SMEs’ direct and indirect access to public guarantees: an evaluation of regional regulations

The Italian public guarantee scheme (Fondo di garanzia - FDG) is the main tool supporting SMEs’ access to credit. This work evaluates the impact of the regional laws limiting the FDG’s operations to loans guaranteed by mutual guarantee institutions. To this end, we exploit the regulations’ discontinuities that occurred in some Italian regions that have either abolished or introduced such a restriction. We study the effects of the regulation changes in a difference-in-differences setting where treated firms are located in regime switching regions and control firms are in neighbouring regions. We find that constraining access to the FDG’s publicly funded collateral to counter-guarantee schemes hampered SMEs’ access to finance overall. Removing the restriction increased both the number of firms with access to the FDG’s guarantees and the total size of the loans granted to treated SMEs of any size. Moreover, the relative cost of credit improved for treated firms. Conversely, the introduction of the restriction to counter-guarantees had mostly negative effects on the number, size and cost of loans granted to treated firms.