Causal Effect of Credit Guarantees for Small‐ and Medium‐Sized Enterprises: Evidence from Italy

Abstract

We evaluate the effectiveness of a partial credit guarantee program, implemented in a large Italian region, that aimed to improve the access to credit of small and medium enterprises. Using unique microdata from a broad set of firms, we show that the policy increased the long‐term loans for beneficiary firms, while the total volume of bank loans was unaffected. Furthermore, targeted firms benefited from a substantial decrease in interest rates. However, there is some evidence that firms are more likely to default as a consequence of the treatment. Conversely, the results do not point to any significant effect on investments.

Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain

“…Credit guarantee schemes have become an important instrument of choice for policymakers to increase access to lending, especially for constrained groups such as small businesses [28]. The establishment of a credit guarantee scheme reduces informational asymmetries between firms and banks, increasing the availability of funds for viable projects and providing financing at a lower cost and a longer term ( [28,39,40], among others). 27 MGS activity has become even more important as a consequence of the liquidity shortfalls experienced by SMEs during the coronavirus pandemic.…”

Firm-level policy support during the crisis: So far, so good?

“…Martín-García and Morán Santor (2021) moreover find a significant impact of credit guarantees by the regional mutual guarantee institution on firm growth in the Spanish Region of Madrid. Country studies for Italy and the Czech Republic, on the other hand, do not find a significant impact (Dvouletý et al, 2019;D'Ignazio & Menon, 2020). Likewise, past subsidized loan programmes for SMEs have been found to have positive effects on job creation, investment and productivity in Bulgaria (Erhardt, 2017) and Hungary (Horvath & Lang, 2021, Endresz et al, 2015.…”

Bank Credit and Trade Credit: The Case of Portuguese SMEs from 2010 to 2019

“…For García-Teruel and Martínez-Solano (2010) and Yang (2011), trade credit can be measured as the ratio between supplier credit plus other credits to total liabilities. The literature review (e.g., Carbó-Valverde et al 2006;Degryse et al 2017;D'Ignazio and Menon 2020) refers to bank credit as an important source of financing for SMEs.…”

“…Trade credit arises from the interaction between a supplier and a customer (company) in a specific context of limited liability for uncollateralized debt (Cuñat 2007). There is a generally agreed-upon conclusion in the trade credit literature that supplier financing has a negative relationship with size (Kestens et al 2012), inventory (Taketa and Udell 2007), liquidity (Love et al 2007), andprofitability (García-Teruel andCanto-Cuevas et al 2016) The limitations, to which SMEs are subject, particularly in periods of the financial crisis, lead a significant number of companies to resort to trade credit (Carbó-Valverde et al 2006;Degryse et al 2017;D'Ignazio and Menon 2020). In the 2008 financial crisis, trade credit emerged as a substitute for bank credit, given the negative impact on the availability of bank credit (Garcia-Appendini and Montriol-Garriga 2013;Cassia and Vismara 2009).…”