Does the lack of collateral prevent the creation and growth of small businesses?

This project has received an ODISSEI Microdata Access Grant (MAG) in 2020.

Project applicant: Daniel Kárpáti (TiSEM).

Project abstract

Small businesses are crucial to the economy: in the Netherlands, they provide over the third of value added and half of the employment. Yet, small firms often face difficulties obtaining bank loans, according to a leading explanation because they do not have sufficient collateral value. The policy implications of this explanation are large as many public programs such as credit guarantee schemes are based on it.

This project tests this hypothesis using the microdata of Statistics Netherlands. The key idea is that for small businesses the personal wealth of the entrepreneur, such as her house, often serves as collateral either directly or indirectly. Therefore, positive (negative) shocks to entrepreneurial wealth should mitigate (exacerbate) financing difficulties if the collateral value channel is indeed important.

This project measures private wealth at the individual-level rather than relying on aggregate data, it studies the effects of wealth shocks both on becoming an entrepreneur (extensive margin) and on existing entrepreneurs (intensive margin), and it considers both negative (2008-2012) and positive (2013-2018) shocks.

Conducting research with CBS microdata

Statistics Netherlands (CBS) collects a wide range of data for its statistical tasks, many of them microdata at the level of individual persons or organisations. Protection of the confidentiality of the data has the highest priority for CBS. Within strict safety conditions however, universities and other authorized research institutes can get Remote Access to such data to perform statistical analyses for their own scientific or statistical purposes. The microdata themselves remain strictly within a secure environment within CBS. Under applicable conditions researcher can also bring in additional dataset to be linked with CBS microdata. Before aggregate statistical results are exported from the secured environment, CBS will check whether these results do not contain any risk for disclosure of information on individual persons or organisations.

Read more about using microdata within the CBS Remote Access Environment.

Photo by Patrick Tomasso on Unsplash.