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Keyterms

Leverage

Sustainability

Safe and liquid securities

Guarantor-Lender Relations

Standard econometric techniques

Empirical Evidence

Financing difficulties

Lowering SMEs degree of


discrimination

Catalysing role in emerging


economies

Ex ante

Regulatory capital relief

IT systems

Budgetary
and incentive policies

Specific
guarantee organizations

Strong large scale capital

Develop mechanism to share risk with


credit institutions

Infrastructural development credit

Promoting Savings And Protecting


Savers

Financial Development

Capital Requirements

Capital Enhancement Guarantees

Conclusion
Leverage refers to the ratio of total outstanding guarantee commitments to the size of theguarantee fund. Since
not all borrowers receiving guarantees will default, and the guarantees (preferably) offer only partial coverage
of the underlying loan, a given amount of capital can be used to achieve a much larger amount of lending to
small enterprises.
In order to achieve a considerable amount of financial and economic additionality over the longer term, credit
guarantees schemes must be designed so as to ensure their viability.Lack ofsustainability is largely a result of
bad management. In addition to insufficient marketing, inadequate risk assessment and slow claims handling,
the investment of funds is a crucial determinant of a schemes sustainability.

Guarantees must be safe and liquid securities, which can be enforced juridically if they are to be accepted by
lenders. Guarantee schemes are either subject to special legislation or are established under the general rules
for financial institutions.
Good guarantor-lender relations are a prerequisite for the efficient and cost-effective functioning of guarantee
schemes. It takes time to build the trust that forms the basis of successful schemes. Guarantors are fearful of
moral hazard on the part of lenders and these, in turn, lack confidence that risk will be assessed correctly by
the guarantor and that claims will be paid quickly and without dispute. It is therefore essential to have written
contracts specifying the rights and obligations of the scheme and lenders.

Conflicting assessments of the effectiveness of a public guarantee, come out of the empiricalevidence gathered
so far through various analytical tools. The evidence presented here is based on standard econometric
techniques about causality effects, and is mainly aimed at checking whether and to what extent a causal
relationship can be established between Italys State-funded guarantee scheme and the level of credit supply
and its cost to SMEs.

This study adds to the existing empirical evidence is the strength of a causality test and its application to an
analysis never carried out before. This econometric test is not relevant just for the country under review but
can be replicated for other countries since no explanatory variable in this analysis is
highly specific to a single country.

Most advanced economies have established publicly funded guarantee schemes to help SMEs overcome their
financing difficulties, that are due to imperfect or incomplete financial markets.

A public credit guarantee should serve the purpose of lowering SMEs degree of discrimination vis-a-vis prime
borrowers, in terms of borrowing costs and unmet demand for credit. In the economic literature, various
approaches have been followed to test the presence and extent of short- and long-term credit rationing on a
macroeconomic scale such as the share of prime lending
over total lending.

Credit guarantee schemes (CGSs) can play a catalysing role in emerging economies where the SME financing
gap is generally wider than in developed economies. In times of financial downturns CGSs can be a part of a
counter-cyclical public policy toolkit to support lending toSMEs.
Objectives and performance criteria should be established ex ante, the proper risk sharing should be ensured,
additionality and long-term sustainability should be continuously evaluated using quantifiable indicators.

Existing variations in the local interpretations oare a source of uncertainty for


financial institutions and it limits their use of guarantees in certain jurisdictions. A uniform treatment of
creditguarantees could be an important contribution towards a more predictable business environment.
Properly designed internal processes and effective communication have to be in place to raise awareness of
credit guarantee products. IT systems should be capable of properly accounting at all levels of the decisionmaking process for the lower capital charges that may come with guaranteed loans. Regulatory support may
also play a role in ensuring that creditguarantees are a dequately reflected in internal systems.

The government should complete legal system, regulation of credit guarantee activities, securitized loans and
re-guarantee. It will help credit guarantee system operation moreefficiently and bring more benefits to SMEs,
creditinstitutions and the economy and incentive policies
The guarantee products should diversify for each type of customer, sector and stage of development of the
country. The government should establish specific guarantee organizations to serve and promote specific
sectors such as credit guarantee institutions for agriculture and exports. There should be more products to offer
and support start-up SMEs, micro-enterprises and
women entrepreneurs.

The credit guarantee system should have strong capital, large scale to ensure operability and development
aswell as the a bility to meet the credit demand of SMEs.The capital of the credit guarantee institution
shoulddiversify from different sources, but the government should care and support the budget for the
organization guarantees.

The credit guarantee institution should develop mechanism to share risk with credit institutions. This will
attach the responsibility of credit institutions in credit guarantee activities and reduce the moral hazardproblem.

Construction and improvement of infrastructural development credit as credit information system,


development tools such as credit scoring, securitization of loans etc. Also building re-guarantee system, this
system will actively support the credit guarantee system.
While banks can collect on their collateral, such as mortgages on buildings, depositors do not have this option.
Low income people, who are usually the majority of the clientele of these institutions, are not well informed of
their rights, they are poorly organized, and they generally do not protest and do not use legal recourse
mechanisms that may be available to them.

They require a supportive policy environment to grow and flourish as an important part of the financial sector.
Making guarantees as a solution to constricted credit markets, before promoting policies for attacking that
constricted market would appear to be unproductive public policy and
counter productive as public investments.
The amounts of capital required to build the infrastructure for large scale operations that can achieve low per
unit administrative costs and to build the sophisticated credit analysis and surveillance systems required so that
the guarantee companies can risk their capital is very large.
Capital enhancement guarantees (CEGs) provide a mechanism that avoids the disadvantages of traditional
guarantees while offering a basis for lenders to explore and assume risk on anincremental basis. The costs
were clearly too high and the volume of operations was clearly too low for the guarantee fund to not be
heavilydependent upon on-going donor and or government support.

APA Intext
(Green, 2003)

(Green, 2003)

(Green, 2003)

(Green, 2003)

(Zecchini, & Ventura, 2007)

(Zecchini, & Ventura, 2007)

(Zecchini, & Ventura, 2007)

(Zecchini, & Ventura, 2007) from


(Jaffee, & Modigliani, 1969)

(Ferrari, Gsiorowski, Gereben, &


Revoltella, 2014)

(Ferrari, Gsiorowski, Gereben, &


Revoltella, 2014)

(Ferrari, Gsiorowski, Gereben, &


Revoltella, 2014)

(Ferrari, Gsiorowski, Gereben, &


Revoltella, 2014)

(Dang, 2015)

(Dang, 2015)

(Dang, 2015)

(Dang, 2015)

(Dang, 2015)

(Gudger, 1998)

(Gudger, 1998)

(Gudger, 1998)

(Gudger, 1998)

APA Citation
Green, A. (2003). Credit Guarantee Schemes for Small Enterprises: An
Effective Instrument to Promote Private Sector-Led Growth?. UNIDO, p
53.

Green, A. (2003). Credit Guarantee Schemes for Small Enterprises: An


Effective Instrument to Promote Private Sector-Led Growth?. UNIDO, p
54.

Green, A. (2003). Credit Guarantee Schemes for Small Enterprises: An


Effective Instrument to Promote Private Sector-Led Growth?. UNIDO, p
56.
Green, A. (2003). Credit Guarantee Schemes for Small Enterprises: An
Effective Instrument to Promote Private Sector-Led Growth?. UNIDO, p
52.

Zecchini, S. & Ventura, M. (2007). The impact of public guarantees on


credit to SMEs. Springer Science & Business Media, LLC.

Zecchini, S. & Ventura, M. (2007). The impact of public guarantees on


credit to SMEs. Springer Science & Business Media, LLC.

Zecchini, S. & Ventura, M. (2007). The impact of public guarantees on


credit to SMEs. Springer Science & Business Media, LLC.

Zecchini, S. & Ventura, M. (2007). The impact of public guarantees on


credit to SMEs. Springer Science & Business Media, LLC.

Ferrari, A., Gsiorowski, P., Gereben, ., & Revoltella, D. (2014). Credit


Guarantee Schemes for SME lending in Central, Eastern and SouthEastern Europe . European Investment Bank, p 30.
Ferrari, A., Gsiorowski, P., Gereben, ., & Revoltella, D. (2014). Credit
Guarantee Schemes for SME lending in Central, Eastern and SouthEastern Europe . European Investment Bank.
Ferrari, A., Gsiorowski, P., Gereben, ., & Revoltella, D. (2014). Credit
Guarantee Schemes for SME lending in Central, Eastern and SouthEastern Europe . European Investment Bank.
Ferrari, A., Gsiorowski, P., Gereben, ., & Revoltella, D. (2014). Credit
Guarantee Schemes for SME lending in Central, Eastern and SouthEastern Europe . European Investment Bank.

Dang, T. B. (2015). Credit Guarantee System For SMES In Asean:


Evidence From Thailand, Indonesia And Malaysia. Managerial
Challenges Of The Contemporary Society.
Dang, T. B. (2015). Credit Guarantee System For SMES In Asean:
Evidence From Thailand, Indonesia And Malaysia. Managerial
Challenges Of The Contemporary Society.

Dang, T. B. (2015). Credit Guarantee System For SMES In Asean:


Evidence From Thailand, Indonesia And Malaysia. Managerial
Challenges Of The Contemporary Society, 8(1), 76-81.

Dang, T. B. (2015). Credit Guarantee System For SMES In Asean:


Evidence From Thailand, Indonesia And Malaysia. Managerial
Challenges Of The Contemporary Society.
Dang, T. B. (2015). Credit Guarantee System For SMES In Asean:
Evidence From Thailand, Indonesia And Malaysia. Managerial
Challenges Of The Contemporary Society.
Gudger, M. (1998). CREDIT GUARANTEES: An assessment of the
state of knowledge and new avenues of research . Food and Agriculture
Organization of the United Nations, p 69.

Gudger, M. (1998). CREDIT GUARANTEES: An assessment of the


state of knowledge and new avenues of research . Food and Agriculture
Organization of the United Nations, pp 89.

Gudger, M. (1998). CREDIT GUARANTEES: An assessment of the


state of knowledge and new avenues of research . Food and Agriculture
Organization of the United Nations, pp 88.
Gudger, M. (1998). CREDIT GUARANTEES: An assessment of the
state of knowledge and new avenues of research . Food and Agriculture
Organization of the United Nations, pp 71-72.