Firm Characteristics and Credit Constraints across SMEs in the Philippines

AIM RSN PCC Working Paper 2019-006

22 Pages Posted: 19 Dec 2019

See all articles by John Paul Flaminiano

John Paul Flaminiano

Asian Institute of Management Policy Center

Jamil Paolo Francisco

Asian Institute of Management

Date Written: November 28, 2019

Abstract

This paper analyzed the relationship between firm characteristics and credit constraints among small and medium enterprises (SMEs) in the Philippines. In particular, we determined whether an SME’s firm characteristics are correlated to the predicted probability of being credit-constrained or “quasi-constrained” — i.e. able to borrow from informal sources. Estimates of marginal effects at the means (MEMs) from logistic regressions provide some suggestive evidence that firm size, previous purchase of fixed assets, and increased use of digital technologies for accounting and financial management are associated with a lower predicted probability of being credit-constrained for the average SME in our sample. However, with the exception of digital technology use, these firm characteristics are not significant in predicting the probability that the average SME is quasi-constrained. This implies that the firm characteristics that are significant in accessing finance solely through formal channels may not be significant when considering informal sources. We also found that the increased adoption of digital technologies has an inverse association with the predicted probability of being credit-constrained and quasi-constrained for the average SME in our sample, although our analysis did not establish the direction of causality.

Keywords: credit constraints, firm characteristics, SMEs, Philippines, informal financing

JEL Classification: G21, G28, E26, O17

Suggested Citation

Flaminiano, John Paul and Francisco, Jamil Paolo, Firm Characteristics and Credit Constraints across SMEs in the Philippines (November 28, 2019). AIM RSN PCC Working Paper 2019-006. Available at SSRN: https://ssrn.com/abstract=3498019 or http://dx.doi.org/10.2139/ssrn.3498019

John Paul Flaminiano (Contact Author)

Asian Institute of Management Policy Center ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Jamil Paolo Francisco

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

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