Can ICT Make Small Beautiful?: Examining the Role of ICT in Affecting Credit Behaviour of SMEs in India

The paper explores the critical role of ICT adoption on credit behaviour for small and medium enterprises in India. We use the latest round of the World Bank Enterprise Survey for India, conducted in 2021, and employ an instrumental variable estimation technique to account for any potential endogeneity between ICT adoption and credit behaviour. We find that better ICT usage enhances the likelihood of obtaining credit for these firms. Additionally, it also increases the likelihood of applying for loans and loan approvals. These results are robust to alternate specifications and ICT measurement. We also examine the result for microfirms in India and find confirmation of our findings. On exploring further, we find evidence that reduced information asymmetry, better financial awareness, innovation and enhanced productivity are possible channels that improve access to credit for small and medium firms. The study underscores the role of ICT in reducing the credit constraints of small and medium enterprises.