Description
The EIB plays a central role in the financing of small and medium enterprises (SMEs) and mid-caps in the Western Balkans. With the aim of supporting growth and job creation, the EIB channels funding through financial intermediaries such as local banks, in such a way as to provide favourable conditions to final beneficiary firms, such as lower interest rates or longer loan duration. This report assesses the impact, particularly in terms of employment, of this intermediated lending.
It builds on a unique dataset that combines information on the allocation of EIB-funded loans to SMEs with data on these firms’ balance sheets. With this data, the study carries out a counterfactual analysis comparing EIB beneficiaries to a group of firms that did not receive any intermediated lending from the EIB. The impact of EIB intermediated lending is then estimated using an econometric model that compares EIB beneficiaries with the corresponding control group. It shows that EIB beneficiaries report higher employment growth than other firms, and effect that is particularly strong for firms that had no previous access to finance. It also shows a positive impact in terms of the amount firms invest. Altogether, it provides further confirmation of the presence on credit-constraints affecting firms in the Western Balkans and suggests that intermediated lending to firms is an effective tool to address these constraints.
