMEs with funds because they contribute to 90% of total Syrian investments and is alone proof of the importance of SMEs in economic growth.

The agreement, from LGIS’s side was signed by Dr Rateb and from SGB’s side was signed by Mr Marqa.

LGIS is a non-profit private financial institution approved by the Ministry of Economy and Trade (MoET) based on the approval of the Syrian Council of Ministries on 26 April, 2009. The LGIS Board of Directors consists of founding members which includes MoET, the Ministry of Finance (MoF), the Ministry of Industry (MoI), the State Planning Commission (SPC), the Federations of Syrian Chambers of Commerce, Industry, Agriculture and Tourism, the Syrian Enterprise and Business Centre (SEBC) and representatives of SMEs whose offices are located at the premises of SEBC Damascus.

The primary product offering of the LGIS is the provision of credit guarantees that bridge the funding gap between businesses and the participating financial institutions (PFIs). For viable Syrian businesses that cannot provide the level of collateral required, the LGIS can help by guaranteeing a limited percentage of the requested loan.

LGIS serves as a motivating tool for SMEs for business development by facilitating their access to finance.

LGIS aims to increase cooperation between the business sector and the financial private sector through:

• Improving the capacities of SMEs with potential growth and which are unable to guarantee their loans
• Sharing risks which come along with individual credits with financial institutions
• Supporting Syrian economic development through encouraging financial institutions (banks, associations, other financial institutions) to become more active in meeting the financial needs of Syrian SMEs.

SGB is the first bank operating in the Syrian market to be awarded Best Bank in Syria in 2009 by the Banker Magazine after having a very successful year in opening new branches and achieving an operational income rate of 188% in the third quarter of 2009.