Economics & Development

This document relates to the IFC Project Number 52494.

This paper examines how the design of credit guarantee schemes for small and medium enterprises affects their performance and policy impact. It draws on a new global survey of 108 credit guarantee institutions in 74 countries, providing the most extensive cross-country dataset to date on governance arrangements, funding models, risk management, and evaluation practices. The analysis shows that performance drivers differ systematically across four dimensions—market reach, leverage, portfolio quality, and financial sustainability. Market reach is largely shaped by country fundamentals, especially financial depth, while portfolio risk reflects both banking-sector conditions and scheme-level choices: default rates tend to be higher in more highly leveraged schemes and lower where governance is stronger and funding more diversified. By contrast, leverage and financial sustainability are mainly determined by institutional design: schemes with robust governance structures, diversified and predictable funding, and active risk-mitigation instruments operate with higher but more controlled leverage and more developed financial sustainability practices. The findings suggest that policy frameworks should benchmark scale and baseline portfolio quality against country conditions, while using regulatory and supervisory tools to enforce minimum standards for governance, funding architecture, risk management, transparency, and impact evaluation. Strengthening these design features is essential to ensure that credit guarantee schemes deliver additional, financially sustainable support to SME finance rather than merely reallocating risks within the financial system.