The Small Credit Fund (Fondo Piccolo Credito, FPC) is a zero‑interest loan programme for micro and small enterprises, implemented by the Lazio Region, Italy. It provides loans of EUR 10 000–50 000 to creditworthy firms with limited access to bank finance, addressing a structural gap in the local credit market.
The rationale for the programme is that private banks are reluctant to provide small loans due to high operational costs relative to the expected returns. As a result, many viable micro and small enterprises may face restricted access to credit or higher borrowing costs.
The OECD, in collaboration with the Lazio Region, conducted an evaluation to estimate the efficacy of the FPC in increasing access to credit and fostering growth of local micro and small enterprises.
The programme generated strong financial additionality for beneficiary firms. The FPC significantly increased access to long‑term finance, raising beneficiary firms’ debt by about EUR 40 000 on average without crowding out private credit.
The FPC substantially improved firm survival outcomes. Beneficiary firms were markedly more likely to remain in business, with a 28–30% lower risk of closure compared to similar non‑beneficiaries.
Investment effects were strongest among financially constrained firms. Smaller and less capital‑intensive enterprises translated the loans into higher investment. As a result, their fixed assets were twice as large as the control group three years after receiving the loan.
Overall, results validate the programme’s market‑gap rationale. The findings confirm that viable micro and small firms are underserved by private lenders, supporting the case for targeted public intervention.
Do subsidised small loans work?
Micro and small enterprises (MSEs) often face persistent difficulties in accessing external finance, particularly small‑scale, long‑term loans. Private banks are reluctant to supply this segment of the market because the fixed administrative costs of small loans are high relative to expected returns. As a result, even creditworthy firms with viable investment projects may encounter credit rationing and higher borrowing costs. Over time, this can lead to adverse selection, where riskier firms have stronger incentives to ask for credit, further reinforcing the lenders’ reluctancy to serve the market.
The Small Credit Fund (Fondo Piccolo Credito, FPC) was introduced to address this market failure by providing zero‑interest loans to micro and small firms that fall below standard banking thresholds but are not inherently risky. The key policy issue is whether such public financial instruments genuinely relax binding credit constraints and support firm development, or whether they merely substitute for private finance and expose beneficiaries to new financial risks without delivering sustained economic benefits.
Micro and small enterprises account for a large share of firms, employment and local economic activity. When these firms are unable to finance investments in capital, technology or business expansion, productivity growth is constrained and firm survival becomes more precarious. Addressing credit gaps for viable MSEs is therefore central to regional development, business dynamism and inclusive growth, especially in contexts where alternative financing channels are limited.
From a public policy perspective, targeted credit programmes also involve trade‑offs. Poorly designed instruments risk misallocation of public resources, crowding out private lenders, or increasing financial vulnerability among already fragile firms. Robust evidence on the effectiveness, distributional impacts and unintended consequences of such programmes is essential to justify public intervention, improve targeting and design, and ensure that scarce public funds are used to support firms where market failures are most acute and potential economic returns are highest.
The analysis highlights areas for improvement across four dimensions: validating programme assumptions, adjusting the type of support, refining targeting and eligibility, and enhancing monitoring and evaluation.
Design innovations that could be tested – possibly through small-scale, randomised pilots – include:
Increasing the loan ceiling via a phased approach;
Requiring private co-financing with a matching scheme;
Extending the pre-amortisation period to allow firms to reap the benefit of their investments before repayments begin;
Employing alternative vetting systems for investment projects to make sure the project can be realised and produce a revenue stream within the loan timeframe.
Targeting can be made more effective by prioritising smaller firms, which showed to benefit more than larger firms.
A stronger monitoring system, building upon the information that is already available, would reduce financial risks and support future evaluations. Improvements include recording reasons for rejection and credit assessments. Post-application monitoring could also be extended to rejected applicants. In selecting beneficiary firms, discrete cut-offs or randomisation could help identify causal impacts more precisely. Trigger-based safeguards, which activate when pre-defined financial health indicators reach a critical level, and follow-on support for beneficiary firms could enhance financial sustainability.
OECD (2026), “Small credit, real impact: Lessons on Lazio’s Small Credit Fund”, OECD Local Economic and Employment Development (LEED) Papers, No. 2026/08, OECD Publishing, Paris, https://doi.org/10.1787/a37305fa-en.
Contact
Carlo Menon, OECD Trento Centre for Local Development, Carlo.Menon@oecd.org.