The causal impact of Covid-19 government-backed loans on MSMEs liquidity and earnings

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IDB Working Paper Series ; No. IDB-WP-1430

Classification and Topics

• Classification: Wirtschaft ; Economics of Gender; Non-labor Discrimination ; Entrepreneurship ; Comparative Studies of Particular Economies
• Subject: RCT ; Government-guaranteed loans ; Covid-19 pandemic ; Eventstudy ; Impact evaluation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cerda, Maikol ; Gertler, Paul J. ; Higgins, Sean ; Montoya, Ana María ; Parrado, Eric ; Undurraga, Raimundo
• Event: Veröffentlichung
• (who): Inter-American Development Bank (IDB)
• (where): Washington, DC
• (when): 2023

Further information

• DOI: doi:10.18235/0004754
• Last update: 10.03.2025, 11:42 AM CET