The provisions of the Government Emergency Ordinance no. 50/2018 for the implementation of the “Invest in Yourself!” national program have been put up for public debate by the National Commission for Strategy and Prognosis (CNP) until September 8.
After the publication, banks wishing to participate in this funding scheme will enrol in the program and will display at the locations where these loan can be requested the note ”The Invest in Yourself program financed by the Romanian Government in 2018. Zero costs. Zero interest rate.” The total guarantees that can be granted by the state in 2018 were set at RON 600 million and the subsidies at RON 5 million.
The program implementation rules for zero interest studies, which are being publicly debated by the CNP, provide guarantees of RON 600 million for 2018, enough for more than 25,000 beneficiaries this year. The forecasting commission estimates that banks will run less than 3 percent of the guarantees provided by the two guarantee funds within two years of the program.
Given that the state guarantees under the “Invest in yourself” program account for 80 percent of the total amount of credit approved by the bank, it means that in 2018 credits will be allocated for studies of about RON 750 million, with values ranging from a maximum of RON 35,000 or 40,000, depending on the category in which the credit applicant is included. In conclusion, a minimum of 25,000 people could obtain loans in 2018 to finance their own studies or retraining courses.
According to the rules, the Ministry of Public Finance mandates the National Credit Guarantee Fund for SMEs (FNGCIMM) and the Romanian Guarantee Fund (FRC) to issue the guarantees related to the program credits. In particular, the state will bear the interest rate of Robor at 3 months plus a bank margin of maximum 2 percent, the analytical fee of no more than 0.1 percent of the amount of the funding. The level of the guarantee management fee will be set annually by MFP, CNSP and guarantee funds.
In the Fundamental Notes to the Methodological Norms, CNP estimates for the period 2018 – 2020 a guarantee execution rate of up to 3 percent, which was calculated in relation to the use of the guarantee ceiling of RON 600 million and the non-performing loans are estimated at 17 percent for the entire duration of the loan.
The guarantees to be requested from the recipients will be similar to those requested by the banks for consumer loans, namely the current and future cash and current income and available cash of the beneficiary and the co-debtor(s) falling into the category those that can be capitalized by the National Agency for Fiscal Administration and regulated by the Code of Fiscal Procedure.
At the same time, the Methodological Norms lay down conditions for the financiers who will enrol in the program after the approval and publication of the Methodological Norms: “The participating banks have the obligation to display at all the units and counters where operations under this program are carried out advertising materials include the following message: “Invest In Yourself Program Funded by the Government of Romania 2018. Zero Costs. Zero Interest Rate”. The sizes of the advertising materials and the way the message is presented will be explained in the framework payment agreements signed between CNP and the financier”, according to the legislative text.
Government Emergency Ordinance no. 50/2018 on the implementation of the governmental investment program “Invest In You” was published in the Official Gazette in June, according to which young people up to 26 years of age and without income will be able to claim interest-free loans of up to 40,000 lei. The program will address young people without a job or who are still in the course of their studies. The credit is intended to cover the needs of young people, namely education, health, culture, sports and others.
The duration of the loan that may be contracted by young people aged up to 26 will be ten years or less, including a grace period of up to five years. This program can also benefit people aged between 26 and 55 who are in the education system or undergoing vocational retraining courses. These people can benefit from credits of 35,000 lei. Moreover, all beneficiaries can benefit in addition to 20,000 lei if they are employed or engage in the program.
According to the Government, the normative act will have a favorable impact on the integration of young people into the labor market and increase employment by about 10,000 people annually. The interest rate for the loan granted, as well as the expenses related to the analysis and management fees, will be borne from the state budget through the budget of the National Commission for Strategy and Prognosis, provided the maturity of the credit rates. The loan will be given in the form of a credit line and its phasing out based on the invoices submitted for settlement or the direct payment of the supplier on the basis of the pro forma invoice. The credit is granted for a maximum of 10 years, including the grace period.
The Beneficiary and the Grantor shall mutually agree to a grace period, with the obligation of the grantor to ensure a grace period at least equal to the period of studies, of no more than 5 years. For the credit, the beneficiary will be accompanied by at least one debtor if he is not employed. The purpose of the credit is to cover young people’s needs in terms of education, health, culture and sport.