Mutual Guarantee Institutions and Small Business Finance

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

Research output: Working paperDiscussion paperOther research output

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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
PublisherFinance
Number of pages35
Volume2009-32 S
Publication statusPublished - 2009

Publication series

NameCentER Discussion Paper
Volume2009-32 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. (CentER Discussion Paper; Vol. 2009-32 S). Tilburg: Finance.
Columba, F. ; Gambacorta, L. ; Mistrulli, P.E. / Mutual Guarantee Institutions and Small Business Finance. Tilburg : Finance, 2009. (CentER Discussion Paper).
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Columba, F, Gambacorta, L & Mistrulli, PE 2009 'Mutual Guarantee Institutions and Small Business Finance' CentER Discussion Paper, vol. 2009-32 S, Finance, Tilburg.

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

Tilburg : Finance, 2009. (CentER Discussion Paper; Vol. 2009-32 S).

Research output: Working paperDiscussion paperOther research output

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KW - group lending

KW - joint liability

KW - microfinance

KW - peer monitoring

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Columba F, Gambacorta L, Mistrulli PE. Mutual Guarantee Institutions and Small Business Finance. Tilburg: Finance. 2009. (CentER Discussion Paper).