Financial constraints and development policies: evidence from Brazilian development bank loans

Resumen

This study maps patterns of credit allocation by the Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social [BNDES]) from 2002 to 2019, examining associations among firm characteristics, regional disparities, and funding access. Previous research has mainly focused on listed firms or aggregate measures, overlooking the broader business landscape. To address this, the paper assembles a granular dataset of 2,515 firms (1,537 beneficiaries and 978 non-beneficiaries), including both listed and private companies. This broader coverage allows the analysis to capture firms often absent from prior studies. Development banks are critical in environments with scarce long-term finance. Given BNDES’s systemic weight, which historically accounts for over 15% of private credit and is tightly correlated with investment, understanding its allocation is central to debates on market-failure correction and inclusive growth. The results reveal BNDES’s trade-offs: funds reach disadvantaged regions and strategic sectors, yet systematically flow to firms able to provide collateral. This challenges assumptions that public development banks primarily serve the most constrained firms and highlights tensions between social objectives and financial sustainability. The study employs binary logistic models on a cross-sectional firm-level sample (2,515 Brazilian firms, 2002-2019), with explanatory variables including age, size, tangibility, liquidity, profitability, leverage, and dummies for region, sector, listing, and group affiliation. A multinomial logistic model explores loan frequency, while propensity score matching ensures robustness. BNDES lending shows clear regional and sectoral targeting: firms in the Northeast and utilities are more likely to obtain credit. Beneficiaries tend to be older, more liquid, and more asset-tangible. The effects of firm size are nuanced: smaller firms are more likely to access funds than larger ones, suggesting a risk-aware tilt within the bank’s developmental mandate. This creates an “allocation paradox,” as support flows to priority regions and sectors but favors lower-risk corporate profiles.