Mutual guarantee insitutions and small business finance
Columba,F. Gambacorta,L. Mistrulli,P.E.
Columba,F.
Gambacorta,L.
Mistrulli,P.E.
Abstract
A large literature showed that small firms experience difficulties in accessing the credit market due to informational asymmetries; these may be mitigated by collateral or relationship lending, possibilities often precluded to small business. We investigate the effect on small business finance of an alternative contractual scheme based on group lending, the Mutual Guarantee Institution (MGI). We test whether firms affiliated to MGIs pay less for credit, due to a joint responsibility that provides affiliates with peer monitoring incentives. Hence, MGI willingness to post collateral signals firms credit-worthiness to banks. Our estimates indicate that indeed MGI affiliation improves small firms lending.
Description
Appeared earlier as CentER DP 2009-32 and EBC DP 2009-05S
Date
2010
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Publisher
Research Projects
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Keywords
SDG 1 - No Poverty, SDG 8 - Decent Work and Economic Growth, SDG 9 - Industry, Innovation, and Infrastructure
Citation
Columba, F, Gambacorta, L & Mistrulli, P E 2010, 'Mutual guarantee insitutions and small business finance', Journal of Financial Stability, vol. 6, no. 1, pp. 45-54.
License
info:eu-repo/semantics/restrictedAccess