Formal Credit and SME Performance: Reviewing Evidence from Impact Evaluations

Irani Arráiz, Razvan Vlaicu and Patricia Yáñez-Pagans

No 14711, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper reviews the impact evaluation evidence on how expanding formal credit affects small and medium enterprise (SME) performance, focusing on developing countries, particularly Latin America, while using evidence from advanced economies to sharpen mechanisms and external validity. Across the core evidence base, the meta-analytic mean effects of formal loans are economically meaningful: employment rises by about 12% on average, sales by about 18%, and profits by about 18%, albeit with substantial heterogeneity across settings, programs, and outcome horizons. The effects are larger in some large-scale public interventions and in programs explicitly targeting constrained firms but smaller or statistically indistinguishable from zero in others. Taken together, the evidence supports the view that relaxing financial constraints can raise SME scale and performance, but it also underscores that credit expansions are not automatically welfare improving, can create distributional and competitive spillovers, and are sensitive to program design, targeting, and local financial architecture.

Keywords: credit access; SME performance; Developing countires (search for similar items in EconPapers)
JEL-codes: E22 E24 E50 G21 (search for similar items in EconPapers)
Date: 2026-08
New Economics Papers: this item is included in nep-ent and nep-fdg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... pact-Evaluations.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14711

DOI: 10.18235/0014476

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().