Credit Constraints and Business Performance: Evidence from Public Lending in Colombia

48 Pages Posted: 31 Oct 2014

See all articles by Marcela Eslava

Marcela Eslava

University of the Andes (CEDE)

Alessandro Maffioli

Inter-American Development Bank; University of Insubria

Marcela Meléndez

Econ Estudio

Date Written: October 15, 2014

Abstract

Whether public lending to firms effectively eases credit constraints has been widely studied for very small businesses. The evidence documented for larger firms refers to lending that is significantly subsidized and targeted to these businesses, so the estimated positive effects may reflect poor allocation of public credit. This paper investigates the impact on its beneficiaries of a wide, untargeted and unsubsidized, lending program in Colombia. We use data on all non-micro manufacturing firms and all formal credit operations. After correcting for potential selection biases using econometric techniques, we find that Bancóldex loans increase firms’ employment, purchases of inputs, investment, and output for small (but non-micro) firms, while large firms experience increases in variable inputs, but not on investment. While both short-term and long-term Bancóldex loans are found to have positive impacts on output, input demand and employment, only long-term loans increase investment. Moreover, short-term loans have a larger impact on input demand than long-term loans. Our findings also indicate that Bancóldex’ beneficiaries end up with improved overall credit conditions after receiving Bancóldex credit: the amount of credit received goes up, the duration of the loans increases, and beneficiaries are able to establish credit relationships with more financial intermediaries. Though the interest rates go down, in this dimension the effect is small.

Keywords: Credit constraints, public development banks, firm growth.

JEL Classification: G28, H43, L25, O12, O54

Suggested Citation

Eslava, Marcela and Maffioli, Alessandro and Meléndez, Marcela, Credit Constraints and Business Performance: Evidence from Public Lending in Colombia (October 15, 2014). Documento CEDE No. 2014-37, Available at SSRN: https://ssrn.com/abstract=2516517 or http://dx.doi.org/10.2139/ssrn.2516517

Marcela Eslava (Contact Author)

University of the Andes (CEDE) ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Alessandro Maffioli

Inter-American Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

University of Insubria ( email )

Via Ravasi 2
Varese, 21100
Italy

Marcela Meléndez

Econ Estudio ( email )

Carrera 7 No. 74-56 Of. 601
Bogotá
Colombia
(571) 743-3280 (Phone)
(571) 743-3283 (Fax)

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