TY - JOUR
T1 - Empowering Economic Growth
T2 - Government Loans for Supply Chains in Emerging Markets
AU - Hou, Jing
AU - Xu, Fasheng
N1 - Publisher Copyright:
© 2024 J. Hou and F. Xu.
PY - 2024/8/21
Y1 - 2024/8/21
N2 - MSMEs (Micro, Small and Medium Enterprises) play a crucial role in emerging markets, despite facing various challenges that impede their growth and success. One primary challenge is the limited access to affordable financing programs. A typical policy intervention is providing affordable government loans to these MSMEs. Motivated by the Indian example, we develop a game-theoretic model to investigate the interaction between the cash-constrained manufacturer and retailer in the context of interest-free government loans. Our research yields the following main insights. First, the value of trade credit can demonstrate both complementary and substitutional relationships with the government loan budget, contingent on the level of the government loan budget. Second, while the government loan consistently enhances the manufacturer’s profit, it may adversely impact the retailer. Finally, in the design of a loan policy, it may be more beneficial for social welfare if the government retains some of the loan budget rather than lending the entire available amount to the supply chain.
AB - MSMEs (Micro, Small and Medium Enterprises) play a crucial role in emerging markets, despite facing various challenges that impede their growth and success. One primary challenge is the limited access to affordable financing programs. A typical policy intervention is providing affordable government loans to these MSMEs. Motivated by the Indian example, we develop a game-theoretic model to investigate the interaction between the cash-constrained manufacturer and retailer in the context of interest-free government loans. Our research yields the following main insights. First, the value of trade credit can demonstrate both complementary and substitutional relationships with the government loan budget, contingent on the level of the government loan budget. Second, while the government loan consistently enhances the manufacturer’s profit, it may adversely impact the retailer. Finally, in the design of a loan policy, it may be more beneficial for social welfare if the government retains some of the loan budget rather than lending the entire available amount to the supply chain.
UR - http://www.scopus.com/inward/record.url?scp=85201872069&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85201872069&partnerID=8YFLogxK
U2 - 10.1561/0200000114-6
DO - 10.1561/0200000114-6
M3 - Article
AN - SCOPUS:85201872069
SN - 1571-9545
VL - 18
SP - 116
EP - 136
JO - Foundations and Trends in Technology, Information and Operations Management
JF - Foundations and Trends in Technology, Information and Operations Management
IS - 1
ER -