Application of the Best International Experience when Developing a Credit Guarantee System for Small and Medium Agricultural Enterprises of Ukraine

Keywords: lending, small and medium-sized agricultural enterprises, guarantee funds, banks, credit guarantee systems, financing

Abstract

The focus of the article is the study of the best international experience in developing the structure and implementation of a loan guarantee system to reduce and distribute risks in financing small and medium-sized agricultural enterprises. Access to finance was identified as the main problem hindering the development of small and medium-sized agricultural enterprises. It has been substantiated that due to its competitive advantages, such as a large area of arable land, low production costs and the possibility of increasing the added value of products, the agricultural sector is a priority sector of the economy. The main obstacles and problems that hinder access to financing and the development of national small and medium agribusiness are identified. It has been substantiated that credit security programs play an important role in reducing restrictions on bank lending to small and medium-sized agricultural enterprises. The basic principles of the implementation of guarantee programs carried out with state participation are given. It has been proven that credit guarantees are one of the tools widely used to support the agricultural sector of the economy. In this case, the most expedient is the issuance of guarantees that provide a partial volume of lending, when the borrowers also bear some responsibility for the return of the funds received. Based on the consideration of international experience, it is concluded that loan guarantee systems are an effective tool that can alleviate the difficulties of entering the credit market for small and medium-sized agricultural enterprises. Key policy directions are proposed that allow correcting the situation with obtaining financing for small and medium-sized agricultural enterprises. The mechanism has been developed to provide state credit guarantees to small agricultural producers. The most effective implementation of the proposed mechanism can be achieved by building a national loan guarantee system with the formation of special institutions specializing in providing investment and innovation projects. The theoretical provisions formulated in the article can serve for further developments in the field of small business support by financial and credit institutions.

References

Vprovadzhennia skhem harantuvannia kredytu v Ukraini: pryklad ahrobiznesu — stratehiia sektornoi konkurentospromozhnosti dlia Ukrainy: Faza II, Lystopad 2012. (N.d.) Retrieved from Organisation for Economic Co-operation and Development: https://bit.ly/3iJDPMP.

Nitani, M. (Miwako), & Riding, A. L. (2005). Promoting Enterprise Development or Subsidizing Tradition? The Japan Credit Supplementation System. International Small Business Journal, 23 (1), 48–71. https://doi.org/10.1177/0266242605048870.

Lien-Wen, Lianga, Bor-Yi, Huangb, Chih-Feng, Liaob, Yu-Ting, Gaob. (2017). The Impact of SMEs Lending and Credit Guarantee on Bank Efficiency in South Korea. Review of Development Finance, 7 (2), 134–141. https://doi.org/10.1016/j.rdf.2017.04.003.

Riding, A., Madill, J. & Haines, G. (2007). Incrementality of SME Loan Guarantees. Small Business Economics, 29, 47–61 https://doi.org/10.1007/s11187-005-4411-4.

Leone, P., Panetta, I. C., Porretta, P. (2013). Credit Guarantee Institutions, Performance and Risk Analysis: An Experimental Scoring. Bank Stability, Sovereign Debt and Derivatives. Palgrave Macmillan Studies in Banking and Financial Institutions / J. Falzon (ed.) (pp. 115–160). London, Palgrave Macmillan. https://doi.org/10.1057/9781137332158_6.

Saito, K., Tsuruta, D. (2018). Information Asymmetry in Small and Medium Enterprise Credit Guarantee Schemes: Evidence from Japan. Applied Economics, 50 (3), 1–17. https://doi.org/10.1080/00036846.2017.1400651.

Beck, T., Klapper, L. F., Mendoza, J. C. (2010). The Typology of Partial Credit Guarantee Funds Around the World, Journal of Financial Stability, 6 (1), 10–25. https://doi.org/10.1016/j.jfs.2008.12.003.

Gropp, R., Gruendl, C., Guettler, A. (2013). The Impact of Public Guarantees on Bank Risk-Taking: Evidence from a Natural Experiment. Review of Finance, 18 (2), 457–488. https://doi.org/10.1093/rof/rft014.

Balog, A. (2018). Analysis of SME Segment Lending Processes in Light of Credit Guarantees in the European Union, Financial and Economic Review, 17 (1), 62–82. https://doi.org/10.25201/FER.17.1.6282.

Caselli, S., Corbetta, G., Rossolini, M., Vecchi, V. (2019). Public Credit Guarantee Schemes and SMEs Profitability: Evidence from Italy. Journal of Small Business Management, 57, 555–578. https://doi.org/10.1111/jsbm.12509.

Zubkova, S. V., Doroganova, O. G. (2015) Primenenie garantijnogo mehanizma podderzhki malogo i srednego biznesa. Bankovskoe delo, 3, 60–64.

Kiseleva, O. V., Karcev, S. V. (2016) Ispolzovanie finansovo-kreditnogo mehanizma dlya aktivizacii malogo biznesa i predprinimatelstva v Rossii. Naukoved, 8 (1). Retrieved from: https://bit.ly/3BDnNwL.

Riding, A. L., Haines, G. Jr. (2001). Loan Guarantees: Costs of Default and Benefits to Small Firms. Journal of Business Venturing, 16 (6), 595–612. https://doi.org/10.1016/s0883-9026(00)00050-1.

Koriakin, I., Kirkhner, R. (2016) Zasnuvannia fondu kredytnykh harantii dlia MSB v Ukraini: Analiz ta rekomendatsii. Berlin/Kyiv. Retrieved from German Advisory Group: https://bit.ly/3eP85F5.

Kirhner, R, Koryakin, I. Kreditno-garantijnaya shema dlya MSB v Belarusi: obzor i rekomendacii. Nemeckaya ekonomicheskaya gruppa Belarus. Issledovatelskij centr IPM. Analiticheskaya zapiska [PP/05/2016]. Berlin/Minsk, Iyul 2016. Retrieved from German Economic Team: https://bit.ly/3wYk2hS.

Pro Fond chastkovoho harantuvannia kredytiv v silskomu hospodarstvi. Porivnialna tablytsia do proiektu Zakonu Ukrainy Reiestratsiinyi № 3205–2. (N.d.) Retrieved from Verkhovna Rada Ukrainy. Elektronnyi kabinet hromadianyna: https://bit.ly/371LY9W.

Published
2021-04-02
Section
Finance, banking and insurance