Individual and Portfolio Models

Individual and Portfolio Models

This classification relates to the way a loan is guaranteed.

Individual Model

Individual borrowers are approved by the guarantor and are directly linked
with a participating institution. The borrowers still have to fulfill the lender’s
requirements. If the loan is approved, borrowers have to pay a fee to the
entity. The fee depends on the amount loaned or guaranteed. It is also
possible that the lender collects the fee and pays the guarantor.

Portfolio Model

In this model, the guarantor does not approve single loans, but negotiates
the criteria for the portfolio it will be guaranteeing. These criteria may vary
depending on the target group. All loans meeting these criteria will be
automatically guaranteed by the fond.
The major advantage for participating institutions is that the maximum
possible loss is known in advance. That loss could be determined to fall into
acceptable levels. However, the fund has to be established in such a way
that the participating lender will consider the financial viability and not only
the security aspect.