Credit guarantee schemes for developing countries : theory, design and evaluation

This study reviews what literature does exist on guarantee schemes in that region, complementing it with data on schemes in Asia and Latin America. The analysis focuses on programs implemented by external or third parties in an effort to increase lending to agriculture and the small-, medium-, and microenterprise (SME) subsectors. Section 2 develops a conceptual framework that outlines the objectives of credit guarantees, classifies their design, and discusses issues in evaluating guarantee programs. Section 3 presents an inventory and synthesis of African guarantee programs. The USAID Loan Portfolio Guarantee Program is described first, followed by guarantee schemes in 16 African countries. Section 4 describes selected credit guarantee programs from the Philippines and Latin America. The latter include ACCION International, FUNDES Guarantee Program, the Mexican Government"s Guarantee Program (FEGA), and Women"s World Banking (WWB). Implications for sub-Saharan Africa are drawn from these examples. Section 5 summarizes the report, and reviews unresolved issues, including the role of interest rates, the objectives of guarantees, employment generation, designing cost-efficient methods for evaluation, and the inherent limits of guarantees in strengthening financial markets. Includes references.