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Access to Credit and Employment Growth for MSMEs: Evidence From Latin America and the Caribbean

A new IDB Invest technical note analyzes 21,696 MSMEs across 30 Latin American and Caribbean economies, linking credit access to employment growth. The study finds that an extra US$1 million in financing generates roughly four permanent jobs per year. Effects vary: smaller firms see higher relative but lower absolute job gains, fast‑growing firms benefit more, and credit directed to fixed‑asset investment outperforms working‑capital loans. The impact wanes as loans age and is muted in markets with low banking‑sector competition.