Public Guarantees on Loans to SMEs: An RDD Evaluation

Abstract

The paper evaluates the impact of the guarantees provided by the Italian Fondo di Garanzia scheme on access to credit for small and medium enterprises. The study exploits the mechanism that assigns the guarantees, which is based on a scoring system to assess eligibility. By using regression discontinuity techniques, the paper finds that on the threshold between eligible and non-eligible firms, the program has a positive impact on bank loans to firms. However, the scheme has no impact on the interest rate charged by banks, and has a positive effect on the likelihood that a firm will become unable to repay its loans. The guaranteed loans were mostly used to finance working capital. Finally, the paper provides inference for firms far from the threshold.