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The economic and fiscal value of German guarantee banks

Peter Hennecke, Doris Neuberger () and Dirk Ulbricht

No 152, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics

Abstract: Guarantee banks backed by the state aim to close the gap in the financing of small and medium-sized enterprises or start-ups caused by lacking collateral or equity and high information asymmetry. The present study quantifies the economic and fiscal net benefits of guarantee banks in the new federal states of Germany, where economic development is still lacking behind those in the old federal states. Using data of five guarantee banks and results 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. In the years 2008 to 2014, there were net fiscal gains of several hundred million euros in the respective federal states.

Keywords: small business finance; loan guarantee schemes; collateral; credit rationing; public guarantees; cost-benefit analysis (search for similar items in EconPapers)
JEL-codes: D61 E17 G21 G28 G38 H81 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
Date: 2017
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