This article analyzes how a credit guarantee confers private benefits to creditors and proposes reform policies and related assessment measures in order to make credit guarantee a socially beneficial intermediation instrument. Analysis indicates that the necessary and sufficient conditions for credit guarantee to have positive economic value to creditors include sufficiency of collateral and creditor’s risk aversion. Findings also suggest that guarantee programs have a limited reach, implying a need for continuing subsidies.
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- Llanto, Gilberto M., Ma. Piedad S. Geron, and Jocelyn Alma R. Badiola. 2016. Comprehensive study on credit programs to smallholders. Discussion Papers DP 2016-48. Philippine Institute for Development Studies.