**Some country studies have concluded that PCGs have contributed positively to SME access to finance.** Although measuring the impact of PCGs accurately remains technically challenging (Section 5), some recent studies have concluded that PCGs have been able to extend finance to firms that otherwise would have remained constrained.  For example, in Canada Ridding (2007) estimates that 75% of guarantees are used by firms that would not have been able to obtain a loan otherwise. In Chile, Larrain and Quiroz (2006) find that the guarantee scheme increases the probability of small firms to get a loan by 14%. At the same time, PCG schemes may add limited value and prove costly when they are not well designed. As noted by Honohan (2008), loose eligibility criteria, low fees, and overly generous coverage ratios may result in the provision of guarantees to enterprises that would have obtained credit anyway.  They may also result in financial imbalances requiring recurrent government contributions. Along these lines, Bechri et al. (2001) studied the case of the Tunisian scheme FOPROPI, which became unsustainable and finally collapsed in 1997 as a result of major institutional failures.

**Guarantee schemes around the world vary on fundamental design features, but there is a growing effort to identify good practices** . The failure of several guarantee schems in the 1980s led to an intensive debate on their role (Levistky, 1997).  As noted by Green (2003) the weaknesses of early guarantee schemes can be avoided through proper design and institutional arrangement. Some recent studies provide guidelines and discuss operational parameters of guarantee funds, based on international experience. Deelen and Moleenar (2004) published a practical manual for guarantee funds managers.  Along these lines, the European Commission established an expert group on guarantee schemes to identify and disseminate best practices (European Commission, 2006).  This literature converges on broad principles, including the need to build attractiveness while ensuring additionality through well designed eligibility criteria, proper coverage ratio and fees, sound risk management, and efficient operational procedures.

# **3 The MENA PCG Survey and the Review Methodology**

## _3.1 Basic Description of the MENA Survey_

**This paper is based on a survey of MENA PCGs conducted in the first quarter of 2010** . The questionnaire prepared for the survey covered the institutional set up, the main operational rules, and the main performance indicators. The questionnaire was partly based on Beck and al. (2008) to ensure comparability with other guarantee schemes around the world. The survey was initiated in February 2010 and completed in April 2010.  The authors met with several managers of surveyed schemes to present the objectives of the survey and discuss technical issues.  There was also a follow-up effort to ensure the timely completion of the survey and check the accuracy of the data.

**The survey covered the largest credit guarantee schemes in 10 MENA countries** . As shown in Table 1, the oldest guarantee fund in MENA was established in Morocco in 1949, while the youngest one in Syria starts operation in 2010.  The average equity is US$50 million, ranging from US$10 million in Syria, to US$75 million in Morocco. Half of these guarantee schemes are majority state-owned (Morocco, Tunisia, Jordan, Syria, Saudi Arabia, UAE), while the others are majority owned by banks (Lebanon, Egypt, Iraq) or donors (Palestine).

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