XXVI Edition

14-15-16 December 2017"

The economic and fiscal value of German guarantee banks

Hennecke Peter, University of Rostock
Neuberger Doris, University of Rostock
Ulbricht Dirk, iff Hamburg

Guarantee banks backed by the state aim to close the gap in the financing of small and medi-um-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 be-hind those in the old federal states. Using data of five guarantee banks and results from enter-prise and bank surveys, we measure finance and project additionality of loan and equity guar-antees 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 em-ployment, 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.

Area: Banking

Keywords: Small business finance, loan guarantee schemes, collateral, credit rationing, public guarantees, cost-benefit analysis

Paper file

University Network