Hybrid seminar: Designing Financial Support for SMEs during Crises: the Role of Bank Lending
On Thursday January 25th, 2024, Xuan Wang (VU Amsterdam) will give a presentation titled: "Designing Financial Support for SMEs during Crises: the Role of Bank Lending." To attend this seminar, please send an e-mail to Simone Pailer (S.Pailer@cpb.nl). You will be registered at the reception or will receive a Webex invitation via Outlook.
When designing schemes to help SMEs survive crises, the government typically faces asymmetric information, so that it cannot target the SMEs most worth saving. We show that the government can exploit the information in the borrower loan demand to improve policy targets compared with existing programmes. If the aim is employment protection, optimal policy should fully subsidise the funding cost of only those SMEs whose loan size is below a threshold. If the aim is economic efficiency, the government should target SMEs whose loan size is above a threshold. In general, public policy should utilise private sectors' information and expertise.