Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises

Cardone‐Riportella, Clara; Trujillo‐Ponce, Antonio; Briozzo, Anahí Eugenia

doi:10.1080/17487870.2013.801317

Cited by 16 publications

(11 citation statements)

References 35 publications

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“…Furthermore, the Spanish system of public support to MGSs is based mainly on counter-guarantees granted by CERSA (Compañía Española de Reafianzamiento, S.A.), an instrumental company of the central government that receives significant support from EU programs. The coverage rate (up to 80%) depends on policy priorities, such as innovation promotion, and types of operations, such as investments or working capital needs [38]. The public counter-guarantee considerably reduces the risk that the bank assumes with the loan guaranteed by the MGS, which should translate into improved credit conditions for the SME.…”

Section: The Spanish Guarantee Systemmentioning

confidence: 99%

“…improve the solvency of the MGS by providing nonreimbursable funds to society (either through capital or the TPF). Banks appreciate MGS activity because they obtain a qualified, up to 100%, guarantee of the loan that allows them to avoid provisions and reduce capital requirements [ 38 ]. Moreover, as is pointed out in the “EU credit guarantee schemes” section, because the cost of default is eliminated (transferred to the MGS), risk analysis and monitoring costs are consequently reduced.…”

Section: The Spanish Guarantee Systemmentioning

confidence: 99%

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Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain

2021

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Countries around the world are working hard to fight against the economic crisis caused by the coronavirus pandemic, with a special emphasis on small-and medium-sized enterprises (SMEs) due to their vulnerability and importance in the business ecosystem. This paper analyzes the Spanish guarantee model and the measures taken by regional governments in conjunction with the main mutual guarantee societies (MGSs) to mitigate the economic problems associated with the COVID-19 pandemic. We show that public administrations may use guarantee schemes as instruments to improve SME access to financing while limiting the burden on the public budget.

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Section: The Spanish Guarantee Systemmentioning

confidence: 99%

Section: The Spanish Guarantee Systemmentioning

confidence: 99%

Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain

2021

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“…Reference [36] analysed the impact of the financial constraints on SMEs considering UniCredit loans and they identified the very important support of MGIs beyond just guarantees. Reference [42] analysed some regional differences in the impact of guaranteed credit supported by MGIs in 6157 firms. Default credit behaviour in Small Family Business Start-ups with MGI guarantees have not been studied in depth; however, good knowledge about this problem could be key to improving access to credit for these companies to ensure financial sustainability and intergenerational transition.…”

Section: Background and Hypothesismentioning

confidence: 99%

“…MGIs contribute to making access to credit for Small Family Business easier in two ways: (i) reducing the credit risk provision and default for the financial institution, and (ii) decreasing the bank capital requirements in the loans granted by the MGIs. Both reduce the banking costs related to loans, so financing for SMEs therefore experiences improvement [41][42][43].…”

Section: Introductionmentioning

confidence: 99%

The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses

et al. 2019

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Small family-owned companies are the most common type of European business structure and are characterised by their orientation to long-term goals. Therefore, they can play an important role in the launching of businesses related to sustainable growth. However, access to finance is difficult for start-ups. Mutual Guarantee Institutions (MGIs) mitigate this problem by facilitating long-term guaranteed loans, but they must assume responsibility for default losses. This paper analyses, as of the end of 2018, the loan default of the portfolio of guarantees formalised by Spanish MGIs with new companies between 2003 and 2012, a period including both economic growth and recession. The objective is to identify the annual evolution and the average global cost of default, as well as the differences in said portfolios according to the purpose of the loan, company size and economic activity. The analysis was developed while considering two scenarios: one determinist, using a ratio method and another stochastic, using an analysis of variance. We found differences in the distribution of defaults for the variables company size and sector of activity. The findings provide relevant information for managers and Public Administrations to improve the distribution of guarantees between Spanish MGIs and public institutions, and their coverage of Small and Medium Enterprise (SME) loan defaults.

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“…Moreover, new guarantee programmes have been introduced to indirectly stimulate growth and job creation (Holton et al, 2013). Several authors Cardone-Riportella et al, 2013;Gai et al, 2010;Gai and Ielasi, 2014) report that banks consider PCGSs the most common and effective government support programmes for SME lending, ahead of directed credit and interest rates or subsidised loans. Our research aims to assess the level of financial sustainability of public intervention in relation to the potential risk of losses of public funds.…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

Public Credit Guarantee Schemes in Supporting SMEs: An Evaluation of Effectiveness and Impacts

Arcuri¹,

Gai²,

Ielasi³

2019

IJBM

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Public credit guarantee schemes are set up with the purpose of facilitating access to credit by Small and Medium-sized Enterprises (SMEs). The aim of the paper is to study the effectiveness and impacts of the Italian Central Guarantee Fund (CGF)’s activity, one of the main public guarantee schemes in Europe. This is even more important in the light of the 2018 CGF reform. Analyzing a sample which includes all the guarantees issued by the CGF from 2012 to 2018 on loans made to manufacturing companies, we find that the CGF methodology is partially able to capture the variables affecting the probability of default of SMEs. The CGF scores before the reform show poor capability to forecast risk in the medium term, above all for micro and small enterprises. The post-reform model shows better forecasting ability and a greater consistency with the Z’’-score, one of the most recognized model in the distress prediction literature. The new CGF model may indirectly control the behaviour of lenders and first-level guarantors. In particular, our findings show that the probability of default on exposures covered by a mutual guarantee institution and counter-guaranteed by the CGF is lower than the probability of default of loans granted by a bank and directly guaranteed by the CGF. As a consequence, the direct guarantees need to be more monitored by the CGF and potential effects on the bank behaviour may derive, strengthening ECB’s supervision activities.

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Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises

Cited by 16 publications

References 35 publications

Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain

Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain

The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses

Public Credit Guarantee Schemes in Supporting SMEs: An Evaluation of Effectiveness and Impacts

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