“Establishing a credit guarantee institution for small and medium-sized enterprises would encourage entrepreneurs and private sector participation,” ADB stated in its Asian Development Outlook (ADO) report released in this week.

ADB initiated a capacity development technical assistance (TA) committee to support and proposed a project to assist the move to setup a SME credit guarantee institution, a new non-bank financial institution.

It would support SMEs to access commercial loans, with a US$ 50 million loan. However, the project to-date remains in proposed status.

As banks and other financial institutions consider SMEs to be of high credit risks and lending continues to be largely based on collateral rather than cash-flows