Financing Small and Medium-Sized Enterprises in Asia and the Pacific

Credit Guarantee Schemes

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• Publisher: Asian Development Bank
• Year: 2022
• Print ISBN: 9789292693589
• eBook ISBN: 9789292693596
• Topic: Negocios y empresa
• Subtopic: Pequeñas empresas

Small and medium-sized enterprises (SMEs) are widely regarded as the backbone of economies and make a unique contribution to gross domestic product, exports, and employment. Yet, SMEs face multiple challenges in gaining access to finance that can fuel their growth. This publication scrutinizes the multiple factors affecting SMEs' access to finance and the impact of credit guarantee schemes (CGSs), examines country case studies from across the globe, and highlights the financial and economic additionality of CGSs when they are rigorously setup. To support Asia and Pacific economies, the publication suggests operational policy recommendations for the key priority areas of CGSs, focusing on legal and regulatory setup, corporate governance, services offered, risk management, and monitoring.

XIII
CREDIT GUARANTEE SCHEME RESPONSE TO THE COVID-19 CRISIS

The COVID-19 crisis has impacted the world severely, especially the SME sector. As seen in the past, small and medium-sized enterprises (SMEs) were the most susceptible segment, facing adversity in delayed receivables, poor business terms, lack of reserves, and avenues of financing and mounting costs. Building upon learning from the past, governments across the globe have taken proactive measures to support the SME sector. The measures varied, including credit guarantee support, direct lending, tax relief, employment support, direct transfers, etc. Figure 14 presents measures taken in Asia and the Pacific to support the SME sector.

Figure 14: Measures to Support Small and Medium-Sized Enterprises

Sources: Economic and Social Commission for Asia and the Pacific based on information available up to 31 May 2020 from International Monetary Fund Policy Responses to coronavirus disease (COVID-19); International Labour Organization COVID-19 Country Policy Responses; Organisation for Economic Co-operation and Development Country Policy Tracker; United Nations Educational, Scientific and Cultural Organization COVID-19 Impact on Education; Oxford COVID-19 Government Response Tracker; and various national sources and news.

Credit Guarantee Scheme Response to COVID-19 Crisis in Asia and the Pacific

As evidenced by Figure 14, loan support is the most used tool. Building upon the discussion, guarantee schemes are most agile to deploy and are one of the least market-distorting mechanisms. Economies across Asia and the Pacific have swiftly rolled out credit guarantee schemes to support SMEs. Response included prompt disbursal (pre-approved loans), concessional interest rates, loan moratoriums, waiver of guarantee fees, increased coverage in percentage and amount, and inclusion of sectors (Table 19).

Table 19: Summary of Guarantee Measures Adopted in Selected Asia and Pacific Economies for COVID-19

Economy	Amount ($ million)	Guarantee Measures Adopted
Azerbaijan	294	Entrepreneurs get state guarantee for 60% of their new bank loans and the government subsidizes half of the interest on guaranteed loans from the state budget; overall, the state support is 500 million Azerbaijan manats (about $294 million).
Cambodia	200	The Ministry of Economy and Finance will establish a “credit guarantee fund” of $200 million. This fund may guarantee loans through banks and financial institutions using the market policy to assuage the pressure of cash flow and working capital of businesses in all sectors.
People’s Republic of China	No amou...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Tables, Figures, and Boxes
• Acknowledgments
• Abbreviations
• Executive Summary
• I. Introduction
• II. Contours of Small and Medium-Sized Enterprise Financing
• III. Economic Critique of Barriers of Access to Finance
• IV. Small and Medium-Sized Enterprise Financing and Challenges in Asia and Pacific Countries
• V. Limited Presence of Nonbanking Avenues of Finance
• VI. Challenges Faced due to Gaps in Credit Infrastructure
• VII. Specialized Institutions
• VIII. Role of Credit Guarantee Schemes
• IX. ADB Support for SME Financing
• X. Credit Guarantee Schemes—Examination and Country Case Studies
• XI. Credit Guarantee Scheme Effects on Small and Medium-Sized Enterprises
• XII. The Role of Credit Guarantee Schemes in Past Crises
• XIII. Credit Guarantee Scheme Response to the COVID-19 Crisis
• XIV. Lessons and Outlook
• XV. Conclusion and Recommendations
• Appendix
• References
• Footnotes
• Back Cover