as with cooperative banks there is broad scope for collaboration and integration between the federal and state governments in the promotion of mgs the national government will need to set the legal framework in which the guarantee societies will operate and possibly ensure counterguarantees state government can also provide public counterguarantees in addition to encouraging the establishment of the mgs at the local level in order not to have the size of their mutual fund reduced by defaulting loans they will have an interest in providing coverage only for reliable borrowers in turn this lowers information asymmetries for the lender