Evalutating development assistance to SMEs in Albania

1
Evalutating development assistance to SMEs in
Albania

• Andrea Gamba
• Alba di Canazei, July 1, 2008

2
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

3
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

4
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!

5
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.

6
A snapshot on Albanian enterprises

• Very large incidence of micro enterprises
• High prevalence of service activities.
• Firms concentrated in Tirana-Duress area.

7
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

8
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

9
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!

10
Some hopes

• Programme in launching phase
• openness to amendments to facilitate rigorous
  inference!
• Government and stakeholder cooperation
• Your suggestions!
• THANK YOU!