Continuous monitoring of the use, regular and active redirection of conditions and available frameworks, the Hungarian Development Bank (MFB) is continually striving for the settlement of its products and demand-side credit programs. According to the president and CEO of Tamas Bernat, their new strategy is to provide the financial institution with an additional contribution to the development of the economy in order to achieve one percent of GDP.
How far do development banking today work twenty-five years ago?
The Hungarian Development Bank, which was founded in 1993, started its business in quite different conditions than today: the balance sheet of the MFB is sixty times the corpus of the foundation. Today, the distribution of EU returnable resources is one of our highest priorities, and at an early stage, I'm just looking forward to joining the European community. Instead of the past, I'm looking forward to it, the MFB's mission from the very beginning is that it has a significant impact on economic development, and what we define in our new five-year strategy is that the contribution of the bank will contribute to one percent of GDP. This is a serious undertaking, since in 2017 this impact was only 0.5% of GDP.
How well does the MFB follow international practice?
Although there is always something to learn from development banks in the world, I must say that there is no single trend for engagement. Our plans and possibilities are determined by the ambitious intentions of the government aimed at bringing the lives of the Hungarian population closer to the Austrian level by 2030 and raising the country among the top five in Europe. To do this, there is a need for large-scale development programs that contribute to economic growth, only if we are considering the massive infrastructural programs in Budapest, which broadcast news of government support in recent days and who will in the next few years appoint a new municipal council for the development of capital . Here MFB can play a unique role of financiers, as commercial banks in this area are unable to hit the ball because infrastructure movements are very difficult and only very long-term.
There are signs that the financing of central banks in this area would also be the …
I think MNB would not appear as a direct lender in the market, because of the ban on monetary financing, but it could not do that. At the same time, other solutions can really help the development of a healthy credit market by the central bank – it is enough to refer to the growth loan program (NHP), which unambiguously provided a new incentive for lending: not only provided a cheap source, it already penetrated through a psychological barrier that banned economic lending – companies are reluctant to seek credit – the feeling "I do not get a loan, so do not ask me" was solved. But there is still something to be done in this field, in Austria, SME loans account for 38 percent of GDP, and we still have only 12 percent of it. The MFB should strengthen its emphasis in areas where the assumption of a commercial bank is less risky. We must constantly offer products and services that are niche substitutes. After the change of time, we have to work on these solutions.
What do you mean?
In the prudent practice of commercial banking until recently, it was unthinkable to get a job that did not have two closed business years. The MFB Group could offer loans, guarantees or equity to this promising start-up. Times change, some banks no longer require serious business results, but, for example, short-term and mid-term solutions are still in progress. At the same time, the development bank will have a maturity of 15-20 years.
Observing financial practice in recent months, the MNB considered it risky that most corporate loans lend interest rates and announced the NHP Fik program. We have a similar attitude, so MFB Fik will be available in the market at the beginning of the next year, which will supplement NHP Fik for the loan amount and the credit target, plus will work on the replacement of capital: the claimant needs part of the capital only at the end of the mandate, then pay.
We also need to consider those companies that do not have access to these programs for some reason, so we consider it to be an extremely important program to refinance financial intermediaries, where 12 billion available 70 billion forints are outsourced. User range just shows the need: half of the transactions are covered by capital-intensive companies that are mostly excluded from the EU tender, and the loan-based allocation is similar: real estate investments are also not supported by EU funds.
Is the main and warranty side similarly attractive?
Our daughter Hiventures is extremely successful: through her equity investments, MFB Group contributed 92 percent of risk capital in 2017, and we are also a direct investor in the market. Since the beginning of the capital fund, more than 1600 investment requests have been received, the amount paid exceeds 12 billion HUF. It is also important to talk about MFB Invest, which invests 50 billion pounds in MFB into five capital funds. As far as the guarantee side is concerned, the results are also here:
our second subsidiary, the guarantee guarantee portfolio of 691 billion euros, means that 17-18 percent of small and medium-sized enterprises are guaranteed, the third largest in the European Union as a part of GDP, with a guaranteed loan guarantee. At the same time, there is a need for thinking in this area: we see that Garantica guarantees a lot of loans for which the client's risk does not require an institutional guarantee that will cost the consumer and the budget.
The goal is to really take out risky loans with a warranty product, and the risks that are easier to transfer are left to banks. However, in the future, it would be possible to perform this procedure: companies can get a guarantee from Garantic, which will help them get better conditions and secure access to banks.
The name of the MFB is most often met by EU funds that are reimbursed through MFB points. How do you rate the program's reception?
The framework for programs for SMEs already covered 81% of applications received. In 2017, the change in the credit portfolio of small and medium-sized enterprises amounted to 17% of MFB performance. This, of course, can also be related to the fact that Hungary is extremely suitable for awarding donations, i.e. Grants: up to 105% of the support framework, make decision on tenders in the current support cycle, while 64 countries in the region make up 64, this is a way for developers to stay in this country, the "zero debt" MFB Poena, with their own strength and interest-based financing of banks. But that is true:
it is obvious that the future will require a much higher degree of access from banks than subsidies: in the next budget cycle, the EU will surely be a stronger expectation that Brussels will increase the role of the call for compensation, the so- financial instruments in which Hungary is already a predecessor.
This is also in the interest of the budget, as refunds will be reused in the home, and the second round will also outweigh the requirements of the EU money program.
MFB is still more flexible in restructuring the program …
Yes, it's because of constant monitoring of usage, market gaps and regular adapting conditions. Based on the latest data, it is easier to get a license to transfer funds intended for programs. An excellent example of this is a credit program for small and medium-sized enterprises, the framework of which is created by similar transfers – with the help of law enforcement experts – that in the program published on September 10 there was already a credit claim above 13 billion HUF. I think that in the meantime there were also frames increased from 60 to 80 billion will soon be reduced.
You can read the full interview on Friday edition Vilaggazdasag