The Causal Impact of Covid-19 Government-backed Loans on MSMEs Liquidity and Earnings

Maikol Cerda, Paul Gertler, Sean Higgins, Ana María Montoya, Eric Parrado () and Raimundo Undurraga

No 12710, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: 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.

Keywords: RCT; Government-guaranteed loans; COVID-19 pandemic; Eventstudy; Impact Evaluation (search for similar items in EconPapers)
JEL-codes: J16 L26 P52 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-ent, nep-exp, nep-inv, nep-mfd and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:12710

DOI: 10.18235/0004754

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