Blockchain network empowering small businesses

Blockchain for Good: Revolutionizing Credit Access for Small Businesses

Mira Elwood in Tech & Innovation December 2025 • 3 min read.

"Discover how distributed ledger technology can transform credit guarantee schemes and empower SMEs."

Small and Medium-sized Enterprises (SMEs) are the backbone of economies worldwide, yet they often struggle to access the credit they need to grow and thrive. Credit Guarantee Schemes (CGSs) are designed to bridge this gap, but traditional CGSs are often plagued by inefficiencies and a lack of transparency.

Imagine a world where SMEs can easily access affordable credit, boosting their financial stability and contributing to economic growth. This is the promise of Distributed Ledger Technologies (DLTs), particularly blockchain, which offer a secure, transparent, and efficient way to manage credit guarantee schemes.

This article explores how blockchain technology can revolutionize CGSs, making them more accessible, transparent, and sustainable. We'll delve into the challenges and opportunities of integrating blockchain into CGS processes, and how this innovative approach can empower SMEs and drive economic development.

Why Traditional Credit Guarantee Schemes Fall Short

Blockchain network empowering small businesses

Traditional CGSs, while crucial for mitigating financial constraints for SMEs, often suffer from significant shortcomings. These include:

Lack of Financial Sustainability: High default rates can strain the financial resources of CGSs, making them unsustainable in the long run.

Lack of Transparency: Opaque processes can lead to mistrust and inefficiencies among borrowers, lenders, and guarantee institutions.
Operational Inefficiency: Manual processes and paperwork can slow down the application process and increase administrative costs.

These challenges highlight the need for innovative solutions that can improve the efficiency, transparency, and sustainability of CGSs. This is where blockchain technology comes in.

The Future of SME Finance is Here

Blockchain technology has the potential to revolutionize credit guarantee schemes, making them more efficient, transparent, and accessible for SMEs. By embracing this innovative approach, we can empower small businesses, promote economic growth, and build a more inclusive financial system for all.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2404.19555,

Title: Transforming Credit Guarantee Schemes With Distributed Ledger Technology

Subject: cs.ce econ.gn q-fin.ec

Authors: Sabrina Leo, Andrea Delle Foglie, Luca Barbaro, Edoardo Marangone, Ida Claudia Panetta, Claudio Di Ciccio

Published: 30-04-2024

Everything You Need To Know

What are the main challenges that traditional Credit Guarantee Schemes (CGSs) face?

Traditional Credit Guarantee Schemes (CGSs) often struggle with several key issues. These include a lack of financial sustainability, due to high default rates that strain resources; a lack of transparency, which breeds mistrust and inefficiencies among stakeholders like borrowers, lenders, and guarantee institutions; and operational inefficiencies stemming from manual processes and extensive paperwork, leading to slower application times and higher administrative costs. These shortcomings limit the effectiveness of CGSs in supporting Small and Medium-sized Enterprises (SMEs).

How can Distributed Ledger Technologies (DLTs), specifically blockchain, improve Credit Guarantee Schemes (CGSs)?

Distributed Ledger Technologies (DLTs), particularly blockchain, offer several advantages for Credit Guarantee Schemes (CGSs). Blockchain's inherent characteristics, such as immutability and transparency, allow for more efficient and trustworthy record-keeping of transactions and guarantee details. This increased transparency fosters trust among borrowers, lenders, and guarantee institutions. Furthermore, blockchain can automate processes, reducing paperwork and administrative overhead, thereby speeding up application times and lowering costs. This ultimately makes CGSs more accessible and sustainable for Small and Medium-sized Enterprises (SMEs).

Why is financial sustainability a key concern for traditional CGSs?

Financial sustainability is a crucial concern for traditional Credit Guarantee Schemes (CGSs) because high default rates can deplete the financial resources of the schemes. When borrowers default on their loans, the CGS is responsible for covering the losses, which can strain the scheme's capital. Over time, if default rates are too high, the CGS may become insolvent, unable to provide guarantees, and thus unable to support Small and Medium-sized Enterprises (SMEs). This highlights the necessity for efficient processes and risk management within CGSs.

How does the lack of transparency in traditional CGSs impact SMEs?

The lack of transparency in traditional Credit Guarantee Schemes (CGSs) significantly impacts Small and Medium-sized Enterprises (SMEs) in several ways. Opaque processes create distrust and can make it difficult for SMEs to understand the requirements and progress of their applications. This opacity can delay loan approvals, add to the administrative burden, and potentially deter SMEs from applying for crucial credit. Ultimately, a lack of transparency undermines the effectiveness of CGSs in supporting the financial needs of SMEs, hindering their growth and economic contribution.

In what ways can embracing blockchain technology empower SMEs?

Embracing blockchain technology in Credit Guarantee Schemes (CGSs) can empower Small and Medium-sized Enterprises (SMEs) in numerous ways. By increasing transparency, blockchain allows SMEs to have a clearer view of the application process and the terms of their guarantees, fostering trust and reducing uncertainty. Automation through blockchain streamlines processes, reducing paperwork and speeding up loan approvals, thus improving efficiency. More accessible and efficient CGSs enable SMEs to access the credit they need more easily. This boosts their financial stability, allowing them to invest in growth, create jobs, and contribute more significantly to economic development, which leads to a more inclusive financial system for all.