The Role of Credit Guarantee Schemes in the Development of Small and Medium-Sized Enterprises with an Emphasis on Knowledge-Based Enterprises

31 Pages Posted: 19 Apr 2019

Date Written: March 13, 2019

Abstract

Small and medium-sized enterprises (SMEs) in their growth stage reach the point where, on the one hand, personal resources do not meet their needs, and, on the other, they do not have enough collateral to attract external finance. Access to finance can be facilitated by obtaining loans from financial institutions backed by governmental credit guarantees. Therefore, the development of a sound credit guarantee scheme will be an important step in filling the financing gap of SMEs.

We investigate the situation of the credit guarantee scheme for SMEs in Iran by using the available data and interviews with activists from this field with the grounded theory method. We show the weaknesses of the Iranian credit guarantee scheme, and based on the analysis, present solutions and policy recommendations in accordance with the social and economic environment of the Islamic Republic of Iran. The most important problem is the lack of a credit database for comprehensive assessment of SMEs, especially knowledge-based enterprises. The lack of a robust database makes it impossible to carry out a comprehensive evaluation because these models require a large amount of data. The lack of accurate models makes it difficult to rate credit status and thus to issue credit guarantees. In addition, the current level of the capital of the credit guarantee funds in Iran is not sufficient given the large number of SMEs in the country.

Keywords: small and medium-sized enterprises (SMEs), knowledge-based enterprises, credit guarantee scheme (CGS), comprehensive credit evaluation

JEL Classification: G32, H81, C52, O1

Suggested Citation

Taghizadeh-Hesary, Farhad, The Role of Credit Guarantee Schemes in the Development of Small and Medium-Sized Enterprises with an Emphasis on Knowledge-Based Enterprises (March 13, 2019). ADBI Working Paper 930, Available at SSRN: https://ssrn.com/abstract=3374795 or http://dx.doi.org/10.2139/ssrn.3374795

Farhad Taghizadeh-Hesary (Contact Author)

Tokai University ( email )

3-20-1 Orido
Shimizu-ku
Shizuoka, 424-8610
Japan

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

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