The Financing of Small and Medium-Sized Enterprises: An Analysis of the Financing Gap in Brazil

40 Pages Posted: 17 Apr 2020 Last revised: 24 Apr 2020

See all articles by Marcelo Godke Veiga

Marcelo Godke Veiga

Godke Advogados; Tilburg Law and Economics Center (TILEC); Insper - Instituto de Ensino e Pesquisa; FAAP - Fundação Armando Álvares Pentedado; CEU Law School

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC); Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Date Written: April 16, 2020

Abstract

While small and medium-sized enterprises (SMEs) are important for economic growth and employment, they face numerous obstacles in accessing external finance. In this article, we review recent developments in the availability of financing for SMEs in Brazil, focusing on the greater use of equity and debt for SMEs. In assessing the barriers to external financing, we focus on the role of bank characteristics, market structure and variations of interest rate spreads across banks and time. Moreover, as banks retreat from SME financing, we examine the potential for SMEs to seek new sources of financing from private equity and venture capital funds. We examine the changes in the availability of bank loans between 2014 and 2016. By considering demand, we estimate the SME loan gap based on Central Bank and publicly available data. Our results show that the loan gap in Brazil is substantial. Finally, we show that the gap grew from 54.29% in 2014 to 87.5% in 2016.

Keywords: Bank loans, Entrepreneurial financing, Interest rate, SME funding

JEL Classification: L21, L26, G32

Suggested Citation

Godke Veiga, Marcelo and McCahery, Joseph A., The Financing of Small and Medium-Sized Enterprises: An Analysis of the Financing Gap in Brazil (April 16, 2020). TILEC Discussion Paper No. DP2020-010, Available at SSRN: https://ssrn.com/abstract=3577741 or http://dx.doi.org/10.2139/ssrn.3577741

Marcelo Godke Veiga (Contact Author)

Godke Advogados ( email )

Rua Gomes de Carvalho 1666
15th floor
Sao Paulo, SP 04547006
Brazil
+55 11 3090-9040 (Phone)

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Insper - Instituto de Ensino e Pesquisa ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil

HOME PAGE: http://www.insper.edu.br

FAAP - Fundação Armando Álvares Pentedado ( email )

Rua Alagoas, 903
Higienópolis
São Paulo, São Paulo 01242-902
Brazil

HOME PAGE: http://www.faap.br

CEU Law School ( email )

Rua Martiniano de Carvalho, 573
São Paulo, São Paulo 01321-001
Brazil

HOME PAGE: http://www.ceulaw.org.br

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31-(0)13-466-2306 (Phone)
+31-(0)13-466-2323 (Fax)

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
100
Abstract Views
509
rank
312,794
PlumX Metrics