Credit guarantee associations nationwide provided credit guarantees for 138 loans worth 5.6 bn yen to small- and medium-sized companies (SMEs) excluded from the list of eligible borrowers for three years up to fiscal 2003, according to Board of Audit sources, who also said these loans had become irretrievable.
Under the credit guarantee system, credit guarantee associations across the nation jointly guarantee financial institutions against risks associated with loans for SMEs.
The associations were established to make it easier for such enterprises to receive loans from financial institutions. Fifty-two credit guarantee associations screen applications from companies and guarantee selected loans.
If a company that borrowed money with a guarantee goes bankrupt, guarantee associations shoulder the debt. The fund comes from the Japan Finance Corporation for Small and Medium Enterprise, which distributes it to credit guarantee associations.
