Public Credit Guarantees and Access to Finance

Public credit guarantee schemes have gained popularity as a tool to try to increase access to credit for firms perceived to be financially constrained, typically small and medium-sized enterprises. This paper discusses the potential relevance of these schemes by providing a brief overview of their use around the world and reviewing some important design features. The paper also presents a brief conceptual discussion of the role of public credit guarantees in increasing access to credit and the rationale for government intervention. Public credit guarantee schemes can constitute useful mechanisms for increasing access to finance for certain groups of borrowers, but their success and financial sustainability hinge on proper design. Moreover, rigorous evidence on the impact of these schemes is still scarce. More in-depth evaluations that jointly take into account financial sustainability and (financial and economic) additionality are needed, as well as an assessment of credit guarantees against alternative policy instruments