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A Review of Credit Guarantee Schemes

Access to capital is a key component to the development of the financial sector and economic growth, and is particularly problematic for small and medium enterprises (SMEs) in the Middle East and North Africa (MENA).

Partial credit schemes in MENA can play an important role in promoting the access to finance for financially isolated companies. In addition to establishing better credit registries and bureaus and strengthening creditor rights, governments in the region have been trying to establish partial credit schemes that efficiently reach a large number of firms while still maintaining financial viability.
A survey was conducted in ten MENA countries, over-viewing the main design features and the management of their respective partial credit guarantee schemes, as well as their outcomes. The average size of guarantee schemes in MENA is in line with the international average, and schemes appear to be financially sound, with enough equity and space to grow. There are, however, wide differences across the countries, and the number of guarantees looks generally small while their average value looks large. This suggests guarantee schemes are not reaching smaller firms. As there have been no impact evaluations on partial credit schemes, assessing the direct impact of credit guarantee schemes on SMEs access to credit is difficult.

A number of key design and management features of credit schemes in the region should be addressed, including the lack of principles and standards developed for partial credit schemes and the need to introduce systematic impact evaluation reviews. There is also significant scope for revising and calibrating eligibility criteria and designing more efficient payout schemes given each country’s enforcement mechanisms and judicial system. Systematic impact evaluations are key to determining if schemes have effectively targeted financially isolated firms.



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