Publication: Access to Finance and Job Growth: Firm-Level Evidence across Developing Countries
Loading...
Published
2016-03
ISSN
Date
2016-04-26
Editor(s)
Abstract
This paper investigates the effect of access to finance on job growth in 50,000 firms across 70 developing countries. Using the introduction of credit bureaus as an exogenous shock to the supply of credit, the paper finds that increased access to finance results in higher employment growth, especially among micro, small, and medium enterprises. The results are robust to using firm fixed effects, industry measures of external finance dependence, and propensity score matching in a complementary panel data set of more than four million firms in 29 developing countries. The findings have implications for policy interventions targeted to produce job growth in micro, small, and medium enterprises.
Link to Data Set
Citation
“Ayyagari, Meghana; Juarros, Pedro; Martinez Peria, Maria Soledad; Singh, Sandeep. 2016. Access to Finance and Job Growth: Firm-Level Evidence across Developing Countries. Policy Research Working Paper;No. 7604. © World Bank. http://hdl.handle.net/10986/24146 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The Marshall Plan: Then and Now(Washington, DC: World Bank, 2025-10-14)This paper is a product of the Development Policy Team, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Geopolitical Risks and Trade(Washington, DC: World Bank, 2025-09-23)This paper studies the impact of geopolitical risks on international trade, using the Geopolitical Risk (GPR) index of Caldara and Iacoviello (2022) and an empirical gravity model. The impact of spikes in geopolitical risk on trade is negative, strong, and heterogeneous across sectors. The findings show that increases in geopolitical risk reduce trade by about 30 to 40 percent. These effects are equivalent to an increase of global tariffs of up to 14 percent. Services trade is most vulnerable to geopolitical risks, followed by agriculture, and the impact on manufacturing trade is moderate. These negative effects are partially mitigated by cultural and geographic proximity, as well as by the presence of trade agreements.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Financing of Firms in Developing Countries : Lessons from Research(World Bank, Washington, DC, 2012-04)This paper reviews and synthesizes theoretical and empirical research on the role of finance in developing countries. First, the paper presents the stylized facts about firms in developing nations as well as the legal, financial and broader institutional framework in which these firms operate. Next, the paper focuses on the financing choices available to small and medium firms in developing countries and highlights areas needing additional research.Publication Collateral Registries for Movable Assets : Does Their Introduction Spur Firms' Access to Bank Finance?(World Bank, Washington, DC, 2013-06)Using firm-level surveys for up to 73 countries, this paper explores the impact of introducing collateral registries for movable assets on firms' access to bank finance. It compares firms' access to bank finance in seven countries that introduced collateral registries for movable assets against three control groups: firms in all countries that did not introduce a registry, firms in a sample of countries matched by location and income per capita to the countries that introduced registries for movable assets, and firms in countries that undertook other types of collateral reforms but did not set up registries for movable assets. Overall, the analysis finds that introducing collateral registries for movable assets increases firms' access to bank finance. There is also some evidence that this effect is larger among smaller firms.Publication Does Local Financial Development Matter for Firm Lifecycle in India?(World Bank Group, Washington, DC, 2014-08)The differences in financial development across Indian states, while seeming substantial, have a minor effect on firm lifecycle and growth. These results hold controlling for differences in labor regulations across states, capital intensity, and for firms born before and after the major reforms. There is no evidence that firms in financially dependent industries have different lifecycle profiles or grow faster in financially developed states than underdeveloped states. Overall, firms in the formal manufacturing sector grow as they age whereas in the informal sector, firms have a declining lifecycle, but in both cases little evidence is found that financial institutions matter for firm lifecycle. The findings of this paper suggest that size and depth differences in financial development across Indian states are likely dwarfed by overall inefficiencies that characterize state-dominated financial systems, with important implications for the reforms of the Indian financial system going forward.Publication How Bank Competition Affects Firms' Access to Finance(World Bank, Washington, DC, 2012-08)Combining multi-year, firm-level surveys with country-level panel data for 53 countries, the authors explore the impact of bank competition on firms' access to finance. They find that low competition, as measured by high values of the Lerner index, diminishes firms' access to finance, while commonly-used bank concentration measures are not robust predictors of firms' access to finance. In addition, they find that the impact of competition on access to finance depends on the environment that banks operate in. Some features of the environment, such as greater financial development and better credit information, can mitigate the damaging impact of low competition. But other characteristics, such as high government bank ownership, can exacerbate the negative effect.Publication The Impact of the Global Financial Crisis on Firms' Capital Structure(World Bank, Washington, DC, 2015-12)Using a data set covering about 277,000 firms across 79 countries over the period 2004-11, this paper examines the evolution of firms capital structure during the global financial crisis and its aftermath in 2010-11. The study finds that firm leverage and debt maturity declined in advanced economies and developing countries, even in countries that did not experience a crisis. The deleveraging and maturity reduction were particularly significant for privately held firms, including small and medium enterprises. For small and medium-size enterprises, these effects were larger in countries with less efficient legal systems, weaker information-sharing mechanisms, shallower banking systems, and more restrictions on bank entry. In contrast, there is weaker evidence of a significant decline of leverage and debt maturity among firms listed on a stock exchange, which are typically much larger than other firms and likely benefit from the spare tire of easier access to capital market financing.
Users also downloaded
Showing related downloaded files
Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Morocco Economic Update, Winter 2025(Washington, DC: World Bank, 2025-04-03)Despite the drought causing a modest deceleration of overall GDP growth to 3.2 percent, the Moroccan economy has exhibited some encouraging trends in 2024. Non-agricultural growth has accelerated to an estimated 3.8 percent, driven by a revitalized industrial sector and a rebound in gross capital formation. Inflation has dropped below 1 percent, allowing Bank al-Maghrib to begin easing its monetary policy. While rural labor markets remain depressed, the economy has added close to 162,000 jobs in urban areas. Morocco’s external position remains strong overall, with a moderate current account deficit largely financed by growing foreign direct investment inflows, underpinned by solid investor confidence indicators. Despite significant spending pressures, the debt-to-GDP ratio is slowly declining.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.