The Importance of Credit Guarantee Scheme as a Financing Alternative for MSMEs in ASEAN: Case Studies of Indonesia and Vietnam

Category: Research Papers Written by Tulus T.H. Tambunan & Pham Van Hong Hits: 3046

The Importance of Credit Guarantee Scheme as a Financing Alternative for MSMEs in ASEAN: Case Studies of Indonesia and Vietnam

Tulus T.H. Tambunan & Pham Van Hong

Abstract

Micro, small and medium enterprises (MSMEs) are facing many difficulties, especially in financial aspect, in their development process. In dealing with this particular constraint, credit guarantee schemes (CGSs) are considered by many as a good financing alternative. This article is based on a study examining the implementation of the CGSs in Indonesia and Vietnam. It shows that critical factors for successful CGSs are including dissemination of the scheme to have a widely coverage of MSMEs, simple application procedure, incentives mechanism for the channelling banks and guaranteed borrowers should be put in place to mitigate or to prevent them from 'moral hazard'.

Key words: MSMEs, CGS, Indonesia, Vietnam, KUR.

JEL codes: D24, E26, E44, G32

 

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