engleski

Credit Guarantees as a Method of Starting Investments in the SME Sector

Access to credits is difficult for small and medium sized enterprises (further on: SMEs) that do not have sufficient capital or other collateral. When entrepreneurs seek funding for their long-term investments, creditors are faced with asymmetric information, high risk of non-payment for such credits and high average transaction costs. Due to these reasons, creditors often refuse requests for credit or lend under unfavorable conditions, which brings about negative selection and moral hazard. In such circumstances, SMEs must provide proof of other collateral. Since SMEs often do not have the additional collateral and have a small capital base, one possible solution to this problem is using credit guarantees that enable access to capital. This paper tries to investigate the effectiveness of a credit guarantee as an instrument of state intervention in terms of supporting the growth and development of the SME sector. The analysis has shown that the companies that have used guarantees in the period from 2007 to 2012 achieved higher debt indicators in terms of increased access to external sources of financing, as well as higher profitability indicators in relation to companies that have not used guarantees, even though they could accordingly to their status. The analysis has shown that the credit guarantees had been used to obtain bank credits by which investments in fixed assets were financed. That proves the effectiveness of the guarantee system in the Croatia, but also discerns certain deficiencies that economic policy makers should consider.

Access to credit, credit guarantee, small and medium enterprises (SMEs)

nije evidentirano