Sensitivity to the crisis of SME financing in Belgium

This article uses various qualitative and quantitative data sources to investigate how bank loans granted to Belgian SME s were affected in the wake of the recent economic and financial crisis.Credit demand from SMEs declined, albeit to a lesser extent than demand from larger firms, which made more use of alternative instruments owing to their easier access to financial markets. On the supply side, survey data indicate that banks perceive SME s as presenting a higher risk, so that they apply tighter credit conditions to this type of firms. Firm-level data suggest that the increase in credit risk was mostly concentrated within a relatively small fraction of Belgian SME s whose financial health deteriorated somewhat faster after the onset of the crisis. These divergent risk profiles seem to have been taken into account by Belgian banks in their credit policy. This is confirmed by an econometric analysis that links the financial situation of the SME s to their access to bank credit. It shows that Belgian banks do indeed take account of the SME s’ financial situation but did not become more risk-averse after the onset of the crisis as far as existing lender-borrower relationships are concerned. However, they tended to favour lower risk profiles when granting loans to SME s which were not part of their existing corporate clientele.