The Impact of Reverse Factoring on MSMEs: Firm-level Evidence from México
Presented by José Tessada
Pontificia Universidad Católica de Chile
Moderated by Alessandro Maffioli (IDB Invest)
Organized by the Private Sector Development Research Network
hosted by the IDB Invest
Friday, June 26th from 9-10am EDT
Click here to join virtually the day of the seminar
ABOUT THE SEMINAR
Since the 2008 global financial crisis, interest in supply chain finance has grown as firms increasingly seek alternative sources of working capital. In this context, reverse factoring (RF) has emerged as a prominent short-term financing instrument, particularly for micro, small, and medium-sized enterprises (MSMEs). Under RF arrangements, suppliers sell accounts receivable to financial intermediaries in exchange for immediate liquidity, benefiting from the lower financing cost of large, creditworthy buyers that guarantee payment through invoice confirmation.
Using firm-level data on MSMEs in Mexico, this study provides evidence on the effects of RF adoption and documents three main findings. First, access to RF is associated with a statistically significant increase in firm sales. Second, these gains are primarily driven by expansion along the extensive margin, as firms increase the number of active clients following adoption. Third, the magnitude and persistence of the effect depend on usage frequency: occasional use yields no measurable gains, whereas sustained use generates persistent improvements over time. In addition, descriptive evidence suggests that while RF reduces financing costs, it does not lead to systematic changes in payment terms.
ABOUT THE SPEAKER
José Tessada is an Associate Professor at the School of Management of the Pontificia Universidad Católica de Chile, where he served as Chair from 2018 to 2025. He is also a Faculty Affiliate of the Abdul Latif Jameel Poverty Action Lab (J-PAL). Before joining the School of Management as an Assistant Professor in 2010, he worked at the Brookings Institution, a think tank in Washington, D.C. His research has been published in academic journals and edited volumes, focusing primarily on labor economics and development economics, particularly with a focus on technological change, migration, and financial inclusion.