The determinants of credit restrictions and their impact on micro firms: the case of Colombia

Jhon Mora Rodriguez () and Andres David Espada Castro

Journal of Economic Studies, 2023, vol. 51, issue 6, 1231-1246

Abstract: Purpose - This article analyzes the determinants of credit constraints and their effects on the productivity of micro-firms in Colombia. Design/methodology/approach - An Endogenous Switching Regression Model (ESRM) is estimated to analyze credit constraint impact on economic performance. Findings - The results show that owner characteristics such as age and gender decrease the likelihood of being constrained. Firms' characteristics, such as legal status, the formality of the employees, commercial property and savings, are important for reducing credit constraints. Originality/value - This article discusses how formal credit restrictions harm the economic performance of Colombia's micro-firms. The results show that the productivity of the micro firms in Colombia could increase, on average, by U$ 825 USD when all types of restrictions are eliminated.

Keywords: Credit constraints; Formality; Small business; Productivity; Endogenous switching regression; C38; C58; D82; O12; O16 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-08-2023-0403

DOI: 10.1108/JES-08-2023-0403

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