1. Credit Guarantees and Loan Contracts Cowling: The Role of Loan Guarantee Schemes in Alleviating Credit Rationing in the UK Columba, Gambacorta and Mistrulli: Firms as Monitors of other Firms: Mutual Loan Guarantee Consortia and SME Finance Comments by Thorsten Beck

2. Some general remarks General theme: effect of partial credit guarantees on loan contract conditions, specifically interest rates Cowling: Do credit guarantee help reduce interest rate stickiness? Columba et al.: do mutual guarantees help lower interest rates and default

3. UK vs. Italy – what do we learn about guarantee schemes? Small Firms Loan Guarantee Scheme: government financed and managed, premium paid by borrower, limited to small enterprises Mutual Loan Guarantee Consortia: “a group of SMEs, linked by joint liability. Each SME contibutes to a guarantee fund that is used as collateral to loans granted to MLGC members.” Resembles microfinance group- lending, but there is third-party funding involved. Seems to be classical case of market-based guarantee scheme

4. Some comments on Cowling Carefully-executed firm-level study, building on previous US-based work and well grounded in literature Using tests of interest rates stickiness, paper shows that there is limited evidence of credit rationing among small businesses in the UK This is not a direct test, since there is no control group of non-guaranteed loans Test of price effect, but what about volume? Proportion tests: is there a selection/composition problem here?

5. Some comments on Columba et al. Carefully-executed firm-level study, including control group of non-guaranteed borrowers Guaranteed firms pay lower interest rates and have lower default rates, with effects being bigger in South The economic effect of guarantees does not seem very big Is there a selection bias? Is there any additionality effect? Guarantees vs. cooperative banks – which one is the more cost-effective mechanism?

6. Looking forward Both: are guarantees cost-effective instruments? Both: what are the real effects of guarantees? Cowling: Expand analysis to include a control group Columba et al.: What is the role of government in funding? Use cross-MLGC variation to assess optimal guarantee design