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Mutual Guarantee Schemes

Calabrese, Elide
(2023)

Files

Calabrese_0248220_2023.pdf
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  • 1.98 MB

Details

Supervisors
Maniquet, François
Faculty
Faculté des sciences économiques, sociales, politiques et de communication
Degree label
Master [120] en sciences économiques, orientation générale, à finalité approfondie
Abstract
In a setting of asymmetric information in the credit market, viable small and medium-sized enterprises (SMEs) are often missing out on credit programs due to their inability to offer adequate collateral. The focus of this paper is on the provision of a theory to rationalize the existence of a particular form of lending technology based on a principle of mutuality among a group of borrowers linked by a joint responsibility. The study reveals that the adoption of a Mutual Guarantee Scheme (MGS) proves advantageous for prospective entrepreneurs under specific conditions: i) when their initial wealth is constrained, and ii) when the financing acquired through MGS notably exceeds what could be obtained without it. Thus, such private guarantee schemes may alleviate the under-investment issue without resorting to public funds or independent third guarantors.