Credit guarantee schemes provide third-party credit risk mitigation to lenders by absorbing a portion of the losses on the loans made to SMEs in case of default, in return for a fee. CGS are popular partly because they combine a subsidy element with market-based arrangements for credit allocation. This allows less room for distortions in credit markets, unlike more direct forms of intervention, such as state-owned banks.

Credit guarantee schemes are present in more than half of developing countries. Their numbers are growing.

With this in mind, the World Bank Group and the FIRST Initiative convened a task force to design, implement and evaluate public credit guarantee schemes for SMEs.