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Identification of loan effects on personal finance: A case for small U.S. entrepreneurs

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  • Banasaz, Mohammadmahdi
  • Bose, Niloy
  • Sedaghatkish, Nazanin

Abstract

This paper draws information from a micro-lender and a credit bureau to identify causal effects of small loans on financial health of small U.S. business owners. To achieve this, we exploit temporal variations in the loan disbursements and use an estimation strategy that controls for potential biases due to treatment effect heterogeneity. The results suggest that even small loans are effective in generating lasting positive impacts on accepted financial health indicators, such as Vantage Score (Credit Score), Debt-to-Income Ratio, and Credit Utilization Ratio. We obtain similar robust results for subprime and startup borrowers, who are known to face difficulties securing credit.

Suggested Citation

  • Banasaz, Mohammadmahdi & Bose, Niloy & Sedaghatkish, Nazanin, 2025. "Identification of loan effects on personal finance: A case for small U.S. entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:jeborg:v:234:y:2025:i:c:s0167268125001027
    DOI: 10.1016/j.jebo.2025.106982
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    More about this item

    Keywords

    Small U.S. entrepreneurs; Identification of loan effects; Financial health; Dynamic treatment effects; Treatment effect heterogeneity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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