The impact of microcredit on small firms in Brazil: A potential to promote investment,growth and inclusion |
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| Institution: | 1. Insper, Brazil;2. University of Sussex, UK;1. Department of Economics, University of Bern, Switzerland;2. Department of Economic and Social Sciences, Università Politecnica delle Marche, Ancona, Italy;3. Department of Economics and Law, Sapienza University of Rome (Italy) and Department of Economics, University of Antwerp, Belgium;4. Department of Economics and Finance, Luiss Guido Carli, Rome, Italy;1. UniSA Business, University of South Australia, GPO Box 2471, Adelaide, South Australia 5001, Australia;2. College of Business, Government & Law, Flinders University, Bedford Park, South Australia 5042, Australia;1. VPNC Lab, Faculty of Law, Economics and Management of Jendouba, University of Jendouba, Tunisia;2. Aix-Marseille University CERGAM EA 4225, France;1. University of Bonn, Germany;2. University of Warsaw, Poland;1. LEAD, Université de Toulon, France;2. Université Côte d′Azur, CNRS, GREDEG, France;3. Banque de France, 31 rue Croix des Petits Champs, 75049, Paris cedex, France |
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| Abstract: | Over the past decades, microfinance has become a pillar of economic development policies. However, despite the great popularity of micro-credit programs, the results of empirical studies are mixed. Thus, more research is needed to help us understand how effective microfinance is in achieving poverty reduction, economic development, and financial inclusion. This paper contributes to the literature by relying on a unique dataset from one of the biggest Fintech companies in Brazil to study the impact of microcredit on small firms’ outcomes. Using a difference-in-difference approach, we find that access to credit increases monthly revenues and profits by nearly 4.5%. We show that the effects are stronger for women-led businesses and less experienced entrepreneurs. In addition, we find that credit renewal strengthens the benefits of credit access. We discuss several policy implications from our results. In particular, the permanent availability of credit – as opposed to one-time/short-term interventions -- has greater potential to generate virtuous cycles of ever more reinvestment and growth, indicating larger gains from relaxing borrowing constraints in the long run. |
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| Keywords: | Microfinance Economic development Impact evaluation Entrepreneurship |
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