The role of regional Guarantee Associations in the financing of enterprises

Hajdu, Emese – Kovács, Tamás – Lentner, Csaba

Keywords: guarantee commitments, financing, rural development

After a long preparation process the regional Guarantee Association system was established in Hungary in 1999, but the seven regional Guarantee Associations could only begin their real work in 2002. Beside the big banks, established Guarantee Associations offer the possibility of supporting needs arising at the local level and of helping with short-term lending and small loans for those small and micro enterprises, which are unable to provide the lender with the required collateral. On the local level, collaboration-based associations can be in daily communication with a lot of entrepreneurs, to size up necessities and to monitor.
Based on the last three years’ performance the system is not functioning successfully. Because of this failure, the founders have decided on a merger of the seven associations. The purpose of our essay is to analyse the causes of this unsuccessful operation and to reveal the facts, which led to the failure of the model.

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