Evalutating development assistance to SMEs in Albania Andrea Gamba Alba di Canazei, July 1, 2008 Motivation What is the impact of subsidized credit on firms performance? Are there potential spillovers to the entire economy? Does capacity building matter? • Evidence of credit constraints in rural markets in developing countries Microfinance, credit unions, group financing • No compelling evidence about constraints in urban areas and for manufacturing firms. Many programs subsidize loans to Small and medium sized firms, both in developing and developed countries. • Italian Development Cooperation about to launch ambitious SME assistance programme in Albania Related literature • Fazzari, Hubbard and Petersen (1998); Lamont (1997); Rosenzweig and Wolpin (1993): financially constrained firms show excess sensitivity of investment to movements in cash flows • Kaplan and Zingales (2000, 2002): financial constraints are not robustly related to investment-cash flow sensitivity • Banerjee and Duflo (2004): quasi natural experiment on SMEs in India. credit constraints are high and directed credit alleviates the problem Main empirical issues • Impossible to isolate true credit demand • Credit substitutes can be correlated with unobservable productivity • OECD and donor community: build capacity of firms, rather than give “plain” credit! Albanian economic and financial context • Loan stock on GDP: 18% (August 2007). Serbia has 23%, Croatia 66%. • But credit is growing rapidly: 82% year on year in 2005 and 50% in 2006. underdeveloped financial markets, with possibly deteriorating loan quality. • High unemployment, large trade deficit, dependence on remittances, a very weak manufacturing sector. A snapshot on Albanian enterprises Settori di attività Dimensione delle imprese 100% 100% 90% 90% 80% 80% 70% Servizi 70% Commercio 60% 60% 21-80 Trasporti 50% 6-20 50% Costruzione 40% 1-5 40% Manifattura 30% 30% Trasf. agricola 20% 20% 10% 10% 0% 0% Shkoder Kukes Lezhe Albania Shkoder Kukes Lezhe Albania • Very large incidence of micro enterprises • High prevalence of service activities. • Firms concentrated in Tirana-Duress area. The Italian SMEs Development Assistance Programme • €25 million credit line to eligible SMEs – Eligibility mainly on size • €2.5 million for Guarantee Fund – Expected to cover 10% of collateral of qualified loans • €1.8 million in TA – Seminars, Capacity building of stakeholders, “train the trainers” Empirical strategy • Data collected from firm balance sheets and additional surveys. – Questionnaire design: suggestions welcome! Would it be possible to analyze stakeholders? • Trackability for last two years and throughout the programme (three years) • Non randomized programme: need matching with appropriate control group – Cooperation with Albanian institutions to get representative control sample Some issues • Matching would not wipe out “unobservables” that drive self selection (say productivity) – Alternative approach: first match regions where info about programme is disseminated and similar ones where no such activity takes place – Use info dissemination (ITT) as instrument? (Thanks Nava!) • What if criteria for lending are changed on the way? • Is it possible to disentangle simple credit from capacity building? Need double randomization? • What about the guarantee fund? Difficult to find a control group for that! Some hopes • Programme in launching phase – openness to amendments to facilitate rigorous inference! • Government and stakeholder cooperation • Your suggestions! THANK YOU!
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