The Impact of Credit-scoring on SME Lending and Performance in the Philippines

How does access to credit affect the growth of small and medium enterprises – both firms receiving loans as well as their competitors, suppliers and customers? Limited access to credit is commonly identified as a key constraint to SME growth, but little evidence exists of the direct and indirect effects of loans on small firms in a given market. Researchers are working with a large bank in the Philippines, using random assignment to offer loans to SME applicants who fall just below the threshold to be automatically approved for a loan. The researchers will compare the firms that received the loans to a similar group that did not. Comparing the two groups will allow for a better understanding of the impact of loans on firm performance and growth as well as any additional effects on firms in the same market or in the loan recipient’s supply chain.

Delivery partner 
The Shore BankThe Development Bank of the PhilippinesThe John Templeton Foundation
Hypotheses/research question 
Can a credit scoring system increase lending to SMEs in emerging markets? Does access to credit improve the borrowing businesses' profitability? How does increased access to credit affect borrowers' competitors, suppliers and customers?
Study design 
Clustered
Reference 
Bryan, G., Jakiela, P., & Karlan, D., [forthcoming]. 'Direct and Indirect Impacts of Credit for SMEs'. Innovations for Poverty Action - Project Registry.