Articles
DOI DOI: 10.5281/zenodo.18442763

SME Financing and Credit Guarantees: Evidence and Design Lessons from Albania and the Western Balkans

Halit Xhafa1
  1. 1 Qiriazi University College, Department of Finance; Tirana, Albania

Abstract

This paper assesses the effectiveness of credit guarantee schemes (CGSs) as a
policy instrument to improve small and medium-sized enterprise (SME) access
to bank finance in Albania and the Western Balkans. SMEs often face credit
rationing due to collateral gaps and information asymmetries, while weakly
designed guarantees can dilute screening incentives, generate moral hazard, and
raise fiscal exposure. The study suggests an evaluation framework that combines
three quantitative indicators—guarantee coverage, SME default rates, and SME
loan growth—with a design assessment of eligibility and targeting, pricing and
fees, risk-sharing arrangements, and claims and monitoring procedures. Using
a structured multi-year dataset (2018–2024) and a transparent linear-trend
projection for 2025–2030 to support present–future comparison, the results
indicate that higher guarantee coverage is associated with stronger SME loan
growth and an initial improvement in observed default performance, conditional
on disciplined underwriting and monitoring. The findings translate into design
lessons emphasising partial risk sharing, portfolio caps, performance-based
pricing, and transparent performance reporting to strengthen additionality and
scheme sustainability. Results are interpreted as associations rather than causal
estimates.

How to Cite

Xhafa, H. (2026). SME Financing and Credit Guarantees: Evidence and Design Lessons from Albania and the Western Balkans. Transnational Academic Journal of Economics, 2(3), 187–196. https://doi.org/10.5281/zenodo.18442763
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