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Cash flow vs. collateral-based credit: performance of micro, small and medium-sized firms in transition economies

Cassano, Francesca, Jõeveer, Karin and Svejnar, Jan (2013) Cash flow vs. collateral-based credit: performance of micro, small and medium-sized firms in transition economies. Economics of Transition, 21 (2). pp. 269-300. ISSN 0967-0750

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Identification Number: 10.1111/ecot.12016

Abstract

We study factors affecting micro, small and medium-sized enterprises (MSMEs) receiving loans and the effect of these loans on MSMEs performance. We study two types of loans - a new type based on cash flows and a traditional-style loan based on collateral. We use unique surveys of MSMEs from Bulgaria, Georgia, Russia and Ukraine. We find that MSMEs receiving a cash flow or collateral loan in the past are more likely to receive the same type of loan (and larger sized) in the future and that cash flow loans may be the preferred form of credit. Both types of loans are related positively to most performance indicators, enabling the MSMEs for instance to be more profitable and expand production. The cash flow loans also appear to be particularly attractive credit delivery schemes for micro and small enterprises. Finally, the effects of the smallest loans are often negative, suggesting that the minimum loan size is an important policy issue.

Item Type: Article
Additional Information: © 2013 The Authors
Divisions: Financial Markets Group
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 05 Apr 2013 13:10
Last Modified: 20 Feb 2019 10:32
Projects: P402/10/2130
Funders: Grant Agency of the Czech Republic
URI: http://eprints.lse.ac.uk/id/eprint/49610

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