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Partial Credit Guarantees and Firm Performance: Evidence from the Colombian National Guarantee Fund

Author

Listed:
  • Irani Arráiz
  • Marcela Meléndez Arjona
  • Rodolfo Stucchi

Abstract

This paper studies the effect of government-backed partial credit guarantees on firms' performance. These guarantees are automatically granted to firms without enough collateral in order to lift their credit constraints. We put together a panel, covering the period 1997-2007, that combines data from DANE's Annual Manufacturing Survey; DIAN's export and import information; and firm-level records from the National Guarantee Fund (NGF), the government agency in charge of implementing this policy. Using propensity score matching and difference-in-differences, we found that firms that gain access to credit backed by the NGF are able to grow in terms of both output and employment. However, we did not find any effect on productivity, wages, or investment. These results suggest that firms use the new funds as working capital to grow their businesses rather than for investment in new durable goods that increase their capital stock.

Suggested Citation

  • Irani Arráiz & Marcela Meléndez Arjona & Rodolfo Stucchi, 2012. "Partial Credit Guarantees and Firm Performance: Evidence from the Colombian National Guarantee Fund," IDB Publications (Working Papers) 4089, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:4089
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    References listed on IDEAS

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    4. Beck, Thorsten & Klapper, Leora F. & Mendoza, Juan Carlos, 2010. "The typology of partial credit guarantee funds around the world," Journal of Financial Stability, Elsevier, vol. 6(1), pages 10-25, April.
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    6. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
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    Cited by:

    1. Giuliani, Elisa & Maffioli, Alessandro & Pacheco, Manuel & Pietrobelli, Carlo & Stucchi, Rodolfo, 2014. "Evaluating the Impact of Cluster Development Programs," Papers in Innovation Studies 2014/10, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    2. Grimm, Michael & Paffhausen, Anna Luisa, 2015. "Do interventions targeted at micro-entrepreneurs and small and medium-sized firms create jobs? A systematic review of the evidence for low and middle income countries," Labour Economics, Elsevier, vol. 32(C), pages 67-85.

    More about this item

    Keywords

    Financial Risk; Financial Services; Small and Medium-Sized Enterprises; Partial credit guarantee; access to credit; firm growth; job creation; productivity; SME; SMEs; PYMES; small and medium size enterprises; impact evaluation; evaluación de impacto; development effectiveness; efectividad en el desarrollo; productividad;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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