The Hidden Cost of Organized Crime: How Anti-Mafia Crackdowns Unlock Credit and Productivity

Organized crime does more than corrupt politics and society—it distorts markets, undermines trust, and warps financial intermediation. In our new study, we provide the first causal evidence on how the dismantling of Mafia-connected firms affects bank lending and local productivity. Leveraging unique data from 38 anti-Mafia operations in Italy between 2019 and 2021, and granular loan-level records from the European Central Bank (ECB), we demonstrate that removing criminal businesses not only increases credit availability for legitimate firms, but also reshapes the local financial landscape—albeit with some short-term risks.

Lending in a Post-Mafia Landscape

We track 667 Mafia-connected firms identified through judicial investigations and cross-referenced with official ownership registries. These firms were often vehicles for rent extraction, tax fraud, and money laundering. After their removal, we observe a robust increase in bank credit to surrounding non-criminal firms—what we call peer firms. Loan volumes rose by 0.8% on average, equivalent to €1.38 billion in new credit. In areas with high Mafia presence, the effect nearly triples, reaching 2.1%, or €3.62 billion.

This ‘intermediation effect’ reflects renewed market confidence. As Mafia influence recedes, legitimate businesses find themselves on a level playing field. Freed from criminal coercion and unfair competition, they seek more credit to expand and invest. The financial sector, in turn, becomes more efficient at allocating capital.

But Credit Comes at a Cost

This revitalization, however, is not costless. We find that interest rates rise after anti-Mafia operations. The average increase in borrowing costs, though modest (around 0.018 percentage points), signals banks’ heightened risk perception. This is the ‘information effect’: police crackdowns expose previously hidden affiliations and risks, forcing lenders to update their assessments of local borrowers.

Importantly, not all banks respond equally. Foreign and non-local banks, lacking boots-on-the-ground insights, increase rates more aggressively than domestic and local institutions. Banks with prior exposure to Mafia-connected clients react more moderately, likely because they had already internalized these risks through established relationships and better soft information.

A Role for Soft Information

Our findings echo a growing literature on the value of soft information—qualitative insights gleaned from proximity, long-term relationships, and community embeddedness. Banks that are local or have had prior dealings in affected areas appear more capable of assessing borrower quality in the face of sudden disclosures. In contrast, banks unfamiliar with local dynamics respond with caution, reflected in tighter credit terms.

This divergence has policy implications. Encouraging a diverse banking ecosystem that includes locally embedded institutions may help mitigate adverse credit shocks following legal or regulatory interventions, especially in areas where organized crime has distorted information channels.

Beyond Credit: Gains in Productivity

The benefits of eradicating Mafia-linked firms extend beyond credit markets. We find meaningful gains in firm-level productivity in the municipalities affected by police actions, especially where rent extraction had been most pervasive. Our data show that revenue per employee, scaled by assets, increases significantly in the post-intervention period. This is consistent with improved capital allocation and a competitive rebalancing in the local economy.

The logic is intuitive: when criminally connected firms exit, more efficient businesses can thrive. Resources are redirected toward productive uses. Firms that previously operated in fear—or were priced out of markets—regain the ability to innovate, hire, and grow. This underscores the broader economic dividends of strong institutional enforcement.

Policy Implications

Our findings carry several policy lessons:

• Combating organized crime yields financial and economic gains. The removal of criminal firms enhances access to finance and spurs local productivity.
• Transparency is a double-edged sword. While it enables better decision-making, it also exposes banks to new uncertainties that may temporarily tighten credit conditions.
• Local knowledge matters. Policymakers should support frameworks that strengthen banks’ access to soft information, particularly in high-risk regions.
• Data and enforcement can reinforce each other. Access to granular, high-quality data—like the ECB’s AnaCredit—was crucial in detecting the real effects of anti-Mafia operations. This kind of regulatory data infrastructure can support more evidence-based policymaking.

Looking Ahead

The nexus between organized crime and financial intermediation remains underexplored. Our study shows that when institutions act decisively against criminal infiltration, the financial system responds—often in ways that promote real economic growth. But it also reminds us that transitions are complex, and banks’ ability to absorb new information plays a critical role in shaping post-intervention outcomes.

Future research might explore how these findings translate to other contexts—such as regions affected by drug cartels, insurgent groups, or kleptocratic regimes. For now, our evidence from Italy suggests a clear message: cleaning up crime pays off—not just for justice, but for jobs, growth, and finance.

Bruno Buchetti is an Assistant Professor in the School of Economics and Political Science at the University of Padua

Michele Fabrizi is an Associate Professor in the School of Economics and Political Science at the University of Padua. 

Elisabetta Ipino is an Assistant Professor of Accounting at Seattle University. 

Ixart Miquel-Flores is a PhD candidate in the Finance Department at Frankfurt School of Finance & Management.

Antonio Parbonetti is a Professor in the School of Economics and Political Science at the University of Padua. 

The authors’ working paper can be found here.