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How Prevalent Are Credit-Constrained Firms in the Formal Private Sector ?Evidence Using Global Surveys

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  • Islam,Asif Mohammed
  • Rodriguez Meza,Jorge Luis

Abstract

This study develops a measure of firm-level credit constraints by leveraging refinements insurvey instruments for a widely used database. Using data on more than 65,000 firms across 109 economies, the studyuncovers several insights. Around 30 percent of firms in the formal private sector are credit constrained. Firms that arecredit-constrained tend to be smaller and negatively correlated with performance. The more developed the economy,the lower the share of credit-constrained firms. One striking finding is that 52 percent of firms do not applyfor loans as they have sufficient credit. For some economies, this may be more indicative of poor opportunitiesfor the expansion of firms and thus the lack of demand for credit. The findings suggest that for policies that improveaccess to credit to be effective, they should go hand in hand with interventions that provide opportunities for firmsto expand.

Suggested Citation

  • Islam,Asif Mohammed & Rodriguez Meza,Jorge Luis, 2023. "How Prevalent Are Credit-Constrained Firms in the Formal Private Sector ?Evidence Using Global Surveys," Policy Research Working Paper Series 10502, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10502
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    References listed on IDEAS

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