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Second-tier Government Banks and Access to Credit: Micro-Evidence from Colombia

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Listed:
  • Eslava, Marcela
  • Maffioli, Alessandro
  • Meléndez Arjona, Marcela

Abstract

Government-owned development banks have often been justified by the need to respond to financial market imperfections that hinder the establishment and growth of promising businesses, and as a result, stifle economic development more generally. However, evidence on the effectiveness of these banks in mitigating financial constraints is still lacking. To fill this gap, this paper analyzes the impact of Bancoldex, Colombia's publicly owned development bank, on access to credit. It uses a unique dataset that contains key characteristics of all loans issued to businesses in Colombia, including the financial intermediary through which the loan was granted and whether the loan was funded with Bancoldex resources. The paper assesses effects on access to credit by comparing Bancoldex loans to loans from other sources and study the impact of receiving credit from Bancoldex on a firm's subsequent credit history. To address concerns about selection bias, it uses a combination of models that control for fixed effects and matching techniques. The findings herein show that credit relationships involving Bancoldex funding are characterized by lower interest rates, larger loans, and loans with longer terms. These characteristics translated into lower average interest rates and larger average loans for firms that used Bancoldex credit. Average loans of Bancoldex' beneficiaries also exhibit longer terms, although this effect can take two years to materialize. Finally, the findings show evidence of a demonstration effect of Bancoldex: beneficiary firms that have access Bancoldex credit are able to significantly expand the number of intermediaries with whom they have credit relationships.

Suggested Citation

  • Eslava, Marcela & Maffioli, Alessandro & Meléndez Arjona, Marcela, 2012. "Second-tier Government Banks and Access to Credit: Micro-Evidence from Colombia," IDB Publications (Working Papers) 3943, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:3943
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    References listed on IDEAS

    as
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    6. Eslava, Marcela & Maffioli, Alessandro & Meléndez Arjona, Marcela, 2012. "Second-tier Government Banks and Firm Performance: Micro-Evidence from Colombia," IDB Publications (Working Papers) 3825, Inter-American Development Bank.
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    More about this item

    Keywords

    Second-tier development banks; access to credit; impact evaluation; panel data; interest rates; loan size; loan term; demonstration effects;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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