The Economic Impact of Credit Guarantees in Jordan
International Journal of Business and Economics Research
Volume 9, Issue 5, October 2020, Pages: 298-307
Received: Jul. 30, 2020; Accepted: Aug. 13, 2020; Published: Aug. 25, 2020
Views 49      Downloads 39
Authors
Reham Abu-baker, Department of Business Economics, School of Business, University of Jordan, Amman, Jordan
Mohammad Adeinat, Department of Business Economics, School of Business, University of Jordan, Amman, Jordan
Article Tools
Follow on us
Abstract
Credit guarantee schemes have become a popular instrument to increase access to credit for financially constrained firms, typically small and medium-sized enterprises (SMEs). This government intervention of using credit guarantees as techniques for increasing access to finance for certain borrowers is argued to be useful, but their success and sustainability depend on many factors. Since 1994, the Jordan loan guarantee corporation through its several programs aims to support SMEs and enable them to have access to finance at a reasonable cost. This paper provides an evaluation analysis and impact assessment of credit guarantee system in Jordan by focusing on the Jordanian loan guarantee corporation (JLGC) performance. It found a positive impact on the Jordanian economy, but more emphasis on the guarantee system is needed with cooperation between all parties of the banking system, Central bank, and JLGC to achieve policy goals. Also it examines the government's recent initiative in the National Program for Finance and Loan Guarantee to encounter Corona crisis and found that it enhances the positive impact on the economy. In addition, more deep assessments that consider financial sustainability and economic additionally will be fruitful, as well as an assessment of credit guarantees against alternative policy instruments.
Keywords
SMEs, Credit Guarantees, Public Guarantees, SME Financing, Access to Finance, JLGC
To cite this article
Reham Abu-baker, Mohammad Adeinat, The Economic Impact of Credit Guarantees in Jordan, International Journal of Business and Economics Research. Vol. 9, No. 5, 2020, pp. 298-307. doi: 10.11648/j.ijber.20200905.11
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Chowdhury, S. R., 2011. “Impact of the global crisis on small and medium enterprises. Global Business Review, 12 (3), 377-399.
[2]
Levine, R. 2005. “Finance and growth: Theory and evidence. In Handbook of economic growth, (Eds), P. Aghion & S. Durlauf, Amsterdam: North-Holland Elsevier Publishers.
[3]
Narteh, B., 2013. “SME bank selection and patronage behaviour in the Ghanaian banking industry. Management Research Review, 36 (11), 1061-1080.
[4]
OECD (2014a). “Financing SMEs and Entrepreneurs: An OECD Scoreboard, OECD Publishing, Paris.
[5]
Beck, T., A. Demirgüç-Kunt, and P. Honohan, 2008. “Finance for All? Policies and Pitfalls in Expanding Access”. World Bank, Washington, DC.
[6]
Chavis, L., Klapper, L. and Love, I. 2010. “The Impact of the Business Environment on Young firm financing”. Policy research working paper. The World Bank.
[7]
Basley, J., 1994. “Marketing tactics of selected small firms in East London CBD area” South Africa University.
[8]
OECD, 2013. “SME and Entrepreneurship Financing: The Role of Credit Guarantee Schemes and Mutual Guarantee Societies in Supporting Finance for Small and Medium-sized Enterprises”. OECD, Paris.
[9]
Zecchini, Salvatore and Ventura, Marco 2009. “The Impact of Public Guarantees on Credit to SMEs”. Small Business Economics, Vol. 32, No. 2, pp. 191-206.
[10]
Mendizabal, A., Zubia, M., Lertxundi, A. 2013. “Degree of guarantee rationing and banking relationship of Spanish SME”. Procedia Social and Behavioral Sciences 109 (2014) 753-757 http://dx.doi.org/10.1016/j.sbspro.2013.12.539
[11]
Levitzky, J., Ranga, N. P., 1989. “Credit Guarantee Schemes for Small and Medium Enterprises”. World Bank technical paper number 58.
[12]
Levitzky, J., 1997. “Best Practice in Credit Guarantee Schemes”. The Financier-Analyses of Capital and Money Market Transaction 4, 86-94.
[13]
Beck, T., 2010. “SME Finance: What Have We Learned and What Do We Need to Learn?” The Financial Development Report: 187-195.
[14]
Roodman, D., & Qureshi, U. (2006): “Microfinance as a business”. Center for Global Development.
[15]
Beck, T., L. F. Klapper, and J. C. Mendoza. 2010. “The Typology of Partial Credit Guarantee Funds around the World”. Journal of Financial Stability 6, 10-25.
[16]
Kang, J., & Heshmati, A., 2008. “Effect of credit guarantee policy on survival and performance of SMEs in the Republic of Korea”. Small Business Economics, 31 (4), 445-462. http://dx.doi.org/10.1007/s11187-007-9049-y
[17]
Janda, K., MichalikovaI, E., Skuhrovec, J. 2012 “Credit Support for Export: Econometric Evidence from the Czech Republic” IES Working Paper 12/2012. IES FSV. Charles University. http://dx.doi.org/10.2139/ssrn.2061868
[18]
Riding, A. L., & Haines. (2001): Loan guarantees: costs of default and benefits to small firms. Journal of Business Venturing, 16 (6), 595-612.
[19]
Lawrence Oparinde, Taiwo Amos, Michael Adeseluka. 2017, “Influence of agricultural credit guarantee scheme fund (ACGSF) in fishery development in Nigeria” Scientific Papers Series Management, Economic Engineering in Agriculture and Rural Development, Vol. 17 Issue 1.
[20]
Akerele Dare, Ashaolu Olumuyiwa, Sanusi Rahman and Egbetade Adedolapo, 2017, “Analysis of partial effects of agricultural credit guarantee scheme fund outputs in Nigeria’s agricultural subsectors”. Sarhad journal of Agriculture, vol 33, No. 4: 630-638.
[21]
Pombo P., Herrero A. 2003, “Los Sistemas de Garantia para la Micro y la Pyme en una Economia Globalizada, Cyberlibro.
[22]
Carlos Gozzi, & Schmukler, Sergio, 2016. "Public Credit Guarantees and Access to Finance," The Warwick Economics Research Paper Series (TWERPS) 1122, University of Warwick, Department of Economics.
[23]
OECD (2017), "Evaluating Publicly Supported Credit Guarantee Programmes for SMEs", www.oecd.org/finance/Evaluating-Publicly-Supported-Credit-Guarantee-Programmes-for-SMEs.pdf
[24]
Shim, I. 2006. “Corporate credit guarantees in Asia.” BIS Quarterly Review, 1-14 Stephens, M., 1999. The Changing Role of Export Credit Agencies. International Monetary Fund, Washington, DC.
[25]
Dang T. Binhi, 2015. The economic impact of credit Guarantee system-Hungarian case study, Club if economics in Miskolc, Vol. 11 pp 11-24.
[26]
Abushanab, S., 2015. Small and medium enterprises role in solving the poverty problem and unemployment. DSpace at Al al-Bayt University.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186