Small Business Economics

, Volume 43, Issue 3, pp 711–724

Partial credit guarantees and firm performance: evidence from Colombia

  • Irani Arráiz
  • Marcela Meléndez
  • Rodolfo Stucchi


This paper studies the effect of government-backed partial credit guarantees on firms’ performance in Colombia. These guarantees are automatically granted by the National Guarantee Fund (NGF) to firms without enough collateral to lift their credit constraints. We put together a panel of firms covering the period 1997–2007 that allows us to control for observed and unobserved firm characteristics potentially affecting both the selection of firms into the program and firms’ performance. We find that firms that gain access to credit backed by the NGF were able to grow in terms of both output and employment. However, we do not find any effect on productivity, wages, or investment.


Partial credit guarantee Access to credit Firm growth Job creation Productivity 

JEL Classifications

H43 L25 O12 O54 L26 


  1. Arráiz, I., Henríquez, F., & Stucchi, R. (2013). Supplier development programs and firm performance: Evidence from Chile. Small Business Economics, 41(1), 277–293.CrossRefGoogle Scholar
  2. Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25(6), 932–952.CrossRefGoogle Scholar
  3. Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2008a). Financing patterns around the world: Are small firms different? Journal of Financial Economics, 89(3), 467–487.CrossRefGoogle Scholar
  4. Beck, T., Demirgüç-Kunt, A., & Martínez Pería, M. (2008b). Bank financing for SMEs around the World: Drivers, obstacles, business models, and lending practices. Policy Research Working Paper 4785, World Bank, Washington, DC.Google Scholar
  5. Beck, T., Demirgüç-Kunt, A., & Martínez Pería, M. (2009). Bank financing for SMEs: Evidence across countries and bank-qwnership types. European Banking Center Discussion Paper No. 2009–20.Google Scholar
  6. Beck, T., & Levine, R. (2005). Legal institutions and financial development. In C. Menard, & M. Shirley (Eds.), Handbook of new institutional economics. Dordrecht: Kluwer.Google Scholar
  7. Beck, T., Levine, R., & Loayza, N. (1999). Finance and the sources of growth. World Bank Policy Research Working Paper No. 2057, World Bank, Washington, DC.Google Scholar
  8. Bester, H. (1985). Screening vs. rationing in credit markets with imperfect information. The American Economic Review, 75(4), 850–855.Google Scholar
  9. Bernanke, B., Gertler, M., & Gilchrist, S. (1996). The financial accelerator and the flight to quality. The Review of Economics and Statistics, 78(1), 1–15.Google Scholar
  10. Boocock, G., & Shariff, M. (2005). Measuring the effectiveness of credit guarantee schemes: Evidence from Malaysia. International Small Business Journal, 23(4), 427–454.CrossRefGoogle Scholar
  11. Caliendo, M., & Kopening, S. (2008). Some practical guidance for the implementation of propensity score matching. Journal of Economic Surveys, 22, 31–72.CrossRefGoogle Scholar
  12. Castillo, V., Maffioli, A., Rojo, S., & Stucchi, R. (2013). The effect of innovation policy on SMEs employment and wages in Argentina. Small Business Economics (forthcoming). doi:10.1007/s11187-013-9485-9.
  13. Chandler, V. (2012). The economic impact of the Canada small business financing program. Small Business Economics, 39(1), 253–264.CrossRefGoogle Scholar
  14. de la Torre, A., Gozzi, J., & Schmukler, S. (2007). Innovative experiences in access to finance: Market friendly roles for the visible hand? Policy Research Working Paper 4326, World Bank, Washington, DC.Google Scholar
  15. de la Torre, A., Martínez Pería, M., & Schmukler, S. (2009). Drivers and obstacles to banking SMEs: The role of competition and the institutional framework. CESifo Working Paper No. 2651.Google Scholar
  16. de la Torre, A., Martínez Pería, M., & Schmukler, S. (2010). Bank involvement with SMEs: Beyond relationship lending. Journal of Banking & Finance, 34(2010), 2280–2293.CrossRefGoogle Scholar
  17. Demirgüç-Kunt, A., & Maksimovic, V. (1998). Law, finance, and firm growth. Journal of Finance, 53(6), 2107–2137.CrossRefGoogle Scholar
  18. Eslava, M., Haltiwanger, J., Kugler, A., & Kugler, M. (2006). Plant turnover and structural reforms in Colombia. IMF Staff Papers, Palgrave Macmillan, 53(Special Issue), 58–75.Google Scholar
  19. Evans, D. (1987). The relationship between firm growth, size, and age: Estimates for 100 manufacturing industries. The Journal of Industrial Economics, 35(4), 567–581.CrossRefGoogle Scholar
  20. Fazzari, S., Hubbard, R., Petersen, B., Blinder, A., & Poterba, J. (1988). Financing constraints and corporate investment. Brookings Papers on Economic Activity, 1988(1), 141–206.CrossRefGoogle Scholar
  21. Gilchrist, S., & Himmelberg, C. (1995). Evidence on the role of cash flow for investment. Journal of Monetary Economics, 36(3), 541–572.CrossRefGoogle Scholar
  22. Heckman, J., LaLonde, R., & Smith, J. (1999). The economics and econometrics of active labor market programs. In O. Ashenfelter & D. Card (Eds.), The handbook of labor wconomics (Vol. 3, pp. 1865–2097). Amsterdam: North-Holland.CrossRefGoogle Scholar
  23. Heinrich, C., Maffioli, A., & Vázquez, G. (2010). A primer for applying Propensity-Score Matching. SPD Working Papers 1005, Inter-American Development Bank, Office of Strategic Planning and Development Effectiveness (SPD).Google Scholar
  24. Honohan, P. (2010). Partial credit guarantees: Principles and practice. Journal of Financial Stability, 6(1), 1–9.CrossRefGoogle Scholar
  25. Hsieh, C., & Parker, J. (2007). Taxes and growth in a financially underdeveloped country: Evidence from the Chilean investment boom. Economia, Fall 2007, 1–53.Google Scholar
  26. IADB. (2004). Unlocking credit: The quest for deep and stable lending. Washington, DC: Inter-American Development Bank and Johns Hopkins University Press.Google Scholar
  27. Jayaratne, J., & Strahan, P. (1996). The finance-growth nexus: Evidence from bank branch deregulation. The Quarterly Journal of Economics, 111(3), 639–70.CrossRefGoogle Scholar
  28. King, R., & Levine, R. (1993). Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, 108(3), 717–737.CrossRefGoogle Scholar
  29. Kang, J., & Heshmati, A. (2008). Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea. Small Business Economics, 31(4), 445–462.CrossRefGoogle Scholar
  30. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131–1150.CrossRefGoogle Scholar
  31. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155.CrossRefGoogle Scholar
  32. Lelarge, C., Sraer, D., & Thesmar, D. (2010). Entrepreneurship and credit constraints: Evidence from a French loan guarantee program. In J. Lerner & A. Schoar (Eds.), International differences in entrepreneurship. Chicago: University of Chicago Press.Google Scholar
  33. Llisterri, J., Rojas, A., Mañueco, P., López, V., & García, A. (2006). Sistemas de Garantía de Crédito en América Latina. Washington, DC: Inter-American Development Bank.Google Scholar
  34. OECD. (2009). The impact of the global crisis on SME and entrepreneurship financing and policy responses: Contribution to the OECD strategic response to the financial and economic crisis. Paris: Organization for Economic Co-Operation and Development.Google Scholar
  35. Oh, I., Lee, J. D., Heshmati, A., & Choi, G. G. (2009). Evaluation of credit guarantee policy using propensity score matching. Small Business Economics, 33(3), 335–351.CrossRefGoogle Scholar
  36. Rajan, R., & Zingales, L. (1998). Financial dependence and growth. The American Economic Review, 88(3), 559–586.Google Scholar
  37. Rosenbaum, P., & Rubin, D. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70(1), 41–55.CrossRefGoogle Scholar
  38. Vogel, R., & Adams D. (1997). Costs and benefits of loan guarantee programs. The Financier-Analyses of Capital and Money market Transactions, 4, 22–29.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Irani Arráiz
    • 1
  • Marcela Meléndez
    • 2
  • Rodolfo Stucchi
    • 1
  1. 1.Inter-American Development BankWashingtonUSA
  2. 2.EconestudioBogotáColombia

Personalised recommendations