BCEAO Instruction 006-09/2017 on Refinancing Admissibility Rules for Credit Institutions' Claims on SMEs under the Regional Financing Support Scheme

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The Governor of the Central Bank of West African States (BCEAO), Having regard to the Treaty of the West African Monetary Union (WAMU) dated 20 January 2007, particularly Article 22; Having regard to the Statutes of the Central Bank of West African States (BCEAO), annexed to the WAMU Treaty dated 20 January 2007, particularly Articles 8, 10, 30, 52 and 62; Having regard to the Law on Banking Regulation, particularly Article 56; Having regard to Decision No. 29 dated 29/09/2015/CM/WAMU of 29 September 2015 on establishing a financing support mechanism for small and medium-sized enterprises (SMEs) and small and medium-sized industries (SMEIs) in the member states of WAMU; Having regard to Decision No. 397/12/2010 of 6 December 2010 on the rules, instruments and procedures for implementing the monetary and credit policy of the Central Bank of West African States (BCEAO), as amended and supplemented by Decision No. 24/2013/CPM/BCEAO of 9 December 2013; Having regard to Decision No. 05 dated 06/12/2016/CPM/BCEAO of 6 December 2016 setting the outstanding amount of BCEAO refinancing on the marginal lending facility and the special refinancing window; Having regard to Decision No. 28 dated 06/12/2016/CPM/BCEAO of 6 December 2016 authorizing the admissibility to BCEAO refinancing of claims held by credit institutions on enterprises eligible for the SME/SMEI financing support mechanism in WAMU member states; Having regard to Decision No. 357/11/2016 of 15 November 2016 establishing the revised UEMOA Banking Accounting Plan and its application instructions; Having regard to Instruction No. 001/02/2014 of 19 February 2014 on the procedures for the Central Bank of West African States (BCEAO) intervention in conducting monetary policy,

Avenue Abdoulaye FADIGA
BP 3108 – Dakar - Senegal
Tel. (221) 33 839 05 00 / Fax. (221) 33 823 93 35 courrier.bceao@bceao.int - www.bceao.int

INSTRUCTION NO. 006-09/2017 ON THE BCEAO REFINANCING ADMISSIBILITY RULES FOR CREDIT INSTITUTIONS' CLAIMS ON ENTERPRISES ELIGIBLE UNDER THE SME FINANCING SUPPORT SCHEME (PME/PMI)

DECIDED:

TITLE I: GENERAL PROVISIONS
Article 1: Purpose
This instruction specifies the BCEAO refinancing admissibility rules for claims held by credit institutions on enterprises eligible for the SME Financing Support Mechanism (hereinafter referred to as the "SME Scheme") in the member states of the West African Economic and Monetary Union (UEMOA).

Article 2: Definitions
i. Autonomous enterprise: any enterprise in which the share of social capital held directly by a private or public company does not exceed 25%, except for venture capital companies and institutional investors;
ii. Credit institution: the legal entity that habitually performs banking operations as defined by the Uniform Law on Banking Regulation;
iii. Accounting professional: any person who provides the public with services aimed at improving the quality of financial, accounting or decision-making information, or the context in which it is presented to assist decision-makers;
iv. Support and supervision structure: the entity responsible for assisting enterprises in meeting eligibility conditions and monitoring those receiving financing.
The support and supervision structure provides the following services:

• capacity building, notably through training, advisory support, upgrading and coaching;
• structuring and preparation of business plans and financial statements, enabling the enterprise to have a relevant and credible strategy with reliable information on its current and future situation;
• enterprise diagnosis, to identify strengths and areas of fragility, accompanied by corrective measures;
• ex-post monitoring, to help enterprises manage loan repayments, monitor the evolution of financed or guaranteed projects, ensure lessons learned are taken into account and track the execution of their business plans;
  v. Non-financial company: an economic agent whose activity is the production of non-financial goods and services. Non-financial public companies and other non-financial companies are distinguished.

5.1. Non-financial public companies
These are essentially:

• non-financial companies whose main function is the production of goods or provision of market services and which are directly or indirectly controlled by public administrations. Control is presumed when public administrations hold more than half of the voting rights, or have the power to determine the company's policy or appoint its directors, by virtue of a law, decree or other regulation;
• public industrial and commercial establishments that are state or local government bodies, not having the legal form of a company, and whose main function is the production of goods or provision of market services.
  5.2. Other non-financial companies
  The main function of other non-financial companies is the production of goods or provision of market services. Credit institutions distinguish among other non-financial companies, foreign-controlled non-financial companies and national private non-financial companies:
• foreign-controlled non-financial companies are resident non-financial companies controlled by non-residents based on majority participation;
• national private non-financial companies are resident non-financial companies not controlled by public administrations or non-residents.

TITLE II: ELIGIBILITY OF AN ENTERPRISE UNDER THE SME SCHEME
Article 3: Enterprises eligible for the SME Scheme
Any non-financial company meeting the following characteristics is eligible for the SME Scheme:

• being an autonomous enterprise, producer of market goods and/or services, registered in the Commercial and Movable Credit Register (RCCM) of a UEMOA member state or any equivalent or substitute register;
• having an annual turnover excluding taxes not exceeding 1,000,000,000 FCFA;
• complying with the legal obligation to produce financial statements in accordance with current regulations.
  Furthermore, the SME must be accompanied by a support and supervision structure as defined in Article 2 above.

Article 4: Classification of eligible enterprises under the SME Scheme
The enterprises referred to in Article 3 above are classified into three categories based on the latest accounting year:

• micro-enterprises: enterprises with an annual turnover excluding taxes less than or equal to 30,000,000 FCFA;
• small enterprises: enterprises with an annual turnover excluding taxes between 30,000,000 FCFA and 100,000,000 FCFA inclusive;
• medium enterprises: enterprises with an annual turnover excluding taxes between 100,000,000 and 1,000,000,000 FCFA inclusive.

Article 5: Preparation and certification of financial statements
Any eligible enterprise, as defined in Article 3 above, is required to produce financial statements compliant with current accounting regulations.
For newly created enterprises that do not yet have financial statements, their eligibility is based on the analysis of a cash flow plan certified by an accounting professional. The financial statements of enterprises referred to in Article 3 above that meet the certification conditions set by current accounting regulations must be certified by an auditor. The financial statements of enterprises referred to in Article 3 above that do not meet the certification conditions set by current accounting regulations must be prepared by an accounting professional.

TITLE III: ADMISSIBILITY TO BCEAO REFINANCING UNDER THE SME SCHEME
Article 6: Nature of instruments representing claims of credit institutions on enterprises eligible for the SME Scheme
The instruments representing claims of credit institutions on enterprises eligible for the SME Scheme admissible to the BCEAO portfolio are:

• commercial bills issued by enterprises eligible for the SME Scheme;
• global mobilization notes on claims on enterprises eligible for the SME Scheme issued by credit institutions.
  These instruments are stamped "SME Scheme" to distinguish them from other effects in the BCEAO portfolio.

Article 7: Solvency criteria of eligible enterprises under the SME Scheme
The solvency of eligible enterprises under the SME Scheme is assessed based on the following elements:

• for medium and long-term loans, the repayment capacity ratio, with calculation methods detailed in Annex 1;
• for short-term loans, the availability of a realistic cash flow plan yielding a positive balance over the identified forecast period.

Article 8: Refinancable credit outstanding
Claims held by credit institutions on enterprises eligible for the SME Scheme are refinanced up to a limit of 300,000,000 FCFA per counterparty.

Article 9: Types of instruments presented for refinancing
Refinancing is granted by the BCEAO to institutions holding claims on enterprises eligible for the SME Scheme upon presentation of individual commercial bills or global mobilization notes as follows:

• loans with an individual outstanding amount between 50,000,000 FCFA and 300,000,000 FCFA give rise to the issuance of individual commercial bills;
• loans with amounts below 50,000,000 FCFA are grouped into global mobilization notes up to a limit of 1,000,000,000 FCFA per note.

Article 10: Quality of credit admitted to the BCEAO portfolio
Loans established under the SME Scheme benefit from BCEAO refinancing as long as they remain healthy claims, in accordance with the provisions of the revised UEMOA Banking Accounting Plan. In case of early repayment, default, or opening of judicial restructuring or asset liquidation proceedings against the beneficiary enterprise, the credit institution bearing the risk must promptly declare this to the BCEAO. It is required to substitute, where applicable, the instrument deposited in repurchase with the BCEAO with another admissible instrument of the same nature for BCEAO refinancing. If the credit institution does not have an admissible instrument of the same nature to offer as a substitute, it is required to immediately settle the total refinanced amount.

Article 11: Exemption from the rule limiting the total outstanding refinancing granted by the BCEAO on the marginal lending facility and special refinancing window
The rule limiting the total outstanding refinancing granted to the same counterparty on the BCEAO's marginal lending facility and special refinancing window does not apply to the refinancing of loans established under the SME Scheme.

Article 12: Other admissibility conditions for BCEAO refinancing
The other admissibility conditions for BCEAO refinancing are those provided by current regulations, particularly those relating to the procedures for the BCEAO's intervention in monetary policy.

TITLE IV: REPORTING MECHANISMS
Article 13: Maintenance of files for claims admitted to BCEAO refinancing
Credit institutions maintain, at their level, a file containing proof of the information underlying the refinancing obtained from BCEAO windows under the SME Scheme. This file includes, for each loan granted to an enterprise eligible for the SME Scheme, the following documents:

• the beneficiary's financial statements from the last accounting year;
• the loan agreement;
• a duly completed summary sheet, template provided in Annex 2;
• the SME accompaniment declaration by a support and supervision structure.
  The accompaniment declaration is sent to the credit institution by the support and supervision structure and remains valid during the SME's accompaniment period. It is submitted to the Central Bank, attached to the summary sheet, when the credit institution requests refinancing.

Article 14: Information to be transmitted to the BCEAO
Credit institutions operating under the SME Scheme are required to transmit monthly reports to the BCEAO as follows:

• a declaration of credit placements in favor of enterprises eligible for the SME Scheme, conforming to the template in Annex 3;
• a breakdown of healthy and distressed credit outstanding on enterprises eligible for the SME Scheme, conforming to the template in Annex 4.
  These reports are transmitted to the National Directorate of the BCEAO in the country where the credit institution is located, no later than ten (10) calendar days following the end of the reference month, in electronic and paper formats.

Article 15: Sanctions
Without prejudice to sanctions applicable to credit institutions, failure to comply with any provision of this instruction may result in the suspension or exclusion of the counterparty from refinancing operations under the SME Scheme.

TITLE V: FINAL PROVISIONS
Article 16: Entry into force
This instruction, including its annexes which form an integral part thereof, enters into force as of 1 October 2017. It will be published where necessary.
Done in Dakar, on [Date]
Tiémoko Meyliet KONE

ANNEX 1: METHODS FOR DETERMINING THE REPAYMENT CAPACITY RATIO
NORMAL SYSTEM
This ratio is presented as follows:
Repayment Capacity Ratio = Global Self-Financing Capacity (GSFC) / Financial Debts Financial Debts = Loans + Finance lease debts and similar contracts + Other financial debts GSFC = Gross Operating Surplus - Remaining cash-out charges (excluding sales of fixed assets) + Remaining cash-in proceeds (excluding sales of fixed assets) Gross Operating Surplus = Value Added - Personnel expenses Remaining cash-out charges = Financial costs + Exchange losses + Charges outside Ordinary Activities + Workers' participations + Income taxes Remaining cash-in proceeds = Operating expense transfers + Financial income + Exchange gains + Financial expense transfers + Products outside Ordinary Activities + Transfers of charges outside Ordinary Activities

MINIMAL CASH FLOW SYSTEM
This ratio is presented as follows:
Repayment Capacity Ratio = Global Self-Financing Capacity (GSFC) / Loans GSFC = Result of the accounting year - Provisions released + Depreciation and provisions charged The standard adopted is: repayment capacity ratio ≤ 4. -----------------------------------------

ANNEX 2: SUMMARY SHEET OF INFORMATION TO BE PROVIDED TO THE BCEAO WHEN REQUESTING REFINANCING UNDER THE SME SCHEME

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COUNTRY: SHEET NO. ............/Year
I - IDENTIFICATION OF THE INTERVENING INSTITUTION Name of the credit institution:
II - IDENTIFICATION OF THE BENEFICIARY ENTERPRISE
2.1 - Company name:
2.2 - Sector of activity (revised NAEMA nomenclature)* :
2.3 - Financial statements produced (minimal cash flow system or normal):
2.4 - Turnover excluding taxes (in millions of FCFA) :
2.5 - Repayment capacity ratio (in %) :
2.6 - Persons authorized to commit the enterprise:
Name and Surname | Functions | Address
(*) Nomenclature of Activities of Member States of AfriStat: cf Annex 2 of instruction no. 24-11-2016 on the revised Banking Accounting Plan (PCB), relating to the definition of attributes. For identifying the beneficiary's sector, please indicate the corresponding number and title. III - IDENTIFICATION OF THE SUPPORT AND SUPERVISION STRUCTURE RESPONSIBLE FOR ACCOMPANYING THE BENEFICIARY ENTERPRISE
3.1 - Company name:
3.2 - Address and phone:
3.3 - Persons authorized to commit the support and supervision structure:
Name and Surname | Functions | Address
IV – CHARACTERISTICS OF THE ESTABLISHED CREDIT
4.1 – Credit conditions (Amounts in FCFA)

Short-term	Medium-term	Long-term	Total
Ordinary or campaign loans
- Amount of credit requested
- Amount of credit granted
Finance lease loans
- Amount of credit requested
- Amount of credit granted
Factoring
- Amount of credit requested
- Amount of credit granted
Credit term (in months)
Interest rate
Financing object*
(*) : financing object: real estate loan, export credit, equipment credit, working capital credit, other credits.
4.2 – Date of establishment: (DD/MM/YYYY)
4.3 – Credit outstanding on the date of requesting BCEAO refinancing (in FCFA) :
(In figures) …..........................................................................................................................
(In words) …............................................................................................................................
Done at …..............................., on …..............................
Functions (signature)	Name and Surname
NOTE: This sheet must be carefully completed and signed by a person authorized to commit the liability of the credit institution intervening with the BCEAO.

ANNEX 3: DECLARATION OF CREDIT PLACEMENTS IN FAVOR OF SMEs/SMEIs (MONTHLY STATEMENT)
DOC.PME1

COUNTRY:
CREDIT INSTITUTION:
CLOSING DATE:

(Mounts in millions of FCFA)

Reg. No. at RCCM or equivalent	Beneficiary SME/SMEI Name	Sector (1)	Turnover of the SME/SMEI	Repayment capacity ratio	Amount of credit	Date placed	Term (months)	Type: Ordinary/campaign, Finance lease, Factoring	Total	Nominal interest rate	Object (2)
(1) Cf Annex 2 of instruction no. 24-11-2016 on the revised Banking Accounting Plan (PCB), relating to the definition of attributes.
(2) Real estate loan, export credit, equipment credit, consumer credit, working capital credit.

ANNEX 4: BREAKDOWN OF HEALTHY AND DISTRESSED CREDIT OUTSTANDING ON SMEs/SMEIs (MONTHLY STATEMENT) DOC.PME2

COUNTRY:
CREDIT INSTITUTION:
CLOSING DATE:

(Mounts in millions of FCFA)

Reg. No. at RCCM or equivalent	Beneficiary SME/SMEI Name	Financings granted (Initial amount)	Residual outstanding	Instruments deposited in repurchase at the BCEAO	Refinancing granted by the BCEAO (1)
I – HEALTHY CREDIT OUTSTANDING ADMISSIBLE TO REFINANCING
Subtotal 1
II – DISTRESSED CREDIT OUTSTANDING DOWNGRADED
Subtotal 2
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Total

NOTE: This table is transmitted to the BCEAO no later than ten (10) calendar days following the end of the month.
(1) Credit leasing, portfolio mobilization, cash desk credits, etc.