The Government will allocate €5.6 million from the current budget reserve as initial capital for the Credit Guarantee Fund (KGF), according to a decision adopted at yesterday’s session.
This represents only part of the required funding, as an additional €5 million must be secured next year. Of that amount, €600,000 will be used to cover the Fund’s operating costs, while the remaining funds will serve as financial support to the economy.
Public call
The Law on the Credit Guarantee Fund came into force in mid-August, and the Ministry of Economic Development (MER) launched an international public call in October to select three independent members of the Fund’s Board of Directors.
According to Pobjeda, a large number of applications were received, both from domestic and international candidates. The selection process is currently underway, after which interviews will be conducted. The selection commission—composed of representatives of MER, the Ministry of Finance (MF), and three representatives of the European Bank for Reconstruction and Development—must submit its report and recommendations to the Government by December 21. The Board will ultimately include five members: three independent experts plus two representatives nominated by the ministers of economic development and finance.
Independent Board members must have a university degree, a minimum of two years of managerial experience, and at least five years of relevant professional experience.
Once the Board of Directors is appointed—no later than mid-February next year—the Fund will officially begin operations. The Law requires the Board to adopt the Fund’s statute within one month and appoint an executive director within three months, through a public competition for a five-year mandate. The executive director must have a background in finance or banking, ten years of professional experience, and at least three years in a managerial role.
One independent member must have experience in banking or finance, another in accounting or auditing, and the third in commercial or business law. Members appointed by the ministers will be required to have at least five years of experience in finance.
Functions of the Fund
The KGF will not only issue guarantees for business loans; it will also be able to invest capital in securities and make deposits in domestic or foreign banks.
According to the Minister of Economic Development Nik Đeljošaj, the new law aims to stimulate and accelerate economic growth and improve access to finance for micro, small, and medium-sized enterprises and entrepreneurs. He previously stated that €600,000 will serve as initial operational funding, while €10 million will be allocated to support the business sector.
“When the Fund guarantees a loan, 50% of the guarantee will come from the Fund and 50% from the commercial bank issuing the loan. This distributes both the burden and the risk,” Đeljošaj explained.
Legislative background and expectations
The Law on the KGF was first introduced nearly four years ago under then-Economy Minister and current President Jakov Milatović, but was withdrawn without explanation during the government of Dritan Abazović. Milatović appealed in 2022 for the law to be returned to parliamentary procedure, emphasizing that the text had been developed in cooperation with the EBRD. The law was ultimately enacted under Minister Đeljošaj.
The Montenegrin Employers’ Federation first highlighted the need for such a fund fifteen years ago. They described it as a major step forward in improving the business environment, particularly for micro, small, and medium-sized enterprises. However, they emphasized the importance of ensuring a transparent and fair allocation process to prevent misuse and ensure funds reach those who truly need them. They expect the Fund’s model—lower interest rates, grace periods, and reduced collateral requirements—to help businesses access the capital needed for expansion, modernization, hiring, and overall growth.
The MER has stated that the establishment of the Fund will accelerate economic development by supporting those with limited or difficult access to financing. This will activate parts of the market that have viable projects but lack collateral or credit history. The expectation is that loans enabled by the KGF—loans that otherwise would not be approved—will create thousands of new jobs, increase turnover and profits, and contribute to a general rise in living standards.
Oversight and governance
The Central Bank of Montenegro (CBCG) will oversee risk management and internal controls of the Fund, while general supervision will be carried out by MER. The Fund’s Board will report to the CBCG and the Government, which will appoint its members for a four-year term.
