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

Author

Listed:
  • Roohollah Aboojafari

    (Asian Development Bank Institute)

  • Alireza Daliri

    (Asian Development Bank Institute)

  • Farhad Taghizadeh-Hesary

    (Asian Development Bank Institute)

  • Mohammad Mokhtari

    (Asian Development Bank Institute)

  • Mohsen Ekhtiari

    (Asian Development Bank Institute)

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.

Suggested Citation

  • Roohollah Aboojafari & Alireza Daliri & Farhad Taghizadeh-Hesary & Mohammad Mokhtari & Mohsen Ekhtiari, 2019. "The Role of Credit Guarantee Schemes in the Development of Small and Medium-Sized Enterprises with an Emphasis on Knowledge-Based Enterprises," ADBI Working Papers 930, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0930
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    References listed on IDEAS

    as
    1. Satoshi Kuwahara & Naoyuki Yoshino & Megumi Sagara & Farhad Taghizadeh-Hesary, 2015. "Role of the Credit Risk Database in Developing SMEs in Japan: Lessons for the Rest of Asia," ADBI Working Papers 547, Asian Development Bank Institute.
    2. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "Optimal Credit Guarantee Ratio for Asia," ADBI Working Papers 586, Asian Development Bank Institute.
    3. Beck, T.H.L., 2007. "Financing constraints of SMEs in developing countries : Evidence, determinants and solutions," Other publications TiSEM 85aac075-08b5-44ce-bf1a-9, Tilburg University, School of Economics and Management.
    4. Baghdadi , Pouya & Akbari , Ahmad & Hassanzadeh , Ali & Zekavat , Seyed Morteza & Taghizadeh-Hesary , Farhad, 2014. "Impact of Basel II Capital Accord on Small and Medium Size Enterprises (SME): An Empirical Study on a Group of Export Oriented SMEs," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 9(1), pages 117-146, October.
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    Cited by:

    1. Calice,Pietro & Reinders,Jan, 2022. "An Exploration of Climate-Related Financial Risks for Credit Guarantee Schemes in Europe," Policy Research Working Paper Series 10232, The World Bank.
    2. Bambe, Bao-We-Wal, 2025. "Can guarantees effectively leverage financing for SMEs in low- and middle-income countries?," IDOS Policy Briefs 3/2025, German Institute of Development and Sustainability (IDOS), Bonn.

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    More about this item

    Keywords

    small and medium-sized enterprises (SMEs); knowledge-based enterprises; credit guarantee scheme (CGS;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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