The economic recovery from the COVID-19 crisis hinges on the profitability and survival of small and medium enterprises (SMEs), which employ a large fraction of the world’s workforce. Policy responses have varied widely across states in the US and across countries around the world. Among the most widespread policies implemented to mitigate the economic effects of the pandemic are large economic stimulus packages, often including state guaranteed loans and other programs to support SMEs. Exploiting variation in the rollout of COVID-19 policies in several countries in Latin America, we propose a two-part project to (i) track and measure the economic impact of COVID-19 on SMEs, as well as the impacts of policies designed to mitigate its effects, and (ii) experimentally evaluate the impact of credit on SME performance during the pandemic. For the descriptive part of the project, we utilize anonymized, transaction-level administrative data for individual firms that are provided by our partnering financial institutions in Brazil, Chile, Colombia, the Dominican Republic, Mexico, Paraguay, and Peru. With these data, we track and measure the impact of the pandemic on economic outcomes such as firm survival, sales, employment, and profits. Furthermore, our ability to disaggregate the banking data into online and POS transactions will allow us to address important questions related to financial technology adoption. Did firms with a greater online presence and/or ability to process credit and debit cards have higher survivability rates during the COVID-19 pandemic? Do we observe a shift towards digitalization from firms with little or no online presence before the pandemic and are these shifts durable? To experimentally assess the effect of government-guaranteed loans on these outcomes, two banks in Chile and Colombia are currently implementing randomized controlled trials (RCTs). In those RCTs, we randomly assign some SMEs to receive a pre-approved offer for a loan that is guaranteed by the government as part of their COVID-19 policy. We hypothesize that SMEs randomly selected to receive a government-guaranteed loan will experience higher subsequent sales, probability of survival, and retention of employees than SMEs that do not receive a pre-approved loan offer.
|Effective start/end date
|9/1/21 → 2/28/25
- University of California, Berkeley (52597)
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