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Credit guarantee


A type of insurance against default provided by a-credit guarantee association or other institution to a lending institution. Credit guarantees enable otherwise 'sound' borrowers who lack collateral security, or are unable to obtain loans for other reasons, to obtain the credit they require through-banks in the normal way. A government loan guarantee scheme insuring loans to small firms by the commercial banks was introduced in the U.K. in 1980.

Reference: The Penguin Dictionary of Economics, 3rd edt.