Public Credit Guarantee Schemes and SMEs’ Profitability: Evidence from Italy

The aim of this study is to assess the effectiveness of the Italian State Credit Guarantee Scheme (Central Guarantee Fund). The paper analyzes the impact of the program on SMEs' profitability considering the firm size and sector. The analysis is performed using propensity-score matching estimators and the Difference in Differences regressions on a proprietary sample of about 38,000 SMEs in the period 2007-2009. Overall, the Central Guarantee Fund generated an increase in the profitability of guaranteed firms during the period of economic downturn. However, significant differences emerged across firms by size and sector. The effect is positive and robust only for micro- and small-sized firms, and the most relevant improvement in the profitability is recorded for firms operating in the manufacturing sector. This implies that more customized programs are necessary to reach a higher value for money in entrepreneurial policies.