Mutual Guarantee Institutions and Small Business Finance

F. Columba, L. Gambacorta, P.E. Mistrulli

Research output: Working paperDiscussion paperOther research output

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.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages35
Volume2009-05 S
DOIs
Publication statusPublished - 2009

Publication series

NameEBC Discussion Paper
Volume2009-05 S

Fingerprint

Small business finance
Guarantee
Small firms
Credit
Small business
Credit markets
Willingness
Peer monitoring
Informational asymmetry
Incentives
Lending
Relationship lending
Group lending
Responsibility

Keywords

  • credit guarantee schemes
  • group lending
  • joint liability
  • microfinance
  • peer monitoring
  • small business finance

Cite this

Columba, F., Gambacorta, L., & Mistrulli, P. E. (2009). Mutual Guarantee Institutions and Small Business Finance. (EBC Discussion Paper; Vol. 2009-05 S). Tilburg: EBC. https://doi.org/10.2139/ssrn.1406424
Columba, F. ; Gambacorta, L. ; Mistrulli, P.E. / Mutual Guarantee Institutions and Small Business Finance. Tilburg : EBC, 2009. (EBC Discussion Paper).
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Columba, F, Gambacorta, L & Mistrulli, PE 2009 'Mutual Guarantee Institutions and Small Business Finance' EBC Discussion Paper, vol. 2009-05 S, EBC, Tilburg. https://doi.org/10.2139/ssrn.1406424

Mutual Guarantee Institutions and Small Business Finance. / Columba, F.; Gambacorta, L.; Mistrulli, P.E.

Tilburg : EBC, 2009. (EBC Discussion Paper; Vol. 2009-05 S).

Research output: Working paperDiscussion paperOther research output

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Columba F, Gambacorta L, Mistrulli PE. Mutual Guarantee Institutions and Small Business Finance. Tilburg: EBC. 2009. (EBC Discussion Paper). https://doi.org/10.2139/ssrn.1406424