The Role of Credit Guarantee Institutes in Strengthening the Banking Credit Base for SMEs in Palestine

Abstract

The study worked on identifying the role, missions and importance of credit guarantee institutes in general and in Palestine particularly. Then, the paper studied the reality of SMEs in Palestine and the reality of credit policies followed by working banks in Palestine. This paper studied the European Palestinian credit guarantee fund in Palestine as a case study. We found useful statistics and information from this case and we concluded some important results and some recommendations. The importance of Study: The role of SMEs in economic development is very important and effective particularly in emerging markets as Palestine. SMEs have consistently suffered in accessing source of finance due to lack or insufficient collaterals accepted by banks. The reluctance or abstention in banks to grant credit to SME sector regarding to lack in required collateral, high level of risk, information asymmetry, cost of small-scale lending or any other reasons make the role of Credit Guarantee institutes very important to overcome this obstacles and encouraging the banks to strengthening and enhance the banking credit base for SME in order to risk sharing mechanism. On the other hand, this credit guarantees will enhance SME competitiveness on sustainable base.