International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Role of Loan Guarantees in Alleviating Credit Constraints: Lessons for Smallholder Farmers Cooperatives
Negussie Efa Gurmessa, Catherine Ndinda

Credit guarantee scheme (CGS) is one of the popular instruments used to alleviate financial constraints among small entrepreneurs. However, debate abounds on whether intervening through CGSs is the best option to address this market imperfection. Empirical evidence is not only scarce, inconsistent and inconclusive. Data on credit guarantees targeting farmers’ cooperatives is scarce. This article reviews the existing studies on CGS, with the purpose of explicating the role and impacts of credit guarantees and drawing lessons for farmers’ cooperatives. Literature suggests that CGSs are designed and implemented in different ways in different contexts. There are also variations in the focus areas and the methodologies employed by existing studies. The studies allude to the positive contribution of CGS, in improving credit allocation for small enterprises. The paper identifies the gaps in studies on CGS as they relate to farmer co-operatives and also highlights areas for future research.

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