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Firm-Level Impact of Credit Guarantees: Evidence from Turkish Credit Guarantee Fund

Author

Listed:
  • Ufuk Akcigit
  • Unal Seven
  • Ibrahim Yarba
  • Fatih Yilmaz

Abstract

This paper studies the firm-level short-term impact of one of the largest credit guarantee programs in the world recently implemented in Turkey. Using a combination of firm-level administrative databases of tax registry, credit registry, and the credit guarantee fund (CGF) registry, we analyze the characteristics of the CGF supported firms and the program’s impact on their employment, sales, and credit default probability. We find that the CGF program on average had a positive impact on the performance of treated firms, where the CGF supported firms were able to increase their employment by 17 percent, sales by 70 percent and reduce their credit default probability by 0.6 percentage point relative to their matched-control group. Evaluating our estimation results at variable averages shows that every 1 million TL credit generated via the CGF program preserved 2.7 extra employment and stimulated about 3 million TL in sales. We also observe an overall increase in firm indebtedness, which may adversely affect firms’ financial health in the long-run. Moreover, our findings reveal that the program impact is heterogeneous across firm size and sector groups. We use this heterogeneity to perform counter-factual policy exercises indicating that redesigning the program with such priorities can bring substantial efficiency gains.

Suggested Citation

  • Ufuk Akcigit & Unal Seven & Ibrahim Yarba & Fatih Yilmaz, 2021. "Firm-Level Impact of Credit Guarantees: Evidence from Turkish Credit Guarantee Fund," Working Papers 2110, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2110
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-10
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    Citations

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    Cited by:

    1. Huneeus, Federico & Kaboski, Joseph & Larrain, Mauricio & Schmukler, Sergio L. & Vera, Mario, 2022. "The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk," CEPR Discussion Papers 17061, C.E.P.R. Discussion Papers.
    2. Büyükbaşaran, Tayyar & Karasoy-Can, Gökçe & Küçük, Hande, 2022. "Macroeconomic effects of bank lending in an emerging economy: Evidence from Turkey," Economic Modelling, Elsevier, vol. 115(C).
    3. Topaloğlu-Bozkurt, Ayça & Tanyeri-Günsür, Başak, 2023. "Pricing the net benefits of a public loan guarantee scheme in a developing market," Economics Letters, Elsevier, vol. 232(C).
    4. Yusuf Kenan Bağır & Ünal Seven, 2022. "Access to finance and productivity growth: the role of own and suppliers’ financial constraints," Empirical Economics, Springer, vol. 63(6), pages 3095-3119, December.

    More about this item

    Keywords

    Credit guarantee schemes; SME lending; Impact analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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