Credit constraints and exports of SMEs in emerging and developing countries

We study the relationship between credit constraints and exports using a large and heterogeneous sample of small- and medium-sized firms from 65 emerging and developing countries between 2003 and 2014. We measure credit constraints by means of each firm’s self-assessment of whether it is credit-rationed, and we follow an instrumental variable approach that uses firm-level instruments to address the potential endogeneity of credit constraints with respect to export performance. We find robust evidence of a negative, statistically and economically significant effect of financial constraints on both the probability that a firm exports (the extensive margin) and the share of exports over total sales (the intensive margin). The impact on both margins of exports is stronger for small and young firms, and for those operating in countries where the financial system, the quality of institutions, and the overall level of economic freedom are less developed.