Small Firm Finance, Credit Rationing, and the Impact of SBA‐Guaranteed Lending on Local Economic Growth

Breakthrough Path of Low-Level Equilibrium of China's Policy-Oriented Financing Guarantee Market

Policy-oriented financing guarantee schemes are widely adopted in the world to alleviate the financing difficulties of small and medium-sized enterprises. However, the development level of policy-oriented financing guarantee market in China has not reached the desired high-level equilibrium target, even though governments have issued a series of guiding policies. Accordingly, based on the evolutionary game theory, this study establishes and analyzes the game model between local governments, guarantee institutions, and banks. Then, the breakthrough effects of different paths on the low-level equilibrium of the guarantee market are simulated. The results show that strengthening superior government's performance appraisal intensity can only partially delay the “window period” of the low-level equilibrium, while adjusting local governments' compensation coefficients or increasing banks' risk sharing ratio have further synergistic effects on the realization of the high-level equilibrium. Additionally, dynamic reward and penalty mechanism of the local governments can effectively restrain the unbalanced state of financing guarantee market caused by banks' excess compensation risk, and finally impel the stabilization of the high-level equilibrium state.

Assessing the Empirical Linkage Among Access to Finance, Firm Quality, and Firm Performance: New Insight From Bangladeshi SMEs'

Access to finance plays a central pillar on the sustainable firm growth of developing and developed nations. This study depicts the linkage between access to external finance, firm quality, and firms’ performance as measured by labor productivity for sustainable small- and medium-sized enterprises (SMEs’) development by employing the ordinary least squares (OLS) regression and propensity score matching (PSM) techniques to alleviate the selection bias and endogeneity issue on Word bank enterprise survey (WBES) cross-sectional firm-level data of 3,196 Bangladeshi SMEs for 2007–2013 period. Empirical evidence linking access to external finance and labor productivity has been positive and significant. However, our finding explores a negative but significant relationship between exports and SME labor productivity. A further look into the results also exhibits no statistical significance in the interaction effect between firm quality and access to finance on labor productivity. Moreover, the study anticipates novel empirical support that, the disintegration effect of export sales between direct and indirect exports with labor productivity for credit-accessed firms, is also found statistically insignificant. Then, several policies are drawn from the results to gain international competitiveness, and to ensure more external finance channels for enhancing SMEs’ performance and sustainable firm growth.

Women’s Entrepreneurship and Government Policy: Facilitating Access to Credit through a National Program in Chile

In this paper, I evaluate the impact of a multidimensional national program implemented in Chile during the second term of President Bachelet to facilitate female entrepreneurs’ access to credit, reduce gender gaps in financial inclusion, and change patriarchal stereotypes. I construct a difference-in-difference estimate of the program. My findings indicate that the program has successfully met its principal aim: the loans granted to women have increased, reducing the gender gap in this dimension. In addition, evidence of heterogeneity by the economic sector has emerged. This evidence aligns with prior research that has emphasised that public policies should not be designed and implemented under the logic of "one type of program fits all". The program analysed in this study is an example of a national public policy that has improved female entrepreneurs’ access to funding, reduced gender gaps in a Latin American country, and potentially offered lessons to other Latin American and middle-income countries worldwide.

When the rainy day is the worst hurricane ever: the effects of governmental policies on SMEs during COVID-19

We investigate the impact of COVID-19 on 42,401 UK SMEs and how government intervention affects their capability to survive the pandemic. The results show that, without governmental mitigation schemes, 59% of UK SMEs report negative earnings and that their residual life is reduced from 164 to 139 days. The analysis shows that government support scheme reduces the number of SMEs with negative earnings to 49% and allows extending the residual life for SMEs with negative earnings to 194 days. In addition, the support scheme reduces the number of jobs at risk in our sample by around 20%. However, our results suggest that weaker firms benefit more than strong ones. Besides, industries that are worst hit by COVID-19 are not those that benefit most from the government support scheme. We ascribe this result to the fact that the schemes do not discriminate between those firms that deserve support and those that do not deserve it.

The Credit-Increasing Mechanism of Small and Medium-Sized Enterprises: Evidence from Taizhou’s Credit Guarantee Fund

Increasing the credit of small and medium-sized enterprises (SMEs) is the key to solving SMEs’ financing difficulties. Because of their small size and fixed assets, it is not easy for SMEs to get loans from mortgage or private guarantee institutions. Therefore, to alleviate the credit rationing faced by SMEs and reduce financing cost, the key is to increase corporate credit score. This study uses small and micro-businesses’ data from Taizhou city to identify the key factors affecting corporate default. The results show that enterprise scale, enterprise operation status, financial environment, and credit-increasing means are the key factors affecting enterprise default, and credit protection funds do not play a significant role. Therefore, it can be argued that at present, the credit growth of SMEs still relies mainly on fixed asset mortgage, while the role of credit protection funds needs further refinement to effectively assist SMEs to solve difficult and expensive financing.