Public Credit Guarantees and SME Finance

55 Pages Posted: 26 Nov 2006

See all articles by Salvatore Zecchini

Salvatore Zecchini

University of Tor Vergata

Marco Ventura

Istituto di Studi e Analisi Economica (ISAE)

Date Written: October 2006


Difficulties in finding appropriate financing weigh heavily on the ability to grow of Italy's small enterprises, due to their narrow equity base and limited access to credit markets. The State Fund for guarantees to SMEs is one of the instruments used to overcome such difficulties. This essay provides the first evaluation of the impact of this Fund in terms of ability to increase the availability of credit, reduction of borrowing costs and financial sustainability. Extensive econometric tests have been carried out by comparing the performance of the SMEs that benefited from this guarantee with a control group made out of a sample of comparable firms. The findings confirm the presence of a causal relationship between the State guarantee and the higher debt leverage of guaranteed firms, as well as their lower debt cost. The guarantee instrument has proved to be an effective instrument, although it has had a limited economic impact because of its narrow capital base and selective approach.

Keywords: SME, State-fund guarantee, credit rationing, causal effect

JEL Classification: G14, G21, G28

Suggested Citation

Zecchini, Salvatore and Ventura, Marco, Public Credit Guarantees and SME Finance (October 2006). ISAE Working Paper No. 73, Available at SSRN: or

Salvatore Zecchini

University of Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133

Marco Ventura (Contact Author)

Istituto di Studi e Analisi Economica (ISAE) ( email )

Piazza dell' Indipendenza 4

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