The determinants of the utilisation of government-backed loan schemes: a case study of Malaysia

Government-backed loan schemes have been introduced in many countries to enable small and medium-sized enterprise (SMEs) to have access to funding at a reasonable cost. This paper focuses on the operation of the Credit Guarantee Corporation (CGC) in Malaysia. A model to determine the utilisation of the CGC’s facilities is developed. The equilibrium level of utilisation is derived by solving a reduced form equation which balances supply and demand factors. In an ex-post simulation test, our estimated model tracked the behaviour of the actual data reasonably accurately. The implications of the model’s findings for CGC, SMEs, banks and public policy makers are explored.