The Causal Impact of Covid-19 Government-backed Loans on MSMEs Liquidity and Earnings
We conducted two randomized controlled trials (RCTs) to evaluate the impact of government-guaranteed loans offered by the Chilean and Colombian governments. The public funds of these programs greatly expanded following the start of the Covid-19 pandemic and offered loans to Micro, Small and Medium Enterprises to mitigate the negative impact of the shock. Through a collaboration with private banks, we launched two experiments which offered loans to a sub-set of the 10,072 Chilean and 3,079 Colombian small businesses that took part in our experiments. Most of these firms had previously applied for a loan during the pandemic--but prior to the RCTs--but were rejected by banks due to their risk analysis of the firms. With take-up rates of 27% and 29%, respectively, we find that Covid-19 loans had a significant positive impact on the total liquidity that treated MSMEs could access: total liquidity with the formal banking system increased by 15.7% (statistically significant at the 1% level). The results of our RCTs will inform Latin American governments concerning their strategies to support MSMEs via government-backed loan programs and will shape similar public policies in the future.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Randomized Controlled Trial, Small Business, Bank Loan, Economy, Coronavirus, Pandemic, Liquidity, Impact Evaluation, J16 - Economics of Gender • Non-labor Discrimination, L26 - Entrepreneurship, P52 - Comparative Studies of Particular Economies, RCT;Government-guaranteed loans;COVID-19 pandemic;Eventstudy;Impact Evaluation, |
| Online Access: | http://dx.doi.org/10.18235/0004754 https://publications.iadb.org/en/causal-impact-covid-19-government-backed-loans-msmes-liquidity-and-earnings |
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