A Comprehensive Solution in Difficult Times

BBJ: Why is further industrialization important; isn’t the current level sufficient?

Adrienn Berta: It’s more a matter of providing for the Hungarian economy, SMEs and large corporations with the right laws and resources. And improving the level of investment, which is lagging a little due to the current turbulent economic situation caused by the protracted war and the EU sanctions. It’s not a very easy life cycle for SMEs or large enterprises. So, for us at Exim Hungary, the program not only aims at re-industrialization but also supports any kind of production, liquidity, or investment because we realize that, in these circumstances, the commercial banks are very, very cautious about financing, and the interest rates are high. For this reason, companies are also very cautious about applying for loans. There are rates of 20%, 22%, which is extremely high. It is not something that could be covered over the years. That’s why it was important to come out with a comprehensive, regional product that could ease the situation for our clients.

BBJ: How many requests have you received for loans with better terms?

AB: In the last two weeks, we have received hundreds, but as applying for a loan is a matter of time, we will have a better picture in the next few weeks. These are just what we have received at EXIM. I have no statistics yet on how many leads or applications the commercial banks have received, but it should be more.

BBJ: What is the aim of the Baross Gábor Program? What is it offering to SMEs?

AB: The Baross Gábor Credit Program is a governmental loan scheme that was worked out by the Ministry of Economic Development and Exim Hungary. The program has a budget of HUF 700 billion. It has three main sub-programs. One is a general investment loan. The second is a green investment loan for sustainability purposes, to make the existing operation more energy efficient. And the third is a working capital loan. For the working capital and general investment loans, the HUF interest rate is 6%, the EUR rate is 3.5%, and the green investment loan is 5.5%. If you compare it with what is available on the market, it is very attractive.

BBJ: What happens if a company cannot pay back the loan?

AB: That’s always the big question for any bank risk management team. But Exim’s role in this program is more one of refinancing. We provide resources and very attractive conditions through our commercial bank partners and our leasing partners, and they contract them. We trust the commercial banks to have prudent risk management. Yes, there is always a risk, but it is independent of Exim and the Baross Gábor Program. It is inherent in the banking business.

BBJ: From what sectors are the SMEs drawn?

AB: Since the program was only launched on February 1, it is difficult to say which sectors are most interested. For now, we have a broad range of applicants. Within a few weeks, we will have a better understanding and better statistics. Some sectors are excluded, but overall, the credit program is open to any Hungarian company.

BBJ: Who is excluded?

AB: The hospitality sector. However, we’re having day-to-day conversations with our partners, with the commercial banks and asking them to give us feedback on what the clients want. So, if there is a huge demand from hospitality, then we may extend the program. Our aim is to help as many businesses as possible.

BBJ: What is the time frame for the applications?

AB: There is an EU framework behind this program, which will close at the end of this year, but I think that we will receive applications until the HUF 700 billion is exhausted, which will happen soon [Editor’s note: Since this interview was conducted, that threshold has now been reached]. The working capital budget has already been exhausted; for this sub-program, we can’t accept any more applications. The other two investment loan sub-programs are continuing without changes for now. We may increase the amount, but we must see the results first.

BBJ: Are other similar programs available?

AB: One that is very popular and works well is the Széchenyi Kártya program, run by Kavosz. However, we do not want to cannibalize it; if you look at our rates, we are a little bit higher than their rates. We are targeting larger investments and larger companies. Therefore, I think these two programs can complement one another.

BBJ: You mentioned earlier the complicated economic situation. What do you expect this year regarding economic growth and inflation?

AB: This is a difficult question. First, I would say that the anticyclical role of Exim, MFB [the Hungarian Development Bank], or any state-owned financial institution is nothing new. If you remember, during COVID-19, Exim had the loss-handling Kárenyhítő [mitigation] program, which was also very successful, and with this new program, we also fulfill this anticyclical role. I would turn the question around and say that when inflation is getting lower, the credit market is consolidating, and the rates are going down, then, of course, we will step back. Our role is to help the economy in this really difficult situation. We don’t want to compete with commercial banks. We just want to help them. In terms of expectations, the second half of the year will probably be easier, but we will see.

BBJ: What other programs does Exim offer?

AB: The Baross Gábor Program is our main program. We also have two others called Exportélénkítő (Export Booster) and Jövő Exportőrei (Future Exporters). In this way, we can provide our clients with different combinations. Together with Baross Gábor, we have five running programs.

BBJ: Are these programs available to foreign companies in Hungary?

AB: The company must be Hungarian, i.e., it must be registered in Hungary. The owners can be foreign citizens, but the company must be registered in Hungary.

Exim Hungary

According to its website, Exim Hungary is one element of a network of 85 export credit agencies, each supporting the development, market penetration, and growth of its own country’s exporters by providing a stable financial background. “Exim Hungary is a specialist financial institution – or rather, a pair of institutions, consisting of a bank and an insurer working together in an integrated way – whose mission is to provide export-related credit services and risk-insurance products of the highest international standard to businesses operating in Hungary, or to firms that supply them, and through its specialist competencies, knowledge, and experience, to create export opportunities and assure security for domestic companies,” the website says.

This article was first published in the Budapest Business Journal print issue of March 10, 2023.