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

Year 2012, Volume: 4 Issue: 1, 211 - 219, 01.06.2012

Zsofia Hars-garami Maria Fekete-farkas

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

• European Mutual Guarantee Association (2012): The members and mission of AECM, 04.2012] Accessed Hungarian http://ksh.hu/docs/hun/xstadat/xstadat_eves/i_qpg001.html, 04.2012] Statistics Office (2012): Annual Statistics, Accessed
• Official website of Hungary (2012): “Országinfó”, www.magyarorszag.hu, Accessed 03.04.2012]
• Rural Credit Guarantee Foundation (2011): History, www.avhga.hu, [Accessed 04.2011]
• Rural Development in the European Union (2010): Statistical and Economic Information, http://ec.europa.eu/agriculture/agrista/rurdev2010/RD_Report_2010.pdf, Accessed 03.04.2012] Report , Wikipedia http://hu.wikipedia.org/wiki/Magyarorsz%C3%A1g_r%C3%A9gi%C3%B3i, Accessed 03.04.2012] (2012): The regions of Hungary,