World Bank holding consultation on public sector guarantee for SME funding
Summary
The consultative process, which began on July 1, is on-going, and will conclude on August 31.
The World Bank Group and FIRST Initiative are inviting stakeholders -- governments, credit guarantee schemes (CGSs) and lenders -- to provide input on how to improve access to finance for SMEs through an effective design, implementation and evaluation of public CGSs.
The consultative process, which began on July 1, is on-going, and will conclude on August 31.
The World Bank Group and FIRST Initiative convened and provide secretariat support to a Task Force for the Design, Implementation and Evaluation of Public Credit Guarantee Schemes for Small and Medium Enterprises, which represents international associations of both CGSs and lenders.
The Task Force invites comments from the public for the review of the consultative document: “Principles for Public Credit Guarantee Schemes for SMEs.” All comments will be published on the website of the World Bank except where anonymity is preferred by commenters.
Credit markets for small and medium enterprises (SMEs) are characterized by market failures and imperfections, which provide a rationale for government intervention. Credit guarantee schemes (CGSs) are a common form of intervention. A CGS provides third-party credit risk mitigation to lenders by absorbing a portion of the losses on the loans made to SMEs in case of default, in return for a fee.
The World Bank says public CGSs can be an effective form of government intervention in credit markets to improve access to finance for SMEs. However, CGSs need to be designed and implemented in a financially sustainable manner.
The consultative document, which is provided for download at the bottom of the page, outlines a set of good practices, which can represent a global reference for the design, execution and evaluation of public credit guarantee schemes (CGSs) for SMEs.
The Task Force has identified a set of key principles for the success of public CGSs, which cover the following areas: legal and regulatory framework, corporate governance and risk management, operational framework, and monitoring and evaluation.
Download the consultative document cgss_principles-consultative_document-final.
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