Credit rationing: literature review and empirical evidence in the survey on access to finance of enterprises

This work aims to provide a thorough summary of the main theoretical frameworks for the study of credit rationing. This subject was approached from several theoretical points of view and in the second part of the 20th century many models have been developed. After a first treatment in the context of the availability doctrine, the concept was more deeply defined in the so-called “à la Hodgman” models. Later, Stiglitz and Weiss (1981) developed what is widely recognized to be the canonical framework for credit rationing. From then on, many economists studied the issue from different angles, incorporating elements like the reputation of the firm, the role of collateral, the presence of monitoring and the existence of self-rationing. The problem can take many forms: “pure” credit rationing refers to cases in which some individuals obtain loans while observationally identical individuals do not. Size-rationing occurs when borrowers obtain an amount lower than requested. Self-rationing, instead, describes a situation in which firms do not apply for loans being sure not to receive it. The existence of credit rationing has been difficult to verify empirically, and the main methods used in the literature involve the use of surveys, proxy variables and econometric analysis. Using these tools, size, age, and management of the firm were identified as the main determinants of credit rationing. This work focuses on credit rationing for small and medium-sized enterprises (SMEs) in Europe, since they account for more than the 99% of all business in the EU. For this reason, SMEs were involved in many support programs launched by the European Central Bank, and the latest developments in their financial situation are monitored through a bi-annual survey on access to finance for the enterprises (SAFE). The thesis discusses the results of the SAFE for the past ten years, observing how the situation evolved until 2019 and examining which types of credit rationing occur. The main outcome is that credit rationing effectively occurs more frequently in SMEs than in large firms, an observation supported by the fact that in 2019 almost the 30% of respondents did not apply for a bank loan despite needing it, and among the applicants only the 70% received the desired amount. It has also been observed that, comparing the results of 2019 with the ones of 2012, the severity of the issue seems to be decreased. The survey confirms the presence of self-rationing and size-rationing, while it is not possible to verify the existence of the theoretical pure credit rationing, since the respondent enterprises are not observationally identical. An extensive analysis is conducted differentiating the business types and the countries, finding out that there is not a clear linear relationship between the variables considered and credit rationing, and that in some countries the rationing occurs more severely than in others. The results are finally compared with the report published by the European Central Bank and with the outcomes of the Bank Lending Survey with the additional objective of analysing the point of view of the banks, which are bound by the conditions of the Basel accords.