Using a firm-level panel dataset of the Colombian manufacturing sector from 1997 to 2007, we study the effect of a
policy by which government-backed partial credit guarantees are automatically granted to firms lacking collateral in
order to lift their credit constraints. The dataset put together for the purpose of this research combines data from
DANE’s Annual Manufacturing Survey, DIAN’s export and import information, and firm-level records from the
National Guarantee Fund (NGF), the government agency in charge of implementing this policy. Using propensity score
matching and difference-in-differences in the common support, we find that firms that gain access to credit backed by
the NGF guarantees are able to grow in terms of both output and employment, and increase the average wages they
pay. We do not find, however, an impact on labor productivity or investment and the evidence with regards to the
impact on total factor productivity is mixed. Our results suggest that firms use the new funds as a source of working
capital to grow their businesses rather than as a source for investment in new fixed assets.