How to estimate SME credit rationing and financing gap in Europe using firm-level micro data? This was the topic submitted by the European Investment Fund to four students from the London School of Economics’ Master of Public Administration (MPA) in the framework of a Capstone programme.

So far, no study has tried estimating EU-wide SME credit rationing using firm-level data. Working very closely with EIF staff involved over five months, the students implemented a theoretical model to estimate credit rationing using the EU SAFE survey and Orbis, a database- providing financial data about firms. In the framework of a previous Capstone with the LSE, students had found a way to match the two databases.

The model can be used to estimate the extent of credit rationing at an aggregate level as well as the heterogeneity of credit rationing by firm size or by country. Click here for presentation.

This is the seventh Capstone project conducted by the EIB Group (EIB and EIF) with students of the LSE’s MPA Programme.

As part of their curriculum, students are required to undertake a consultancy project on a selected topic relevant to a client organisation (a Capstone project). A number of international organisations such as the World Bank, EBRD, OECD and the UK Government are regular participants in the MPA Capstone programme.