Public Credit Guarantees and SME Finance

Zecchini, Salvatore; Ventura, Marco

doi:10.2139/ssrn.947106

“…According to Wilcox and Yasuda (2008); Leonello (2018);de Blasio et al (2018) among others, CGSs have been proven to empirically increase loan supply to SMEs. Respectively, in advanced economies for appraising small business financing, guarantee scheme roughly supplies additional 9% financing than bank loan and promotes 10%-13% probability of getting a loan (Riding and Haines Jr, 2001;Berger et al, 2005;Zecchini and Ventura, 2006). On the other hand, it shows that CGSs are capable to eliminate the financing constraints in theory (Xiang and Yang, 2015).…”

Section: Introductionmentioning

confidence: 99%

Innovative Credit Guarantee Schemes with equity-for-guarantee swaps

Song

¹

,

Hai

²

,

Zhao

³

2021

International Review of Financial Analysis

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Small and medium-sized enterprises (SMEs) faces much severer financial constraint compared to large companies and it is more vulnerable to market imperfection. To alleviate SMEs' financial constraints, Public Credit Guarantee Schemes (CGSs) have been introduced and widely used around the world. We first provide a thorough analysis of the effectiveness of the traditional CGSs and then introduce an innovative financing contract, referred to as equity-for-guarantee swap (EGS), with the aim of reducing SMEs' financial constraint in a more effective way. We show that EGS effectively reduces information asymmetry between lenders and SMEs and alleviates SMEs' severe financial constraint. We further investigate the impact of maturity on asset prices under EGS contract and analyse the value-at-risk (VAR) and expected shortfall (ES) of the insurer's risk exposure when participating in the EGS contract. Consistent with pecking order theory, an extension of our model shows that an SME tends to use equity financing first when it faces much severer financial constraint, then the SME issues more debt when it is less financially constrained.

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“…In Nigeria, Eyo (2008) reports that Favorable exchange rate, low interest credit, low rate of inflation increased foreign private investment in agriculture where important variables that affected agricultural sector growth. Elsewhere, Zecchini and Ventura (2006) observed that higher real GDP growth translates into more income which improves the debt servicing capacity of borrowers and when there is a slowdown in the economy unemployment increases, default risk is bound to increase with unemployment, borrowers have difficulty in paying their debt. Also, Yoshinco et al (2015) asserts that loan default risk ratio depend in macroeconomic factors -stock prices, GDP and money supply.…”

Section: Introductionmentioning

confidence: 99%

Agricultural Credit Guarantee in Nigeria and the Uncertainties of the Macroeconomic Environment

Eyo

¹

,

Nwaogu

²

,

Agenson

³

2020

IJEFI

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Efforts to revitalize agricultural credit delivery became a reality in 1977 with the establishing of the Agricultural Credit Guarantee Scheme (ACGS) Fund. This study assesses the ACGS under the Nigerian macroeconomic environment. It assesses the real value of loans guaranteed overtime; analyzes agricultural output in agriculture credit guarantee scheme, analyses the effect of changes in interest rate and other variables on the volume of loans guaranteed. Data obtained were analyzed using both descriptive and inferential statistics. This study suggests that the macroeconomic environment has not been friendly with ACGS operations. Credit guarantee contributes positively to increased agricultural output, but the number and value of loans guarantee as well as the performance of loans and agricultural sector output would be greatly enhance by policies that make interest rates, inflation, stock market capitalization, nominal exchange rates and other variables of the macroeconomic environment agricultural sector friendly and supportive.

show abstract

“…According to Wilcox and Yasuda (2008); Leonello (2018); de Blasio et al (2018) among others, CGSs have been proven to empirically increase loan supply to SMEs. Respectively, in advanced economies for appraising small business financing, guarantee scheme roughly supplies additional 9% financing than bank loan and promotes 10%-13% probability of getting a loan (Riding and Haines Jr, 2001;Berger et al, 2005;Zecchini and Ventura, 2006). On the other hand, it shows that CGSs are capable to eliminate the financing constraints in theory (Xiang and Yang, 2015).…”

Section: Introductionmentioning

confidence: 99%

Innovative Credit Guarantee Schemes with Equity-for-Guarantee Swaps

Song

¹

,

Zhang

²

,

Zhao

³

2020

View full text Add to dashboard Cite

Small and medium-sized enterprises (SMEs) faces much severer financial constraint compared to large companies and it is more vulnerable to market imperfection. To alleviate SMEs' financial constraints, Public Credit Guarantee Schemes (CGSs) have been introduced and widely used around the world. We first provide a thorough analysis of the effectiveness of the traditional CGSs and then introduce an innovative financing contract, referred to as equity-for-guarantee swap (EGS), with the aim of reducing SMEs' financial constraint in a more effective way. We show that EGS effectively reduces information asymmetry between lenders and SMEs and alleviates SMEs' severe financial constraint. We further investigate the impact of maturity on asset prices under EGS contract and analyse the value-at-risk (VAR) and expected shortfall (ES) of the insurer's risk exposure when participating in the EGS contract. Consistent with pecking order theory, an extension of our model shows that an SME tends to use equity financing first when it faces much severer financial constraint, then the SME issues more debt when it is less financially constrained.

show abstract

Public Credit Guarantees and SME Finance

Cited by 18 publications

References 16 publications

Innovative Credit Guarantee Schemes with equity-for-guarantee swaps

Innovative Credit Guarantee Schemes with equity-for-guarantee swaps

Agricultural Credit Guarantee in Nigeria and the Uncertainties of the Macroeconomic Environment

Innovative Credit Guarantee Schemes with Equity-for-Guarantee Swaps

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