Infrastructure and Water Supply Project Financing Programme

1. Programme Objective 

Objective of this Programme is implementation of investment projects in the area of infrastructure (roads, water supply, waste water treatment etc.) at local and state level, which are in function of utilization of the economic potentials and creation of conditions for business development, as well as financing projects of a local, regional and national importance.

Projects to be financed from the credit line should contribute to sustainable development, validation of natural resources and stimulation of business development.

2.      Loan Purpose 

Loans are designed for investment in road infrastructure projects, water supply and other petty infrastructure projects validating economic potentials (business zones, primary production zones etc.). 

Loans are intended for new investments in fixed assets: land, buildings, equipment and appliances, etc. 

Each project will be assessed individually, from the economic, financial and technical acceptability, as well as from the development policy standpoint, i.e. creating conditions for business development. 

Obtained building permit is a precondition for realization of loans for projects under this credit line. 

If a loan is financed from the European Investment Bank, funds can not be used for VAT financing. 

Financial support shall not be approved for the following purposes:

  • Participation in projects violating internationally recognized employee rights, including safety at work, rules and procedures in Montenegro;
  • Any of the activities perceived as illicit or environmental and/or human health threat;
  • Completed investments intended for loan obligations refinancing;
  • Immoral and illegal activities.

3.      Loan Beneficiaries 

Beneficiaries of these loans may be municipalities, Capital City, Old Royal Capital, companies whose founder is (the majority owner) state – unit of  local self-government, commercial enterprises and other legal entities. 

End beneficiaries of these loan arrangements may be entities that have obtained a confirmation from the Tax Administration on their tax arrears). 

Right to a loan is not a guaranteed right and IDF MN JSC shall enact a decision on each Loan Application 

4.      Lending Method 

IDF MN JSC implements this Programme through: 

·         Direct lending to the loan beneficiaries,

·         Financing end beneficiaries of loans through commercial banks that have established business relation with IDF MN JSC.  

Loan Applications that are not supported with mandatory defined documents shall not be taken into consideration. 

Based on the Loan Agreement between a commercial bank and IDF MN JSC, the commercial bank shall enter into agreement with the end beneficiary of the loan.

5.      Loan Conditions 

Loans approved under this credit line and financed by the European Investment Bank (EIB), will be approved at an interest rate from 0.5 % to 0.7%[1] lower compared to the interest defined hereinafter.     

A) Direct lending

·         IDF may directly finance up to 70% of the total investment value, or up to 50% if the beneficiary of credit is municipalities, Capital City, Old Royal Capital, companies whose founder is (the majority owner) state – unit of  local self-government, commercial enterprises;
·         Maximum amount up to €3.000.000,00[2];

·         Minimum amount of € 10.000,00;

·         Interest rate of 4.0% annually with the proportional interest calculation method;

·         Maximum term of 15 years (including grace period);

·         Grace period up to 5 years. 

INCENTIVE MEASURES FOR DIRECT LOAN ARRANGEMENTS: For entities implementing projects in Northern region municipalities or in municipalities that are below the average value of the development index in Montenegro, a special incentive measure of reduction of the interest rate by 0,50% shall be approved. Additionally, incentives shall pertain to loans approved with a commercial bank’s guarantee or with the State's guarantee, in a way that the initial interest rate will be decreased by 1,00%. 

Active direct beneficiaries of this type of IDF MN JSC's loans may apply again for additional loan funds, bearing however in mind that the overall exposure on the basis of the loan to one client is in accordance with his balance indicators, and the maximum exposure to one client including all related persons shall be defined by the internal acts of the IDF. 

In case of a direct loan arrangement that is fully supported by a bank guarantee, cash collateral or State guarantee, such loan arrangement or its proportional part shall not be considered as exposure of the end beneficiary.

Special incentives will be approved to business entities that regularly settle their tax liabilities, i.e. are on the "white list" of the competent state body or have provided a certificate to properly settle their tax obligations by meeting the criteria to appear on the "white list", , in the form of reduced interest rates by 0.50% (it is necessary to provide confirmation of the state body or an official document of the state body which will be submitted to the IDF MN JSC). 

B) Lending through commercial banks

·         IDF may directly finance up to 70% of the total investment value, or up to 50% if the beneficiary of credit is municipalities, Capital City, Old Royal Capital, companies whose founder is (the majority owner) state – unit of  local self-government, commercial enterprises;

·         Maximum amount up to €6.000.000,00;

·         Minimum amount of € 10.000,00;

·         Interest rate of 5,00% annually from which the bank belongs 3%;

·         The Bank has the right to arrange a lower interest rate with the client, in which case the interest rate of the Fund is from 1,5% to 2%, but not less than 1,5%[3];

·         Maximum term of 15 years (including grace period);

·         Grace period up to 5 years. 

NOTE: Business bank shall, based on its own business policy, have the right of approving a loan to the client in a percentage it deems appropriate, from its own potential and under the terms it establishes at its own discretion.

Commercial bank through which the loan arrangement is realized shall be required to provide from the end loan beneficiary fulfilment of all obligations under the legislation regarding the realization of the investment - a project supported with the loan proceeds of the IDF MN JSC. 

Special incentives will be approved to business entities that regularly settle their tax liabilities, i.e. are on the "white list" of the competent state body or have provided a certificate to properly settle their tax obligations by meeting the criteria to appear on the "white list",, in the form of reduced interest rates by 0.50% (it is necessary to provide confirmation of the state body or an official document of the state body which will be submitted to the IDF MN JSC). This incentive measure applies to direct loan arrangements and through banks.

 

6.      Fees 

  1. For direct loans

·         0,30% on the approved amount for subjects implementing projects in northern municipalities of Montenegro and in municipalities that are below the average value of the development index in Montenegro;

  • 0,40% on the amount approved for projects implemented in other municipalities. 

a)       for loans realized through commercial banks

Fees for loans realized through bank IDF MN JSC shall not be charged, and the fee shall be agreed upon between the bank and the end beneficiary.

7.      Utilization of Loan 

Loan utilization period is up to 24 months.

Final utilization period shall be established on the case-by-case basis for each individual loan arrangement dependent on the real needs and the dynamics of investing.

Loan beneficiaries shall be obliged to a dedicated usage of loan funds in accordance with this programme and agreement signed between IDF MN JSC and end beneficiary.

IDF MN JSC shall perform control of the dedicated usage of loan funds.

IDF MN JSC shall execute approved direct loans by transferring funds to:

  • The supplier’s account or service/works provider or
  • Loan beneficiary account, in single or in tranches - in phases. 

Transfer of funds directly to the Loan Beneficiary’s account in tranches – in phases, means that, as a general rule, the subsequent transfer of funds will not take place until the Beneficiary justifies dedicated usage of prior realized funds under the approved loan (fund per already transferred tranches). 

Exceptionally, in case of refunds of the paid investments, the transfer of funds to the loan beneficiary's account may be performed as a single payment, in accordance with the present rulebook of IDF MN JSC. 

The transfer of funds under loan arrangements through and with the guarantee of commercial banks shall, as a general rule, shall be a one-time exercise. 

In case of extending loans to final beneficiaries through commercial banks, commercial banks are obliged to establish and maintain documents and keep records that provide for a prompt and efficient control of dedicated usage of loans, as well as for defining other conditions for utilization of loan finds in accordance with legal requirements. IDF MN JSC retains the possibility of exercising control over dedicated usage of loan funds in direct contact with the end beneficiary.

8.      Means of Security 

As means of security, IDF MN JSC shall accept bills of exchange, mortgages over immovable property, bank guarantees, local self-governments’ guarantees, guarantees of the Government of Montenegro, guarantees of credit rating legal entities, stocks of receivables and other generally accepted instruments of security in the banking sector, in accordance with the Acts of IDF MN JSC and decisions passed by competent bodies of IDF MN JSC. 

All costs with regard to providing instruments of security as well as of the execution of insurance-related tasks, deletion and retrieval of realized instruments shall be carried by the loan beneficiary. 

In case of loans through and guaranteed by commercial banks, bills of exchange and bank authorizations shall be accepted as collateral, whilst the bank retains the right to contractually arrange means of security with the end beneficiary.

 

9.      Required Documents 

Documents required for realization of the project through direct loan arrangement:

  • Loan Application (IDF MN JSC official form);

·         Excerpt from the Central Registry of Business Entities - not older than 30 days;

  • Planned budget for the current year and budget execution for the prior year: Balance Sheet, Income Statement, annual account balance, analytical breakdown of buyers and suppliers (for public and private companies) Balance Sheet, Income Statement, annual account balance (Trial balance), analytical breakdown of buyers and suppliers) – for the past two years, as well as the interim aforementioned reports for the current year;
  • Investment project;
  • Valid form of certified signatures of persons authorised for representation (OP) and valid specimen signature card;
  • Authorization for retrieving data from the Regulatory Loan Registry of the Central Bank of Montenegro (RKR), including founders and related parties[4] when speaking of business entities;
  • Tax Administration certificate on settled taxes and contributions – not older than 30 days;
  • Official form for reporting on settlement of monthly taxes and social contributions for employees, verified by the Tax Directorate as evidence of the number of employees;
  • Proposal of the collateral;
  • Approval of loan applicant’s competent bodies (in case of local self-governments and public companies).
  • Preliminary agreements and pro-forma invoices (photocopy or original) on procurement of equipment, preliminary invoices for construction works (IDF shall not accept offers/preliminary agreements/pro-forma invoices issued by natural persons (exception being purchase of real estate), and by related parties (exception being local self-governments and public companies) nor internal invoices). The documents in subject may not be dated more than three months from the date of the submission of the Loan Application. 

      For construction/expansion/reconstruction of business facility

·         Real estate folio for the real estate where the concerned investments is realized not older than 30 days;

·         Building permit (equivalent in accordance with the Law) which refers to the applicant;

  • Priced bill of quantities and offers for execution of works. 

All documents, as a general rule, shall be submitted in Montenegrin language. 

Executive office of the IDF MN JSC retains the right to request additional documents. 

Documents required for realization of the project through and with the guarantee of a commercial bank:

  • Investment programme in line with bank regulations;
  • Decision of the bank’s competent body;

·         ecision on registration of the end beneficiary in the Central registry of Business Entities or in another register of the competent authority;

·         Certificate on VAT registration, if the end user is subject to the VAT;

·         Tax Administration certificate on settled taxes and contributions – not older than 30 days;

  • Balance Sheet, Income Statement, for the last two years (in case of a business entity – public company);
  • Official form for reporting on settlement of monthly taxes and social contributions for employees, verified by the Tax Directorate as evidence of the number of employees;
  • Pro-forma invoices (photocopy or original) on procurement of equipment and inventory, preliminary invoices for construction works, preliminary agreements/agreements on purchase of real estate (IDF MN AS shall not accept offers/preliminary agreements issued by natural persons, exception being purchase of real estate, offers/preliminary agreements issued by related parties[5] (exception being local self-governments and public companies) nor internal invoices). The documents in subject may not be dated more than three months from the date of the submission of the Loan Application.
  • Statement on related parties. 

All documents, as a general rule, shall be submitted in Montenegrin language. 

Executive office of the IDF MN JSC retains the right to request additional documents.

10.  Other Provisions 

Additional rules applicable to this Loan Programme, which are not mentioned in this document, are defined in special acts passed by competent bodies of IDF MN JSC.

11.  Credit Line Validity 

This Credit Line shall be valid until 31 December 2019, until it’s altered or terminated. 

President of the Board of Directors of IDF MN JSC 

         PhD Zoran Vukčević 

                                               




 

[1] In addition to regular stimulation in the interest rate of 0.5% on funds withdrawn from the EIB, it is additionally possible to achieve stimulation at an interest rate of 0.2% if the requirements of the EYET initiative relating to the employment of young persons to the utilization of funds foreseen in the contract with the EIB.

 

[2]The Board of Directors of IDF has the right to approve a higher loan amount in a particular case considering the entire loan arrangement.

 

[3]If the interest rate towards to final beneficiary with all incentives is 4% on an annual basis, the Bank and the client can agree an interest rate of up to 4,5% annually, exclusively if there is a mutual interest of the final beneficiary and the Bank.

 

[4]Article 3, point 8 of the Law on Banks - (Official Gazette of Montenegro 17/08 of 11 March 2008, 44/10 of 30 July 2010, 40/11 of 8 August 2011)

 

[5]IDF MNE JSC shall accept offers / pre-requisites from related parties in cases provided for by internal acts.

 

LENDING

Factoring