Economic impact of COVID-19: Evidence from Chile

Through a collaboration with the bank Banco de Crédito e Inversiones (BCI), the project team previously conducted a randomized evaluation to evaluate the effect of government-backed loans offered through the Chilean government’s FOGAPE program, which offers loans to small and medium enterprises (SMEs) to mitigate the effects of the COVID-19 crisis. The randomized evaluation was conducted among 10,072 SMEs that had previously applied for a loan during the COVID-19 crisis prior to the FOGAPE program but had been rejected by the bank based on a risk assessment. The FOGAPE program enabled BCI to lend to these SMEs, and the study randomly offered loans to half of them through a phone and internet campaign. In the treatment group, 27% of SMEs took up the loan. Furthermore, the loans had a significant effect on the total amount of credit available to those SMEs: using administrative data on total debt in the financial system, a statistically significant 12% increase in total credit was observed. The current project seeks to (a) collect survey data from firms that received loans to measure firm outcomes such as firm sales, profits, and survival and (b) incorporate and analyze linked employer-employee data provided by the Chilean Ministry of Finance to measure effects on employment and wages at the employee level. The results will inform the Chilean government strategy on SME support and will shape government-backed loan programs in the future.