Credit Guarantees: An Assessment of the State of Knowledge and New Avenues of Research

Can innovative approaches solve the debate about credit guarantees?

This book attempts to address the main issues with guarantee funds and the advantages and disadvantages of traditional guarantee systems. It explores the ongoing debate about credit guarantees, looking at the rationale for credit guarantees and arguments against guarantee funds. The book:

  • Studies contemporary credit guarantee practice;
  • Asks whether U.S. commercial guarantee companies are a model for development finance, and examines case studies of home mortgage guarantee insurers' and bond insurers;
  • Examines the relationship between private mortgage and bond guarantee insurers, and development finance;
  • Suggests new approaches to guarantees, and makes a proposal for a field trial of financial guarantees for small- and micro-enterprises and micro-lenders.

The book concludes that:

  • Guarantees require economies of scale and deep, large and liquid credit markets;
  • Capital requirements to establish efficient guarantee companies are too large to be met by a single developing country;
  • Sustaining growth and profitability requires expansion of markets and products as well as continuing process innovation.