The Debate of Impact From Government Credit Guarantee on Business Development and Non-Performing Loan of Micro and Small Enterprises (MSES): A Literature Survey

Febriandi Prima Putra, Purbayu

Abstract

The purpose of this study is to explain the debate about the existence of a credit guarantee policy that is needed to overcome the limited access of Micro and Small Enterprises (MSEs) to financing resources. Although in its implementation, the credit guarantee policy, in the end, turned out to create other asymmetrical information. This study used a systematic review approach that links and compares findings from various sources and synthesizes data by summarizing available information, combining and reviewing from several previous studies related to credit guarantee schemes, loan guarantees, guarantee schemes, micro-small business loans and asymmetric information. There is no agreement, but there are objections and doubts about the effectiveness of the role and impact of credit guarantee in reducing credit barriers among micro-small businesses. However, this paper shows that credit guarantees are one of the tools widely used by governments and other institutions to increase the access of micro-small enterprises to formal credit.