The impact of microcredit on small firms in Brazil: A potential to promote investment, growth and inclusion

Luis Bettoni, Marcelo Santos and Gilberto Oliveira Filho

Journal of Policy Modeling, 2023, vol. 45, issue 3, 592-608

Abstract: Over the past decades, microfinance has become a pillar of economic development policies. However, despite the great popularity of micro-credit programs, the results of empirical studies are mixed. Thus, more research is needed to help us understand how effective microfinance is in achieving poverty reduction, economic development, and financial inclusion. This paper contributes to the literature by relying on a unique dataset from one of the biggest Fintech companies in Brazil to study the impact of microcredit on small firms’ outcomes. Using a difference-in-difference approach, we find that access to credit increases monthly revenues and profits by nearly 4.5%. We show that the effects are stronger for women-led businesses and less experienced entrepreneurs. In addition, we find that credit renewal strengthens the benefits of credit access. We discuss several policy implications from our results. In particular, the permanent availability of credit – as opposed to one-time/short-term interventions -- has greater potential to generate virtuous cycles of ever more reinvestment and growth, indicating larger gains from relaxing borrowing constraints in the long run.

Keywords: Microfinance; Economic development; Impact evaluation; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: D14 G21 I31 I32 O12 O16 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:45:y:2023:i:3:p:592-608

DOI: 10.1016/j.jpolmod.2023.04.005

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