Optimal credit guarantee ratio for small and medium-sized enterprises’ financing: Evidence from Asia

Naoyuki Yoshino, Farhad Taghi Zadeh Hesary*


    研究成果: Article査読

    60 被引用数 (Scopus)


    Difficulty in accessing finance is one of the critical factors constraining the development of small and medium-sized enterprises (SMEs). Given their importance for national economies, it is imperative to find ways to provide SMEs with stable finance. One efficient way to promote SME financing is through credit guarantee schemes, by which the government guarantees a portion (ratio) of a loan provided by a bank to a SME. Due to asymmetry of information between banks and SMEs, total loans to SMEs are smaller than the desired level of SME loan demand. Therefore, providing credit guarantees reduces information asymmetry between SME and banks, which increases the amount of loans to SMEs. The ultimate goal of the government is to provide a desired level of loans to SMEs by reducing information asymmetry. This research provides a theoretical model and an empirical analysis of factors that determine an optimal credit guarantee ratio. The ratio should be at such a level that it achieves the government's goal of minimizing banks’ nonperforming loans to SMEs, and at the same realize the government policy objective of supporting SMEs by reducing information asymmetry. Our results show that three factors determine the optimal credit guarantee ratio: (i) government policy, (ii) macroeconomic conditions, and (iii) the behavior of banks. To avoid moral hazard and ensure the stability of lending to SMEs, it is crucial for governments to set the optimal credit guarantee ratio based on macroeconomic conditions and vary it for each bank or each group of banks based on their soundness.

    ジャーナルEconomic Analysis and Policy
    出版ステータスAccepted/In press - 2018 1月 1

    ASJC Scopus subject areas

    • 経済学、計量経済学
    • 経済学、計量経済学および金融学(その他)


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