Credit Guarantee Institutions, Performance and Risk Analysis: An experimental Scoring

In a financial system, in which SMEs have no substantial alternatives to bank lending, credit guarantee institutions (CGIs) can significantly contribute to facilitating the credit access of such firms, by reducing the information asymmetries between the lenders and the borrowers and, in some cases, by decreasing the cost of funding. Financial crises and the new capital requirements are leading to increased interest from both practitioners and regulators for these financial institutions, which have always acted as intermediaries between banks and enterprises. These changes in market and regulatory conditions have made it necessary to assess whether the new generation of CGIs is really able to support credit access and whether they can be considered a valid instrument for avoiding small lending problems. That’s why, over the last twenty years, the literature has paid more attention to measuring their financial additionality or incrementality, the economic additionality and financial sustainability of the CGIs, and the practioners have paid more attention to measuring their creditworthiness, their risk and their performance profile. The validity and the "strength" of the support provided by CGI's to those who have difficulties in accessing credit, in fact, in the current competitive environment, are closely related to the solvency and solidity of CGI's. Nevertheless, these last two "dimensions" qualify and determine the ability of CGI's to survive in the current economic situation. It has therefore become crucial for a variety of the CGI's interlocutors, who interface with them in different roles (policy makers, intermediary banks, industry associations), to understand their risk and performance profile; to attempt to measure the credit, even in a rudimentary way. In this perspective, this paper aims to define a quantitative scoring framework methodology able to expresses the risk and performance of a sample of Italian CGIs (so called Confidi) on an experimental position map. The construction of the ranking/position map on the basis of the CGIs’ score is derived from a set of indices expressive of the balance of management and more representative of the production process of CGIs and their risk profile and performance. The present work is a first experimental exercise in the field of credit guarantee institutions ranking/scoring therefore it is subject to improvements and possible future developments highlighted in the concluding remarks.