Incrementality of SME Loan Guarantees

Incrementality of SME Loan Guarantees In many countries, loan guarantee programs are important elements of government policy with respect to small- and medium-sized enterprises (SMEs). If loan guarantee schemes are to be effective, a majority of firms obtaining assistance through such a scheme ought not to be able to obtain financing from existing sources: a property known as incrementality or additionality. This paper describes a new approach to measuring incrementality. This work uses a two-stage process to estimate the incrementality of loans made under the terms of the Canada Small Business Financing (CSBF) program. First, a logistic regression-based model of loan outcomes (essentially a credit-scoring model) is estimated based on a large representative sample of SMEs. The resulting model was consistent with prior expectations and exhibited high levels of goodness-of-fit. The model was then employed to classify a sample of firms that had received loans under the terms of the loan guarantee scheme. Incremental loans ought to be classified as “turndowns” by the model; hence the proportion of loan guarantee recipients that the model classified as turndowns is a direct measure of incrementality. For the CSBF loan guarantee program incrementality was estimated (with 95% confidence) as 74.8±9.0%. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Incrementality of SME Loan Guarantees

Loading next page...
 
/lp/springer_journal/incrementality-of-sme-loan-guarantees-Q7D6XaCxQP
Publisher
Springer Journals
Copyright
Copyright © 2006 by Springer
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-005-4411-4
Publisher site
See Article on Publisher Site

Abstract

In many countries, loan guarantee programs are important elements of government policy with respect to small- and medium-sized enterprises (SMEs). If loan guarantee schemes are to be effective, a majority of firms obtaining assistance through such a scheme ought not to be able to obtain financing from existing sources: a property known as incrementality or additionality. This paper describes a new approach to measuring incrementality. This work uses a two-stage process to estimate the incrementality of loans made under the terms of the Canada Small Business Financing (CSBF) program. First, a logistic regression-based model of loan outcomes (essentially a credit-scoring model) is estimated based on a large representative sample of SMEs. The resulting model was consistent with prior expectations and exhibited high levels of goodness-of-fit. The model was then employed to classify a sample of firms that had received loans under the terms of the loan guarantee scheme. Incremental loans ought to be classified as “turndowns” by the model; hence the proportion of loan guarantee recipients that the model classified as turndowns is a direct measure of incrementality. For the CSBF loan guarantee program incrementality was estimated (with 95% confidence) as 74.8±9.0%.

Journal

Small Business EconomicsSpringer Journals

Published: Nov 29, 2006

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off