Financial Access of Latin America and Caribbean Firms: What Are the Roles of Institutional, Financial, and Economic Development?

Abstract

This article examines the impact of institutional, financial, and economic development on firms’ access to finance in Latin America and Caribbean region. Based on firm- and country-level data from the World Bank databases, we employ an ordered logit model to understand the direct and moderating role of institutional, financial, and economic development in determining firms’ financial obstacles. The results show that older, larger, facing less competition and regulation burden, foreign owned, and affiliated firms report lower obstacles to finance. Second, better macro-fundamentals help to lessen the level of obstacles substantially. Third, the role of institutions in promoting firms’ inclusive finance is quite different to the role of financial development and economic growth. JEL classification: E02; G10; O16; P48

Examining the influence of financial inclusion on investment decision: A bibliometric review

“…Financial development initially hinders financial integration between commercial banks and microfinance organizations, but as integration advances, it has a favorable effect [ 80 ]. Macroeconomic fundamentals and institutional strength play independent roles in fostering inclusive finance for businesses from the effects of financial development and economic growth [ 85 ]. Nguyen & Doan [ 77 ], determine the various determinants of individual saving behavior in Vietnam.…”

“…Financial inclusion has been shown to positively affect economic growth, highlighting how crucial it is for policymakers to consider financial inclusion as a long-term engine of economic growth [ 89 ]. Improved macro-fundamentals significantly reduce barriers, and the role of institutions in fostering inclusive finance differs from that of financial development and economic growth [ 85 ]. Established, larger, less competitive and regulated, foreign-owned, and affiliated firms encounter fewer financial obstacles.…”