The purpose of the performance bonds guarantee is to honour, in case of the failure of a bank or financing company, the performance bonds issued by it to business professionals who are required by law to provide a guarantee to their customers. These professionals may be builders, travel agents, insurance brokers, etc.
If the bank or financial institution fails, the FGDR takes over and honours the performance bond until the project is completed. If the professional subsequently defaults vis-à-vis their customer, the FGDR compensates the customer.
The business professionals in question:
either hold funds received from their customers for the purpose of delivering them to third parties to whom such funds are owed;
- for example: a travel agent who organises a trip and takes bookings,
or must ensure the proper completion of a service which they have agreed to provide to their customers and for which they have been paid;
- for example: off-plan sale of property by a real estate developer.