Credit Guarantee Institutions and SME Finance by Paola Leone, Gianfranco A. Vento

By Paola Leone, Gianfranco A. Vento

This book analyses and confronts the functioning of warrantly structures for SMEs in international locations the place those schemes had a massive development. The e-book additionally highlights how the present monetary predicament is editing the promises schemes, via coverage maker interventions.

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2006 Country CGS analysed Thailand Small Business Credit Guarantee Corporation Sample Year No. , 2006 Chile FOGAPE 2000–05 84,640 firms and 141,260 loans • Increased access to credit for high-quality firms Derivation of the bank’s guarantee allocation decision model to good and bad borrowers, with and without guarantees. , 2005 Chile, Egypt, India, Poland Fund of State Guarantee for Small Industrialists, Chile; Credit Guarantee Company for SMEs, Egypt; Credit Guarantee Fund Trust for Small Industries, India; and Lublin Development Foundation, Poland 2004 4 case studies (data collected by questionnaire) • Strong and increasing competition concerning both quality and cost of SME financial services in some markets (Poland) • CGSs serve as accelerators not drivers of financial sector deepening • In some cases (notably in Chile and Poland) there has been diversification of SME-specific financial products by banks Qualitative analysis to assess direct and indirect effect of CGS intervention on behaviour of lender in financial markets BIS, 2010 Small Firms Loan Guarantee (SFLG) 2006 441 granted firms and 1049 nongranted firms (data from questionnaire) • Increased access to credit Descriptive analysis of respondent to interviews UK Boocock and Shariff, 2005 Malaysia New Principal Guarantee Scheme (NPGS) offered by the Credit Guarantee Corporation 1998–2000 92 firms (data from questionnaire) + 15 case studies • No additional financing to guaranteed firms • Lower interest rate • The official targets relating to CGC-backed lending create market distortions Logistic regression analysis to find a single statistically significant factor linked to FA Brash and Gallagher, 2008 USA 7(a) Loan Guarantee Program, Certified Development Company (504) Loan Program, Small Business Investment Company Program 1997–2007 8477 firms granted in 1999–2001 • Increased access to credit • Lower interest rate Descriptive analyses to examine sample characteristics and overall trends in the outcome measures Busetta and Presbiterio, 2006 Italy Mutual guarantee institutions 2002–05 866 firms, 1978 guarantee contract • Critical relevance of the MGI guarantees on the local firms’ credit access.

Much empirical research involves trying to determine whether the loans are actually additional – that is, whether they would not have been made without the intervention of the CGS. 20 Researchers mainly used the following methods to overcome the systematic lack of data for the measurement of financial additionality: • analysis of bank data and surveys of lenders; • analysis of guarantee programme files (the most commonly used method); Ida C. Panetta 17 • structured and semi-structured interviews with borrowers and/or lenders (the second most commonly used method); • analyses of lending activity under loan guarantee programmes as compared to lending activity to SMEs in general.

In addition to the guarantees, the article in question states that credit guarantee institutions can provide their members with advisory services on financial matters. The only explicit prohibition laid down by the law regards deposits taken, loans and investment services. It therefore outlines a core business (guarantees) which can be expanded by related or subsidiary activities comprising the entire range of advisory services for firms requiring guarantees. After setting the general boundaries of the guarantee activity, the law also specifies the characteristics of those who may undertake it.

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