Working Paper: CEPR ID: DP15799
Authors: Filippo De Marco; Fabrizio Core
Abstract: This paper investigates whether banks' information technology (IT) can substitute for local branch presence in the provision of small business credit. Our identification strategy relies on loan-level data and the unique institutional features of the Italian public guarantee scheme during Covid-19. Despite the availability of online applications and low screening incentives, small business lending remains local, even for first-time borrowers. However, IT partly mitigates the impact of local branch presence: banks with better IT provide more, cheaper and faster guaranteed loans and lend more in areas where they have no bank branches, especially to first-time borrowers.
Keywords: Public Guarantees; COVID-19; Liquidity Constraints; Information Technology; Lending Relationships
JEL Codes: G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Banks' IT capabilities (G21) | Supply of guaranteed loans (H81) |
| Banks' IT capabilities (G21) | Charging rates for loans (E43) |
| Banks' IT capabilities (G21) | Processing speed of guaranteed loans (H81) |
| Better IT capabilities (L86) | Issuing loans in areas without branches (G21) |
| Local branch presence (C62) | Small business lending (G21) |