THE REGIONAL EFFICIENCY OF CREDIT GUARANTEE PROVIDED BY THE RURAL CREDIT GUARANTEE FOUNDATION: HUNGARIAN CASE STUDY

Abstract

In Hungary – as well as in other EU countries – small- and medium sized enterprises (SMEs) are not enough capitalised to make investments and their lack of capital causes difficulties in access to finance. Credit guarantee – which is one of the most effective financial instrument – helps SMEs to get external financing. Regional development is one of the core issues in Hungary nowadays, because the high proportion of agricultural production of the total GDP is not sustainable anymore. Therefore a number of Hungarian farmers have to finish its work or other rural inhabitants should diversify their activity as well to other related businesses in order to ensure or enhance their cost of living. In this study we examined the efficiency of the Rural Credit Guarantee Foundation (AVHGA) in the access to finance of rural enterprises through regional breakdowns. AVHGA issues credit guarantee for all regions in Hungary, and have been provided guarantee for more than 33 000 cases of more than 600 billion HUF credit amount from the start of its operation until the end of year 2011. The examination based on the statistical data of AVHGA (by the regional amount of guarantee, aid element and redemptions) and the regional GDP data of Hungary in the year of 2008. During the analysis we assume, that the GDP/capita index shows the degree of development by regions. Based on the fundamental goals of AVHGA, the data show the verification of the higher subsidisation of less developed regions. The significantly low percentage of Central Hungary also fulfils the main requirement that the most developed area is not promoted too much. There are possibilities in two regions for more guarantees: Northern Hungary and Central Transdanubia.

Keywords

• credit guarantee, small- and medium sized enterprises, finance, rural development

References

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