Consequences of Public Financial Aid for Organizations Providing Guarantees for SMEs in Poland
The article aims to answer the questions of whether public intervention in the form of financial aid for guarantee funds is necessary. This study examines the consequences of the financial aid for guarantee funds in Poland at the beginning of the 2014-2020 EU budget in the light of state intervention theory. We investigate three possible effects for organizations providing guarantees for SMEs: changes in output (the value and number of guarantees), changes in the transaction scale (average guarantee) and changes in efficiency. We use a panel regression analysis to verify the existence of such effects. The results show that grants lead neither to an increase in output (the number of guarantees or the total value of guarantees) nor to the improvement of multiplier or default ratios. We observe the positive impact of grants on the transaction scale and cost efficiency. We continue the discussion on the justification of state intervention in the market and the consequences of the public aid. The research shows that state intervention through public support for guarantee schemes has both advantages and disadvantages. In order to enhance the efficiency of the guarantee schemes, government intervention on behalf of private investors should be limited. Our research has some limitations. The sample does not cover all the functioning guarantee funds, as there were financial statements that were not available and our study does not concern the whole EU budget period (2014-2020). The consequences of public financial aid for organizations providing guarantees for SMEs are rarely studied, therefore, the paper fills the research gap on the influence of public aid on guarantee funds functioning in European Union countries.(original abstract)
- Abraham, F., & Schmukler, S. L. (2017). Are public credit guarantees worth the hype?" Research & Policy Briefs (no. 11), 1-4. Washington, DC: World Bank.
- Armstrong C., Craig B., Jackson W. E., & Thomson J. B, (2014). The moderating influence of financial market development on the relationship between loan Guarantees for SMEs and local market employment rates. Journal of Small Business Management, 52(1), 126-140.
- Arrow, K. J. (1962). The economic implication of learning-by-doing. Review of Economic Studies, 29, 155-173.
- Bardhan, P. (1990). Symposium on the State and Economic Development. Journal of Economic Perspectives, 4(3), 3-7.
- Besanko, D., & Thakor, A. V. (1987). Collateral and rationing: sorting equilibria in monopolistic and competitive credit markets. International economic review, 28(3), 671-689.
- Boerger, L. (2016). Neoclassical Economics. Retrieved March 18, 2019, from https://www.exploringeconomics.org
- Chang, H-J. (2001). Breaking the Mould. An Institutionalist Political Economy Alternative to the Neoliberal Theory of the Market and the State. Retrieved March 18, 2019 from the United Nations Research Institute for Social Development. Retrieved June 21, 2019, from http://www.unrisd.org
- Chatzouz, M., Gereben, A., Lang, F., & Torfs W. (2017). Credit Guarantee Schemes for SME lending in Western Europe. EIF Working Paper 2017/42, Retrieved June 21, 2019, from http://www.eif.org/
- Cowling, M., Robson, P., Stone, I. & Allinson G. (2018). Loan guarantee schemes in the UK: the natural experiment of the enterprise finance guarantee and the 5 year rule. Applied Economics, 50 (20), 2210-2218.
- Cowling, M. & Clay, N. (1995). Factors influencing take-up rates on the Loan Guarantee Scheme. Small Business Economics, 7(2), 141-152.
- D'Ignazio, A. & Menon, C., (2013). The causal effect of credit guarantees for SMEs: Evidence from Italy. Bank of Italy Temi di Discussione. Working paper, 900, 1-42.
- Datta-Chaudhuri, M. (1990). Market failure and government failure. Journal of Economic Perspective, 4 (3), 25-39.
- Deelen, L. & Molenaar, K. (2004). Guarantee funds for small enterprises. A manual for guarantee fund managers. Retrieved April 30, 2019 from https://www.researchgate.net
- Dvouletý, O. (2017). Effects of soft loans and credit guarantees on performance of supported firms: Evidence from the Czech Public Programme START. Sustainability, 9 (12), 1-17.
- European Commission (2006), Guarantees and mutual guarantees. Best Report. Retrieved April 30, 2019, from https://ec.europa.eu/
- Garcia-Tabuenca, A. & Crespo-Espert, J.J. (2010). Credit guarantees and SME efficiency. Small Business Economics, 35, 113-128.
- Gonzalez, P.P., Sanchez, H.M. & Sobrino, J.N.R. (2015). Guarantee systems. Keys for their implementation. Madrit: AECA.
- Green, A. (2003). Credit guarantee schemes for small enterprises: an effective instrument to promote private sector-led growth? Unido (United Nations Industrial Development Organizaton) SME Technical Working Papers Series, 10, 1-88.
- Greenwald, B. C., & Stiglitz, J. E. (1986). Externalities in economies with imperfect information and incomplete markets. The quarterly journal of economics, 101(2), 229-264.
- Hirschman, A. (1992). Rival views of market society and Other Recent Essays. Cambrige: Harvard University Press.
- Kaliński, J. (2004). Gospodarka Polski w procesie transformacji ustrojowej (1989-2002)[ Polish economy in the process of political transformation (1989-2002)]. Bank i Kredyt, 1, 7-37.
- Khan, S.M. & Aziz, G. (2011). Neoclassical versus Keynesian approach to public policy - the need for synthesis. MPRA. Retrieved March 18, 2019, from: https://mpra.ub.uni-muenchen.de
- Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45 (1), 1-28.
- Ong H-B., Habibullah M.S., Radam A. & Azali M. (2003). Evaluating a credit guarantee agency in a developing economy: a non-parametric approach. International Journal of Social Economics. 30 (1/2), 143-152.
- Önis, Z. (1995). The limits of neoliberalism: toward a reformulation of development theory. Journal of Economic Issues, 29 (1), 97-119.
- European Council. (2000). Presidency conclusions Lisbon European Council 23 and 24 March 2000. Retrieved June 8, 2019, from http://kbn.icm.edu.pl
- Quinto Lanz L. and Tomei P.A. (2017). Building trust in a guarantee fund in a challenging institutional environment. Revista Ibero-Americana de Estratégia (RIAE), 16 (3), 90-110.
- Raith, M. G., Staak, T. & Starke, Ch. (2010). The goal achievement of federal lending programs. Small Enterprise Research, 17 (1), 43-57.
- Ru, H. (2018). Government credit, a double-edged sword: evidence from the China Development Bank. The Journal of Finance, 73 (1), 275-316.
- Sanneris, G. (2015). Support of SME's in Italy: case of Confidi, experience and perspectives of evolution. St. Petersburg State Polytechnical University Journal. Economics, 228 (5), 7-19.
- Schich S., Cariboni J., Naszodi A. & Maccaferri S. (2017). Evaluating publicly supported credit guarantee programmes for SMEs. Retrieved April 30, 2019, from http://www.oecd.org
- Schich S., Maccaferri S. and Cariboni J. (2016). Un moment opportun pour l'évaluation des coûts et bénéfices des garanties de crédit et la relance des politiques de soutien aux PME [Timely Opportunity to Evaluate Costs and Benefits of Credit Guarantee Interventions to Reinvigorate Policy Support for SMEs]. Revue d'économie financière, 123, 279-296.
- Stiglitz, J. E. (2000). Economics of the public sector (3rd ed.). New York: W.W. Norton & Company.
- Veiga, L.G., & Pinho, MM. (2007). The political economy of intergovernmental grants: Evidence from a maturing democracy. Public Choice, 133(3-4), 457-477.
- Wilcox. J., Yasuda. Y., (2008). Do government loan guarantees lower, or raise, banks' non-guaranteed lending? Evidence from Japanese Banks. The World Bank Workshop, Retrieved April 30, 2019, from: http://siteresources.worldbank.org
- Zecchini, S. and Ventura, M., (2009). The impact of public guarantees on credit to SMEs. Small Business Economics, 32, 191-206.