Mutual Guarantee Associations for Small and Micro‐Entrepreneurs: Lessons Learned from Europe and Africa

Mutual guarantee associations (MGAs) can be a viable solution to the problem of access to credit from banks for those small entrepreneurs who cannot offer sufficient collateral, in particular for artisans. After providing a general description of an MGA, the most successful model in Europe, both in number and in volume of guarantees, is considered and its factors of success are analysed. Findings from Europe as well as from some developing countries are presented. Some applications of the MGA scheme in a few African countries are described and potential ways to improve the current situation of those MGAs are highlighted. An MGA is an association comprised of entrepreneurs who join together to create an organization which establishes a dialogue with banks. The association plays the role of an intermediary between artisans and banks: small‐ and micro‐ enterprises (SMEs) join the association to obtain credit from banks and the association negotiates with banks to secure loans for its members. Successful MGAs strengthen private initiatives and SMEs, which is widely regarded as a key ingredient to development and poverty‐alleviation in most countries. They may become strong entities which can deal with banks on an equal level, helping SMEs gain access to credit that is normally unavailable.