Guaranteed loans to microfinance institutions : how do they add value?
Flaming, Mark
This Focus Note looks at recent experience with guarantees of commercial loans to microfinance institutions (MFIs). Such loan guarantees are a form of insurance that covers a lender - typically a commercial bank - against default on its loan to an MFI. This Focus Note discusses the results of a study, jointly supported by CGAP and USAID. The study reviews the specific benefits loan guarantees are meant to produce; describes guarantor agencies, transaction volumes, cost structure, and guarantee mechanisms; and examines the results of a set of ninety-six loan guarantees issued by eight agencies and draws conclusions about the effectiveness of loan guarantees.
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