Two guarantors will be required for applicants for microcredits below 7,500 leva, and a mortgage of fixed assets will warrant larger loans, Minister of Labour and Social Policy Lidia Shuleva told a seminar in Velingrad on Saturday.

Microloans for amounts up to 10,000 leva will be extended for turnover capital and loans for as much as 15,000 leva will be given for investment in fixed assets, as part of a government program to stimulate small business, which was also a campaign promise.

The working capital loans will be repayable over one year and will have a grace period of one month, and the investment credits will mature in five years with a grace period of six months.

A guarantee fund with a starting capital of 20 million leva allocated from the 2002 budget will partially or completely cover the collateral of credits extended to socially disadvantaged people.

The interest rate for all microcredits will be about 10 per cent, but if the borrower does not meet the repayment term, the penalty interest will increase to between 16 and 18 per cent.

Negotiations with prospective partner banks have begun and the banks that will be pooling the project on a regional level must be announced by the end of next week.

Velislava Ivanovska, a spokesperson from the Labour and Social Policy Ministry's press centre, told The Echo what criteria a prospective partner bank should meet. It should be a first-class bank with solvency and liquidity corresponding to the Bulgarian National Bank's criteria for capital adequacy, and enjoy the trust of the general public. The proportion of bad credits in its loan portfolio should be of an acceptable level.

The bank should have a developed national network of branches, especially in the target regions of the project. The pilot municipalities have not yet been named, but should be announced next week after the board of directors of the guarantee fund is selected.

Another requirement for the banks is experience in crediting small and medium-sized enterprises and knowledge of the psychology and motives that drive entrepreneurs in seeking financial resources, Ivanovska added.

The Ministry has sent letters to 15 prospective partners, Shuleva said at the seminar. She added that banks have shown great interest in the project.

The Ministry expects that 4,000 new jobs will be created after the project begins. The first microcredits should be available before Christmas.