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The economic and fiscal benefits of guarantee banks in Germany

  • Peter Hennecke
  • Doris Neuberger
  • Dirk Ulbricht
Article

Abstract

State-backed credit guarantee schemes aim to close the gap in the financing of small enterprises or start-ups caused by lacking collateral and high information asymmetry. The present study discusses the effectiveness of German guarantee banks compared to credit guarantee schemes in other countries and quantifies their economic and fiscal net benefits in the new federal states of Germany, where economic development is still lacking behind. Using data of five guarantee banks and from enterprise and bank surveys, we measure finance and project additionality of loan and equity guarantees provided over the period 1991–2015. Cost-benefit analyses show that the economic benefits of the guarantee banks are considerable because of increased production and employment, while the economic costs are negligible. The real GDP increases by about 1.2 euro per euro guarantee each year. For the years 2008–2014, we find net fiscal gains of several hundred million euros in each federal state.

Keywords

Small business finance Loan guarantee schemes Collateral Credit rationing Public guarantees Cost-benefit analysis 

JEL classification

D61 E17 G21 G28 G38 H81 O16 L26 

Notes

Acknowledgements

Provision of data and funding by the guarantee banks of Berlin, Brandenburg, Mecklenburg-Western Pomerania, Saxony-Anhalt, and Thuringia is gratefully acknowledged.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of RostockRostockGermany
  2. 2.iffHamburgGermany
  3. 3.DIWBerlinGermany
  4. 4.CERBERomeItaly
  5. 5.iff institut für finanzdienstleistungen HamburgHamburgGermany

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