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Do financial instruments or grants have a bigger effect on SMEs’ access to finance? Evidence from Hungary

Györgyi Nyikos (Department of Public Finance and Finance Law, National University of Public Service, Budapest, Hungary)
Attila Béres (Department of Tax, Legal, Government and Incentives, Deloitte Hungary, Budapest, Hungary)
Tamás Laposa (National University of Public Service, Budapest, Hungary)
Gergő Závecz (Department of Competitiveness and Structural Research, Central Bank of Hungary, Budapest, Hungary)

Journal of Entrepreneurship in Emerging Economies

ISSN: 2053-4604

Article publication date: 8 May 2020



The economic situation in Europe is improving, nevertheless in Central and Eastern Europe (CEE) entrepreneurs and small and medium enterprises (SMEs) are still lacking in finances. In this situation, public funding can play an important role. Besides grants, the use of financial instruments (FIs) has become increasingly popular lately in CEE as well. This paper aims to examine the micro-level effects of the different financial tools to understand which type of finance could be most recommended for policymakers in relation to improving access to finance for SMEs, and thus achieving long-term, sustainable economic growth.


The database used is a panel with firm-years as the units of analysis, the variables contain firm-level characteristics, yearly aggregated information on European Union (EU) subsidies and yearly aggregated information on credits received by the firms. The analyses are done using propensity score matching. The ultimate goal is to show whether the EU funds – grants and FIs – have contributed to the development of the Hungarian post-communist economy at micro level or not.


The result shows that the use of subsidies has a positive impact on employment, sales and in certain settings on productivity. It is very important to notice, that grants seem to be used effectively. However, the results also show that the provision of the FI holds more direct relevance to advanced productivity. The conclusion is that FIs have more positive impact on the Hungarian economy.


At the time of the programming for the EU 2021-2027 multiannual financial framework, the paper presents original research in the field of access to finance showing evidence and evaluating the effect of using grants versus FIs, emphasiing differences between the two development tools. It is providing an invaluable insight to the policymaker for planning policy tools and use of funds in a most effective and efficient way.



The views in the paper are those of the authors and do not necessarily reflect the official view of the Central Bank of Hungary.


Nyikos, G., Béres, A., Laposa, T. and Závecz, G. (2020), "Do financial instruments or grants have a bigger effect on SMEs’ access to finance? Evidence from Hungary", Journal of Entrepreneurship in Emerging Economies, Vol. 12 No. 5, pp. 667-685.



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