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TERRA ECONOMICUS

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  • Loan vs subsidy: Comparing the effects of SMEs’ regional support during macroeconomic shocks

Loan vs subsidy: Comparing the effects of SMEs’ regional support during macroeconomic shocks


TERRA ECONOMICUS, Vol. 23, No 4

Citation: Bakaykina A.V. (2025). Loan vs subsidy: Comparing the effects of SMEs’ regional support during macroeconomic shocks. Terra Economicus 23(4), 68–85 (in Russian). DOI: 10.18522/20736606-2025-23-4-68-85


Drawing on the causal inference framework, this paper examines the comparative effectiveness of repayable (concessional loans, loan guarantees) versus non-repayable (grants, subsidies) government support instruments for industrial small and medium-sized enterprises (SMEs) in Russia over 2020–2023. The empirical analysis relies on administrative records on regional financial assistance provided through development institutions and executive authorities. The paper’s contribution is twofold. First, the control group is constructed from recipients of alternative support instruments (e.g., for loans/guarantees – the counterparts are subsidies/grants), which allows different measures of support to be treated as functionally equivalent policy levers from the government’s perspective. Second, a two-stage procedure – combining Coarsened Exact Matching with Propensity Score Matching – is employed to form a high-quality quasi-experimental sample. Regression results indicate that, on average, repayable instruments are associated with higher SME revenue growth than the provision of subsidies and grants. This implies that the activities of development institutions contributed more to SME growth than support delivered by executive authorities. However, this advantage largely disappears when employment dynamics are used as the outcome. Limited access to credit remains a significant barrier to SME development: firms in financially constrained regions exhibit slower revenue growth regardless of the instrument used, while concessional lending and guarantee programs can mitigate regional disparities by fostering additional growth in both business activity and headcount.

Keywords: financial support for SMEs; development institutions; repayable support; non-repayable support; COVID-19; sanctions; Coarsened Exact Matching; Propensity Score Matching
JEL codes: G23; G28; H81


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Publisher: Southern Federal University
ISSN: 2073-6606