Credit access in Latin American enterprises

Abstract

An intense process of deregulation and financial liberalization in Latin America has increased competitive pressures and led to bank restructuring and consolidation. This chapter looks at firm access to credit in the region, focusing on the role of credit market structure. Using firm-level data from the World Bank Enterprise Survey, we find that access to bank credit is very heterogeneous. On average, smaller and less productive firms are less likely to apply for credit and more likely to be financially constrained. We also find that a high degree of bank penetration and competition are significantly correlated with a lower probability that borrowers are financially constrained. The penetration of foreign banks has a negative effect on access to credit, particularly in less developed and more concentrated markets, while it has a positive influence in more competitive and financially developed markets.