Financing in times of crisis: lessons from the impact assessment of Banco Provincia's working capital credit line during the pandemic

Abstract

The unprecedented nature of the Covid-19 pandemic generated the challenge of studying the impact of Development Bank financing in mitigating this great shock. The objective of this study is to analyze the impact, possible heterogeneous effects and the mechanism of action of the Working Capital credit line of Banco Provincia, designed to support Micro, Small and Medium Enterprises, and thus provide evidence on the effectiveness of public banking at a subnational level. The results obtained by applying a quasi-experimental methodology, which combines Propensity Score Matching with a Fixed Effects model, indicate that the companies that accessed the credit achieved a significantly higher level of employment than the control group, mitigating the effect of the pandemic. These results remain robust to controls for previous employment trajectories, exports, access to credit and are consistent in companies of different types and sizes. Furthermore, the findings are consistent with previous research conducted at the national level.

Date of presentation: 06-26-2023

Date of approval: 09-22-2023

JEL classification: D22, G21, H81, J23, O1