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The Impact of German guarantee banks on the access to finance for SMEs

Valentin, Anke


Anke Valentin


German guarantee banks provide guarantees for small and medium-sized enterprises (SMEs) that apply for bank loans but cannot provide their own valuable collateral; this lack of collateral would normally lead to credit restrictions. Consequently, the central aim of guarantee banks is to enable SMEs to be eligible for loans. In Germany, the state provides counter-guarantees in the range of 65-80 per cent of the guarantee bank’s guarantee. To justify the governmental intervention and the risk-taking of the state, guarantee banks need to be evaluated regularly. The literature review has revealed that additional research about German guarantee banks is needed. Some interesting literature exists about the ability of guarantee schemes to alter the lending behaviour of banks and reduce information asymmetries between the lenders and the borrowers. However, the literature review has demonstrated that these mechanisms have not yet been tested empirically. The present research provided a unique research approach for bridging this gap. Following the conceptual literature, the research aim was to test the ability of German guarantee banks to compensate collateral shortfalls and make available loans to SMEs, reduce information asymmetries, create lending relationships and mitigate credit restrictions immediately as well as in a sustainable way. This was done by carrying out a web survey with firms that have received a guarantee from guarantee bank Hesse as well as conducting semi-structured research interviews with bank managers. The results have demonstrated that the provision of a guarantee from a guarantee bank provides the missing collateral to banks and makes available loans to otherwise credit restricted SMEs. Evidence has been found for a reduction of information asymmetries and a creation of lending relationships between the borrower and the lending bank. Moreover, connections between an application for a guarantee and the support of the region and cross-selling aspects of commercial banks have been revealed.

Thesis Type Thesis
Deposit Date Feb 13, 2015
Peer Reviewed Not Peer Reviewed
Keywords German banking; SME's; guarantee banks; lending behaviour;
Public URL
Contract Date Feb 13, 2015
Award Date 2014-09


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