The authors examine the investment behaviour of a sample of small, credit-constrained firms in Sri Lanka. Using a unique panel-data set, they analyze and compare the activities of two groups of small firms distinguished by their different access to financing; one group consists of firms with heavily subsidized loans from the World Bank, and the other consists of firms without such subsidies. The use of program-evaluation techniques reveals that the relaxation of financing constraints did not affect economic efficiency for the group of firms that received subsidized capital.

Also published as:

Financial Constraints and Investment: Assessing the Impact of a World Bank Credit Program on Small and Medium Enterprises in Sri Lanka
Varouj A. Aivazian; Eric Santor
Canadian Journal of Economics (0008-4085)
May 2008. Vol. 41, Iss. 2, pp. 475-500