Typology of Guarantee Societies and Glossary of Technical Terms

Topic :

Mutual Guarantee Societies are initiatives put in place by socio-economic circles such as Chambers of Commerce or Business Federations to promote access to financial services. They generally operate midway between three main partners : SMEs, Financial Organisations and Public Authorities. Guarantee Funds are founded by States or Regions as guarantee instruments to help SMEs. They may intervene either directly towards entrepreneurs or as reinsurance of commitments taken by Mutual Guarantee Societies. In this case, there is a leverage effect between public and private sectors.

The European Mutual Guarantee Association (AECM) was formed in 1992 to represent the interests of mutual guarantee societies in Europe. There is a wide variety of models of guarantee schemes which have been designed in different countries as a result of different historical contexts, regulatory and legal environments and local financial sector structures. This edition of their flash bulletin aims to clarify these differences by providing a typology of SME loan guarantee schemes, based around the following characteristics:

  • the scope of activity
  • the channel of the guarantee
  • the nature of the scheme

The scope of activity considers whether schemes are acting as wholesalers, retailers or portfolio guarantors, the channel of the guarantee refers to direct or indirect guarantors and the nature of the scheme is related to ownership, legal form, creation, objective, and the extent of involvement of shareholders in the functioning.

The second part of the bulletin is made up of a useful glossary of terms, with definitions provided under the following headings:

  • Banks and loans
  • Guarantee scheme
  • Management and various

More information can be found on the AECM website.

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