The 2004 Brazil ICA survey data provide firm level information on 1,642 firms interviewed in 2003. The ICA sample is composed such that 20 percent of firms in the sample are micros (1 to 19 employees), 52 percent are small (20 to 99), 23 percent are medium (100 to 499), and 5 percent are large (above 500 employees)<sup>3</sup> . In other words, 95 percent of firms are micro or small and medium enterprises. This ratio is similar regardless of the definition by employees (95 percent) or sales (96 percent).<sup>4</sup> The ICA questionnaire asks each firm whether it has a loan and whether it has applied for a loan. It also asks which bank is the firm’s principal finance provider as well as the number of banks they does business with. Of all firms, 567 or 34.5 percent have a bank loan, and the remaining 1075 firms do not have bank loan. Many firms that decide not to apply for a bank loan report that they do not need a loan (431 firms), probably substituting other sources of finance for bank loan. Few firms report that their loan demand has been rejected by a bank (113 firms). The Brazil ICA survey also asks firms to rank potential obstacles to growth. High interest rates are the principal reason cited for not applying for a loan as reported by firms of all size. Application procedures and collateral requirement are next in importance, affecting especially micro and small firms. The cost of finance is reported to be the main obstacle to growth for 57 percent of all surveyed firms. Access to finance (and specifically collateral) is ranked seventh (34.5 percent of surveyed firms) in the obstacles to growth list, after cost of finance, tax rates corruption, economic and regulatory policy uncertainty, and macroeconomic instability. However, the ranking varies by firm size: access to finance and cost of credit are less binding obstacles for large than for smaller firms. Large firms are more likely to cite tax rates and corruption as their main constraint to growth than micro and small firms. Micro and small firms are charged higher interest rates on overdraft (around 5 percent per month) compared to medium and large firms (3 and 4 percent respectively per month). This analysis, which is typical in ICAs, shows some links between high lending interest rates and poor firm financing, and limited growth, but does not present causal evidence. In particular, the survey does not control for the endogeneity of firm responses.

The data also show that 45 percent of firms do business mainly with public banks, while domestic private banks cater to 42 percent of firms in the sample and foreign private banks cater to 12.7 percent of the sample firms. In particular, Banco de Brasil, a public bank is the principal bank for 593 firms or 36 percent of the sample; it is the main bank for small firms. The second most important Bank is Bradesco, a private domestic bank that cater to firms of all size. Micro firms mostly work with Caixa Economica Federal, a public bank. The firms in our sample tend to work with more banks on average as their size increase, with on average 2 banks for micro firms, 3 banks for small firms, 4.8 banks for medium firms, and 8.2 banks for large firms.

For 2003 and SCR, Table 1 shows various summary statistics for firms (1642 for 2003 and 694 for SCR) according to their size. Most of the firms in the sample are small (73%) (and 23% of medium size). Most of the small and medium firms are dedicated to the Garment Industry, and most of the large firms are in the Food Processing market. As expected, the larger the firm, the more it operates in the exterior, the more it sells abroad. Larger firms are older and employ more people (by construction).With respect to capital origin, the table shows that most capital for smaller firms comes from private and domestic sources, whereas larger firms have more access to private and foreign sources. Unsurprisingly, larger firms have larger equity and liability levels. These trends are similar for 2008, except for the fact that most small firms operate in the Furniture Industry, median firms in the Machinery business, and large firms in Auto Parts (Table 2).

Table 1. ICA data on Firms’ Characteristics in 2003 and 2008 and SCR

> 3 The classification of firm by size (when size is defined according to the number of employees) is as defined by the Ministry of Industrial Development and External Trade.

> 4 The ICA dataset for Brazil has been well described by Kumar and Francisco (2005), most of the descriptive that follow draw on their analysis.

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