Sustainable Credit Guarantee Associations

Purpose of the paper

This research analyses credit guarantee associations and their contribution to financial solutions in local societies. Credit cooperatives aim to guarantee bank loans for micro, and small and medium-sized enterprises.

Research method

Qualitative data were gathered through semi-structured interviews and direct observation with organisations, public authorities, businesses and bank institutions to conduct a case study of Upper Norrlands Credit Guarantee Association (ÖNKGF), in Sweden.

Research Findings

Cooperative enterprises have been democratically owned and controlled by their members and have taken economic and social responsibility for the development of local societies and businesses for the benefits of the members and the society. The research shows that ÖNKGF creates relations with the members by communicating their value base as a cooperative organisation. They develop cooperation with local banks to support commercial business and entrepreneurs who want to start and finance their own businesses. They get advantage to attract new members by emphasising democratic management and members´ sovereignty, educate members, network with authorities and bank officials in charge of handling loans and with local and global organisations using mouth to mouth marketing.  For the cooperative credit guarantee association we can see an enlargement of the market and members´ participation and also need for innovations to sustain its business. New entrepreneurial activities face difficulties because of lack of stable financial resources.

 

Main Contribution

The study contributes to the literature of credit cooperative financial sector, by presenting a model of successful operation of ÖNKGF. We recommend managers to develop networks with members and other stakeholders to promote cooperative collateral financial activities in the local economy to legitimate and sustain their business in the local society.