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Public Credit Guarantees and SME Finance

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Author Info

  • Salvatore Zecchini

    (University of Tor Vergata, Rome, Italy)

  • Marco Ventura

    ()
    (ISAE - Institute for Studies and Economic Analyses)

Abstract

Difficulties in finding appropriate financing weigh heavily on the ability to grow of Italy’s small enterprises, due to their narrow equity base and limited access to credit markets. The State Fund for guarantees to SMEs is one of the instruments used to overcome such difficulties. This essay provides the first evaluation of the impact of this Fund in terms of ability to increase the availability of credit, reduction of borrowing costs and financial sustainability. Extensive econometric tests have been carried out by comparing the performance of the SMEs that benefited from this guarantee with a control group made out of a sample of comparable firms. The findings confirm the presence of a causal relationship between the State guarantee and the higher debt leverage of guaranteed firms, as well as their lower debt cost. The guarantee instrument has proved to be an effective instrument, although it has had a limited economic impact because of its narrow capital base and selective approach.

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File URL: http://lipari.istat.it/digibib/Working_Papers/WP_73_2006_Ventura.pdf
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Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 73.

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Length: 55 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:isa:wpaper:73

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Related research

Keywords: SME; State-fund guarantee; credit rationing; causal effect; difference-in-difference.;

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References

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  1. Bagella, M. & Becchetti, L. & Caggese, A., 2001. "Financial constraints on investments: A three-pillar approach," Research in Economics, Elsevier, vol. 55(2), pages 219-254, June.
  2. Becchetti, Leonardo & Trovato, Giovanni, 2002. " The Determinants of Growth for Small and Medium Sized Firms: The Role of the Availability of External Finance," Small Business Economics, Springer, vol. 19(4), pages 291-306, December.
  3. Sanz-de-Galdeano, Anna & Vuri, Daniela, 2004. "Does Parental Divorce Affect Adolescents' Cognitive Development? Evidence from Longitudinal Data," IZA Discussion Papers 1206, Institute for the Study of Labor (IZA).
  4. Anna Sanz De Galdeano, 2004. "Does Parental Divorce Affect Adolescents' Cognitive Development? Evidence from Longitudinal Data," CSEF Working Papers 128, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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Citations

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Cited by:
  1. Arping, Stefan & Lóránth, Gyöngyi & Morrison, Alan D., 2010. "Public initiatives to support entrepreneurs: Credit guarantees versus co-funding," Journal of Financial Stability, Elsevier, vol. 6(1), pages 26-35, April.
  2. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all?: Policies and pitfalls in expanding access," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508393, Tilburg University.
  3. Ricardo Bebczuk, 2010. "Acceso al financiamiento de las PYMES en Argentina: Estado de situación y propuestas de política," CEDLAS, Working Papers 0104, CEDLAS, Universidad Nacional de La Plata.

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