The Political Economy of Financing Italian Small Businesses

This chapter discusses the political and economic rationales behind the structure of Italy's banking system and explores the system of medium-term credit and financial subsidies established in the country to promote the development of small and medium-sized enterprises (SMEs), which were viewed as an important component of the Italian economy by the end of WW2. It has also explained how major political parties, as well as economic institutions such as the Bank of Italy, agreed to foster SMEs. This led to the establishment of a fragmented banking system, in which local banks were preserved to serve the needs of SMEs clustered in local production systems, and to the establishment of the medium-term credit institutes (the Mediocrediti and the Artigiancassa) which provided additional financial support to SMEs and to artisan firms.