Do subsidised small loans work?: Lessons from Lazio’s Small Credit Fund

Oecd

No 2026/11, OECD Local Economic and Employment Development (LEED) Papers from OECD Publishing

Abstract: Micro and small enterprises (MSEs) often face persistent difficulties in accessing external finance, particularly small scale, long term loans. In many regions, including Lazio, private banks are reluctant to supply this segment of the market because the fixed administrative costs of small loans are high relative to expected returns. As a result, even creditworthy firms with viable investment projects may encounter credit rationing and higher borrowing costs. Over time, this can lead to adverse selection, where riskier firms have stronger incentives to ask for credit, further reinforcing the lenders’ reluctancy to serve the market.The Small Credit Fund (Fondo Piccolo Credito, FPC) was introduced to address this market failure by providing zero interest loans to micro and small firms that fall below standard banking thresholds but are not inherently risky. The key policy issue is whether such public financial instruments genuinely relax binding credit constraints and support firm development, or whether they merely substitute for private finance and expose beneficiaries to new financial risks without delivering sustained economic benefits.

Date: 2026-06-15
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1787/6ad62577-en (text/html)

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:oec:cfeaaa:2026/11-en

Access Statistics for this paper

More papers in OECD Local Economic and Employment Development (LEED) Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().