Transforming Credit Guarantee Schemes with Distributed Ledger Technology
Sabrina Leo, Andrea Delle Foglie, Luca Barbaro, Edoardo Marangone, Ida Claudia Panetta, Claudio Di Ciccio
TL;DR
This paper investigates how distributed ledger technologies can address the financial sustainability and operational inefficiencies of Credit Guarantee Schemes (CGSs). It proposes a comprehensive framework leveraging blockchain features such as immutable ledgers, smart contracts, and interoperable data sharing to streamline CGS workflows from application to enforcement. The authors discuss configuration choices (emphasizing private, permissioned networks) and demonstrate how ex-ante and ex-post guarantee processes can be automated to improve KYC, reduce costs, and increase transparency and trust among banks, CGIs, and SMEs. The work provides a strategic roadmap for policymakers and stakeholders to modernise CGS mechanisms and stimulate innovation in SME credit finance, with potential to reduce moral hazard and information asymmetries.
Abstract
Credit Guarantee Schemes (CGSs) are crucial in mitigating SMEs' financial constraints. However, they are renownedly affected by critical shortcomings, such as a lack of financial sustainability and operational efficiency. Distributed Ledger Technologies (DLTs) have shown significant revolutionary influence in several sectors, including finance and banking, thanks to the full operational traceability they bring alongside verifiable computation. Nevertheless, the potential synergy between DLTs and CGSs has not been thoroughly investigated yet. This paper proposes a comprehensive framework to utilise DLTs, particularly blockchain technologies, in CGS processes to improve operational efficiency and effectiveness. To this end, we compare key architectural characteristics considering access level, governance structure, and consensus method, to examine their fit with CGS processes. We believe this study can guide policymakers and stakeholders, thereby stimulating further innovation in this promising field.