Kazakhstan finds some small business loans help jobs, others don't

Kazakhstan tested two ways to help small businesses get loans. One method, interest rate subsidies, made companies shrink their workforce. Another, fee-based credit guarantees, helped companies hire more people and sell more goods.

This paper shows that how you design a loan program for small businesses matters more than just offering one. Simple interest rate subsidies, which cost the government a lot, actually hurt employment. But a credit guarantee program that makes banks share some of the risk with borrowers seems to create jobs, especially in areas that need them. This suggests governments can design programs that actually help businesses grow, rather than just spending money.