Financing small and medium enterprises for the green recovery in ASEAN

This chapter’s primary objective is to detect the factors that determine the optimal credit guarantee ratio in four member countries of the Association of Southeast Asian Nations (ASEAN), namely Indonesia, Singapore, the Philippines, and Malaysia, using statistical techniques and the vector autoregressive approach. The empirical findings demonstrate that the loan default rate is the primary determinant of the optimal credit guarantee ratio. For the post-COVID-19 green economic recovery and the survival of small and medium enterprises in the aftermath of the COVID-19 pandemic, empirical findings confirm that the credit guarantee ratio must be increased in the ASEAN region. The results indicate that the credit guarantee ratio should vary based on the macroeconomic climate and for each bank, or in other words, for groups of banks with comparable financial strength. Establishing a regional credit guarantee scheme and assessing the soundness of banks in order to determine the optimal credit guarantee ratio are practical policy recommendations.