Quantifying credit gaps using survey data on discouraged borrowers

50 Pages Posted: 29 Nov 2023

See all articles by Ozan E. Akbas

Ozan E. Akbas

University of Warwick - Warwick Business School

Frank Betz

European Union - European Investment Bank

Luca Gattini

European Union - European Investment Bank

Date Written: November 06, 2023

Abstract

The credit gap in this study is given by the financing needs of firms that are bankable but discouraged from applying for a loan. To quantify the credit gap, we combine a scoring model that assesses the creditworthiness of discouraged firms with a credit allocation rule. Our study covers 35 emerging markets and developing economies and uses the 2018-2020 EBRD-EIB-World Bank Enterprise Survey. We show that on average discouraged firms are less creditworthy than successful applicants. Nonetheless, the share of bankable discouraged firms is large, suggesting inefficient credit rationing. The baseline results point to an aggregate credit gap of 8.4% of GDP with significant variation across countries. SMEs account for more than two-thirds of the total, reflecting both their contribution to economic activity and the fact that they are more likely to be credit-constrained.

Keywords: credit rationing, discouraged borrowers, firm-level data, EMDEs

JEL Classification: D22, D45, E51, G21, G32

Suggested Citation

Akbas, Ozan E. and Betz, Frank and Gattini, Luca, Quantifying credit gaps using survey data on discouraged borrowers (November 06, 2023). Available at SSRN: https://ssrn.com/abstract=4629235 or http://dx.doi.org/10.2139/ssrn.4629235

Ozan E. Akbas

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Frank Betz (Contact Author)

European Union - European Investment Bank ( email )

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg

Luca Gattini

European Union - European Investment Bank ( email )

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg

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