6 . 7 .

92 Official Journal of the European Communities No C 169/7

Opinion on the communication from the Commission on 'The Role of Mutual Guarantee
Systems (MGSs) in the Financing of small and medium-sized enterprises (SMEs) in the
European Community'

(92/C 169/03)

The Commission decided on 28 October 1991 , in accordance with Article 198 of the EEC
Treaty, to ask the Economic and Social Committee for an Opinion on the abovementioned
communication .

The Section for Industry, Commerce, Crafts and Services, which was responsible for the
preparatory work, adopted its Opinion on 1 April 1992. The Rapporteur was Mr E. Muller.

At its 296th Plenary Session ( meeting of 29 April 1992) the Economic and Social Committee
adopted unanimously the following Opinion.

1 . Preliminary remarks according to certain categories (craft sectors , trad­

1.1 . Subject to the comments made below, the Econ­
omic and Social Committee supports the action pro­
posed in the Communication from the Commission on
'The Role of Mutual Guarantee Systems (MGSs) in
the Financing of small and medium-sized enterprises
(SMEs) in the European Community'.
1.2. In various Opinions issued since 1982 in favour
of a policy to encourage SMEs, the Economic and Social
Committee has stressed the need to provide such firms
with easier access to adequate sources of finance and
thus improve their chances of attracting investment and
adapting to new technological, economic and social
conditions .
ing, hotels, etc.) as embodied in appropriate admin­
istrative, financial and tax measures, for instance .
1.4 . The Commission document mentions a series of
steps taken by the Community in the field of financing,
such as the 'Seed Capital ', 'Venture Consort' and 'Euro­
tech Capital' projects. The question remains of whether
these projects are sufficiently known to SMEs, whether
the choice of multiplying factors has been made with
proper care and whether the impact of these measures
is encouraging.
2. Some features of mutual guarantee scheme oper­
ation

1.3 . While the essential role of SMEs in the European
integration process is generally known and recognized,
particular attention should be paid to the question of
how they are financed. With this in mind, the Economic
and Social Committee, while recognising that the pre­
sent Communication deals with an important aspect
of SME financing, recommends that the Commission
produce, as soon as possible, topics for discussion and
proposals for action in the field of financing addressed
to all the parties concerned.
2.1 . The mutual guarantee system is a type of
guarantee which enables SMEs, and/or participants in
such a scheme,
— to obtain credit more easily because of the banking
confidence inspired by the guarantee, and
— to pay a minimum commission for the guarantee,
since the system is based on the idea of service and
not on that of profit.

2.1.1 . However, the reduced cost of credit is not the

1.3.1 . This more general approach should take direct aim of the system, although it inevitably plays a
account of such aspects as : part because of the advantages which the formula offers
for banks .
— the variety of firms and operations covered by the
SME banner, as shown by their size, type of oper­
ation, market impact and legal status, which may 2.2. Mutual guarantee schemes can offer banks a
range from that of one-man or family business to triple guarantee :
that of partnership, company with share capital or
cooperative,

— the consultation, information and training facilities a) A technical guarantee :

available to the directors and staff of such firms ,
To the extent that MGSs are aware of their members'
— the policy of encouraging SMEs in the context of needs, they can assess the technical side of the invest­
the structural policy of the Member States and ment plans submitted to them, monitor the use of
No C 169/8 Official Journal of the European Communities
credits and, in the event of any failure on the part of
the borrower, secure the best terms governing pledges;
b) A moral guarantee :
The directors of MGSs often know members of the
profession personally and can give an informed assess­
ment of their technical competence and their pro­
fessional capability;
c) A financial guarantee :
The financial guarantee provided by the MGS is the
result of :
— the formation of a guarantee fund to cover unpaid
debts and other problems, and
— the provision of a general performance guarantee
pledging its entire capital as guarantee.
2.2.1 . The value of the financial guarantee provided
by a MGS lies basically in the size of its guarantee fund.
In any case, any MGS must be able, if necessary , to
top up its guarantee fund by means of appropriate
measures .
2.3 . There can be no question of MGSs taking the
place of banks and credit institutions ; their role is a
complementary one, when the usual guarantees request­
ed by banks etc. can no longer be provided or when
the ceiling on current loans is reached .
2.4. In the interests of operational efficiency, the
main terms and conditions governing the granting of a
guarantee should be adopted by the internal bodies of
the MGS. Among other things, and bearing in mind
specific data on the sector or region concerned, they
may cover the following points :
— the firm must be in a transparent financial situation
and its operating accounts should be positive within
appropriate periods,
— the firm must not be in a precarious financial situ­
ation and its provisional operating accounts must
be positive or at least show that the enterprise is
profitable,
— the director(s) of the firm must possess an appropri­
ate qualification and recognized personal qualities
(character, good standing, etc.),
— the previous history of the firm and its director(s)
must be favourable (no litigation for economic or
financial misdemeanours , no attackable or criminal
bankruptcy, etc.).
2.4.1 . Some of the above criteria also apply to the
taking-over and setting-up of firms.
6. 7. 92
2.5 . As part of their normal activity, MGSs should
advise firms seeking their services, even if intervention
is impossible. This particularly applies to recommen­
dations for re-organisation and rationalisation, assess­
ment of the terms of contracts or takeover agreements
or facilitating banking and cooperation relationships.
2.5.1 . Such additional services may turn out to be
extremely useful to all the enterprises involved.
2.6 . The Commission Communication contains a
number of passages on the position of MGSs in the
financing of SMEs. In view of the action proposed by
the Commission it seems worthwhile to consider certain
issues from the point of view of both SMEs and MGSs.
2.6.1 . From the point of view of the users, i.e. SMEs,
several points may be emphasized .
2.6.1.1 . One of the main complaints that firms have
about MGSs is that procedure is long and cumbersome
and involves dealing with several bodies, which often
leads to a pile-up of delays and restrictions.
2.6.1.2. Some credit seekers do not apply to MGSs,
or are sometimes put off from them, not for financial
reasons, but because they do not belong to a pro­
fessional body.
2.6.1.3 . In some mutual guarantee systems the appli­
cant firm may have to pay in money in order to receive
a guarantee (e.g. contributions to the MGS's capital or
guarantee fund, handling charges, life assurance policy
premiums or conclusion of a policy to cover outstanding
repayments); this may lead to cash flow problems.
2.6.1.4. However, these complaints, no matter how
justifiable they may be, must not lead one to lose sight
of the undoubted benefits of MGSs, whose activities
enable banks to mobilise credits and provide a security
which is much appreciated .
2.6.1.5 . As already stated, an MGS's acceptance of
a guarantee application is based primarily on its confi­
dence in the applicant's professional and personal capa­
bilities .
6 . 7 . 92 Official Journal of the European Communities
2.6.1.6. However, MGSs have to protect themselves
against the risks inherent in the granting of guarantees
[e.g. chronic insolvency, death of the director(s)]. The
forms of additional collateral on which the MGS may
call if necessary should be laid down by its management
bodies .
2.6.2. From the MGSs' point of view, it seems worth­
while to mention the following problems :
2.6.2.1 . The own funds serving as back-up capital
for an MGS vis-a-vis providers of funds are basically
made up of capital paid in by MGS members, the legal
reserve, free or voluntary reserves, capital provided by
the state or other public or semi-public bodies plus
compound interest, endowment funds provided by
organized professional groupings, payments into the
guarantee fund and provisions against risks .
2.6.2.2 . The public authorities may intervene in vari­
ous ways, depending on the scheme :
a ) External monitoring, laid down by law, may be
carried out in two ways :
— either, assuming that MGSs are treated in the
same way as banks, by the authority responsible
for monitoring banks ,
— or by an auditor appointed by the government
following a proposal by the internal bodies of
the MGS ;
b) Financial intervention by the public authorities may
take several forms :
— start-up aid for a new MGS in the form of
operating subsidies and/or capital donated for
the purpose of building up adequate capital
cover ,
— annual budgetary resources to develop the
MGS's range of activities,
— State guarantees to promote a structural policy
in a given sector or region with the involvement
of economic and social interest groups .
2.6.2.3 . As far as taxation is concerned, the forma­
tion of reserves should not be hampered by tax rules
which are badly adapted to the economic and social
role of MGSs . However, this approach should not
lead to discrimination or to distortions of competition
between businesses with different legal forms .
No C 169/9
2.6.2.4. The funds which make up capital cover can­
not be invested freely; they should be placed in safe,
non-speculative investments or deposited with banks.
2.6.2.5. MGSs must take steps to find a satisfactory
solution to the three problems faced by bankers (secur­
ity, financing, profitability) and thus make SMEs into
customers which are as interesting as large firms.
2.6.2.5.1 . In addition, to facilitate the granting of
credit by banks, MGSs should take on certain adminis­
trative work (e.g. monitoring and follow-up of case
files, management of disputes) as well as providing a
guarantee .
2.6.2.6. As regards the granting of guarantees, the
procedures involved must take account of the dual need
for simplicity and speed . In no case should either the
applicant or the bank be put off by a pile-up of docu­
ments and forms , which differ from one MGS to anoth­
er and tend to slow down decisions .
2.6.2.7. MGSs should not limit their operations to
the long and medium term; they should also include
the short term in their range of eligible operations (e.g.
financing of working capital in general and seasonal
credits for certain sectors in particular).
3 . Ways of promoting and strengthening mutual
guarantee schemes
3.1 . In most cases MGSs represent the concrete
expression of the desire of companies to cooperate in
a joint attempt to find proper solutions to the problems
of guaranteeing investment loans . It is therefore necess­
ary that the best use should also be made of them as a
tool for managing such companies . In addition to the
services traditionally and currently provided by MGSs,
which are rightly mentioned in the Commission docu­
ment, it seems that there is a need for a more systematic
exploration of the new possibilities for action in the area
of company management and sector support, bearing in
mind the new needs which are emerging in the fields
of accounting, administrative management, human
resources management, technical and economic cooper­
ation , the improvement of quality , etc .
3.2. The proposals for action in the present Com­
munication, which deserve the support of the Economic
and Social Committee, should include a systematic
search for concrete and effective ways of giving a new
impetus to healthy MGSs which are well integrated into
economic and social structures .
No C 169/ 10 Official Journal of the European Communities
3.3 . Cross-border cooperation between MGSs or
with compatible institutions could, logically, be encour­
aged in the medium term . It is worth recalling here the
steps currently being taken at Community level to give
enterprises like MGSs a statute similar to that for a
European Company (SE). Thought should also be given
to the considerable input of experiences and ideas which
could come from certain countries of the European Free
Trade Association (EFTA) which are contemplating
joining the EC in the near future.
3.4. Creating a sufficiently attractive environment
for those in all EC regions, population categories and
sectors who wish to set up a business, irrespective of
their qualifications, must also be seen from the angle
of strengthening economic and social cohesion within
the Community. Not only should business creation be
encouraged; firms should be given the opportunity to
equip themselves with the human and material
resources they need to develop and achieve a high
degree of stability . The presence and efficient operation
of MGSs is a valid element which should increasingly
form an integral part of various areas of EC policy,
especially those of regional development, cross-border
cooperation and structural consolidation, as in the new
German 'Lander', where MGSs may play an important
and salutary role for the Community as a whole.
3.5 . The Economic and Social Committee supports
the reasons and arguments set out in the Commission
Communication .
3.5.1 . It would draw attention to five points which
should be borne in mind in measures planned for the
future :
— The Commission's initiative will only have a lasting
positive impact at Community level if the systems
to be adapted or created in the Member States
respect the rules of the market and the principle of
optimal resource allocation when they are
operating, and do not create distortions of compe­
tition; however, an attempt should be made to
improve the mechanisms of the market, which
sometimes prove to be serious obstacles for SMEs.
— The Commission Communication has no binding
conditions either on operating MGSs or on the
guarantee schemes developed in certain Member
States . However, it should trigger off a process of
reflection which could lead to effective improve­
ments or to fundamental changes in present systems .
It also constitutes an offer of information and poss­
ible action for Member States which have no experi­
ence in such matters .
6 . 7. 92
— The role of the MGS as an intermediary institution
between, on the one hand, SMEs, the banks and
credit institutions and, on the other, the intervening
public authorities should, in principle, be con­
firmed .
— To avoid unrealistic initiatives, the role of the Com­
mission and the public authorities in the Member
States should initially be to inform and encourage
a correct awareness and then, later on, to promote
tangible measures supported at the roots by firms ,
SME organisations and, where appropriate, other
economic agents prepared to cooperate on this mat­
ter. As regards the mutual exchange of information,
the Commission could usefully avail itself of the
Community Euro-Info-Centres network.
— To encourage MGSs, it might be useful to consider
providing them with an appropriate legal status and
minimum conditions for them to meet .
3.5.2 . The Economic and Social Committee does not
intend to analyze the various chapters of the Communi­
cation in detail. Certain major aspects will emerge in
the normal course of events during consultations and
exchanges of experiences. On such occasions it will
doubtless be possible to establish a comparative table
showing the features and the strong and weak points
of mutual guarantee systems operating in the Member
States .
3.5.3 . The Economic and Social Committee has not­
ed that a European congress of MGSs was organized
with the Commission's support in Madrid at the end
of November 1991 .
3.5.3.1 . It regrets that it was unable to take part in
this meeting. It suggests that it should be considered as
a prime negotiating partner in view of the number of
its members who represent various economic and social
sectors which are directly concerned by this whole
question .
3.5.4. The Commission Communication makes no
mention of any possibilities of intervention by the Euro­
pean Investment Bank (EIB) in financing programmes
specifically slanted towards SMEs. This question
should, of course, be examined against the more general
background of EC policy on financing, but also in the
light of the specific functions of MGSs as mentioned in
the Commission document .
6 . 7 . 92 Official Journal of the European Communities No C 169/ 11

4. Final observations instruments with a view to achieving optimal perform­

ance in the SME sectors concerned .

4.1 . The Economic and Social Committee approves
the Commission's action as launched by the present
Communication .
4.2. The highly satisfactory results obtained by
MGSs in various countries should encourage the Mem­
ber States and the Community to continue and success­
fully complete this specific attempt to improve the way
in which MGSs operate, while at the same time bearing
in mind the size of the general problem of SME finan­
cing and facilitating a diversification of systems and
4.3 . Such support by the Community is all the more
justified because MGSs are aid instruments which
enable SMEs to help themselves better, a principle
which seems necessary to the sound operation of MGSs.
4.4. Finally, the Economic and Social Committee
would stress the role which well-designed MGSs can
play in the economic and social spheres and concludes
that there must be intensive consultation with the Com­
mittee, which is the very forum where all the economic
and social interests directly concerned by MGSs are
represented .

Done at Brussels, 29 April 1992.

The Chairman
of the Economic and Social Committee
Michael GEUENICH

Opinion on the proposal for a Council Directive relating to fertilizers

(92/C 169/04)

On 14 January 1992 the Council decided to consult the Economic and Social Committee,
under Article 198 of the Treaty establishing the European Economic Community, on the
abovementioned proposal .

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee's work on the subject, adopted its Opinion on 1 April 1992. The Rapporteur
was Mr Proumens .

At its 296th Plenary Session (meeting of 29 April 1992), the Economic and Social Committee
adopted the following Opinion unanimously.

The Committee approves the proposed Directive unre­ — to the fourth : 79/ 138/EEC, 87/566/EEC and 89/
servedly. 516/EEC .

1 . General comments 1.2. By its decision of 1 April 1987 the Commission

1.1 . The purpose of this Directive is to consolidate
four earlier Directives (76/ 116/EEC, 80/876/EEC, 87/
94/EEC and 77/535/EEC). There have also been amend­
ments to these Directives, viz :
— to the first : 88/ 183/EEC, 89/284/EEC and 89/530/
EEC,
— to the third : 88/ 126/EEC,
gave instructions that Directives which had been
amended several times should be consolidated no later
than after their 10th amendment, which is the case here.
1.3 . The new text does not change the substance of
the existing Directives, but has the advantage of being
easier to consult both for officials of the Member States
and for those working in the sector.