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Second-tier Government Banks and Access to Credit: Micro-Evidence from Colombia

  • Marcela Eslava
  • Alessandro Maffioli
  • Marcela Meléndez Arjona

Government-owned development banks have often been justified by the need to respond to financial market imperfections that hinder the establishment and growth of promising businesses, and as a result, stifle economic development more generally. However, evidence on the effectiveness of these banks in mitigating financial constraints is still lacking. To fill this gap, this paper analyzes the impact of Bancoldex, Colombia's publicly owned development bank, on access to credit. It uses a unique dataset that contains key characteristics of all loans issued to businesses in Colombia, including the financial intermediary through which the loan was granted and whether the loan was funded with Bancoldex resources. The paper assesses effects on access to credit by comparing Bancoldex loans to loans from other sources and study the impact of receiving credit from Bancoldex on a firm's subsequent credit history. To address concerns about selection bias, it uses a combination of models that control for fixed effects and matching techniques. The findings herein show that credit relationships involving Bancoldex funding are characterized by lower interest rates, larger loans, and loans with longer terms. These characteristics translated into lower average interest rates and larger average loans for firms that used Bancoldex credit. Average loans of Bancoldex' beneficiaries also exhibit longer terms, although this effect can take two years to materialize. Finally, the findings show evidence of a demonstration effect of Bancoldex: beneficiary firms that have access Bancoldex credit are able to significantly expand the number of intermediaries with whom they have credit relationships.

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Paper provided by Inter-American Development Bank in its series IDB Publications (Working Papers) with number 64578.

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Date of creation: Mar 2012
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Handle: RePEc:idb:brikps:64578
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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  2. João Alberto De Negri & Alessandro Maffioli & César Rodríguez & Gonzalo Vázquez, 2011. "The Impact of Public Credit Programs on Brazilian Firms," IDB Publications (Working Papers) 61998, Inter-American Development Bank.
  3. Shawn Cole, 2009. "Fixing Market Failures or Fixing Elections? Agricultural Credit in India," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 219-50, January.
  4. Mathias Dewatripont & Eric Maskin, 1995. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9603, ULB -- Universite Libre de Bruxelles.
  5. Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May.
  6. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  7. Marcela Eslava & Alessandro Maffioli & Marcela Meléndez Arjona, 2012. "Second-tier Government Banks and Firm Performance: Micro-Evidence from Colombia," IDB Publications (Working Papers) 61518, Inter-American Development Bank.
  8. de Aghion, Beatriz Armendariz, 1999. "Development banking," Journal of Development Economics, Elsevier, vol. 58(1), pages 83-100, February.
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