The Determinants of Firm Access to Credit in Latin America: Micro Characteristics and Market Structure

Due to deregulation and financial liberalization, Latin American countries have recently undertaken bank restructuring and consolidation processes. This paper investigates firm access to credit in the region, focusing on the role of the credit market structure. Through an empirical investigation based on the World Bank Enterprise Survey, we find that access to bank credit is very heterogeneous. On average, smaller and less productive firms are less likely to apply for credit and more likely to be financially constrained. Besides, a high degree of bank penetration and competition is significantly correlated with a lower probability that borrowers are financially constrained. Finally, foreign banks penetration has a negative effect on access to credit particularly in less developed and more concentrated markets, while it has a positive influence in more competitive and financially developed markets.