A “partial credit guarantee” (or “first loss” guarantee) is a pledge made by a public finance institution to take financial responsibility for the first losses should a company fail to repay its debt or go bankrupt. Partial credit guarantees are a popular leveragingtool since they allow public institutions to claim that relatively small cash outlays have “mobilized” large financial flows. Such claims have been criticized on the grounds that the reported investments are not additional – i.e. they are highly likely to have taken place irrespective of the provision of a partial credit guarantee.
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