The Effects of Business Credit Support Programs: Evidence from a Regression Discontinuity Design

Government-backed business loan programs have commonly been used as a policy tool for mitigating the impact of adverse scenarios such as the recent pandemic. However, the effects of these policies on micro, small and medium enterprises remain unclear, particularly in developing countries. Using firm-level data and a Fuzzy Regression Discontinuity Design, we study the impact of a large credit support program deployed in Peru in 2020 (Reactiva Peru). We examine real outcomes such as employment, sales, and survival rates. We find a positive and significant effect of Reactiva loans on the number of employees; this effect continues to linger three years after the pandemic.