The effect of size and productivity on borrowing discouragement for small firms in Colombia

I estimate the effect micro firms’ size and productivity have on the probability of becoming a discouraged borrower: firms that do not use credit from the formal financial system despite needing it. I also estimate the effect that size and productivity have on the probability of becoming accepted in the event of a formal credit request. Using a trivariate probit model that corrects for selection biases, I find that productivity and size (number of employees) reduce the likelihood of becoming discouraged. Both variables are related to a higher probability of being accepted in formal credit requests.