Evaluating Credit Guarantee Programs in Developing Countries

Publication Date: Jul 1996
Published by: OSU Rural Finance Program
Document Type: Paper

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What are the methodological issues in undertaking an evaluation?

This paper discuss the key issues involved in evaluating credit guarantee programs. It reviews the results of evaluations that have been conducted of guarantees for agricultural and small enterprise lending in developing countries

The paper conclude that:

• There is surprisingly little quantitative information to clearly support the use of guarantee schemes to stimulate lending;
• Many studies of credit guarantees suffer from the same methodological weaknesses found in impact analysis of credit programs;
• Attributing additionality to guarantee programs is difficult to ascertain with simple research designs, but more robust methodologies are costly, and require a great deal of data and talent to complete;
• Evaluating the revenues, costs and losses of guarantee funds is necessary to determine implicit subsidies and future viability;
• More attention is needed to evaluate the impact of guarantee schemes on lender behavior and the overall operation of financial markets, and less effort should be put into the difficult task of assessing impact on borrowers;
• Resources should be concentrated on a few comprehensive evaluations of borrowers and lenders to learn if some of the fundamental assumptions about the impact of guarantees are correct.