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Connectedness and SME Financing in Post-Communist Economies: Evidence from Uzbekistan

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  • Kobil Ruziev
  • Peter Midmore

Abstract

This paper investigates effects of interpersonal links with bureaucrats on SME access to formal finance. A survey of 502 SMEs in post-communist Uzbekistan shows fewer SMEs with government connections express a need for external finance, but success rates of applications are higher than for SMEs without connections. Econometric models show government-connected SMEs receive more formal credit than their counterparts. The small share of SME credit available is thus distributed in favour of those capitalising on bureaucratic links, with consequent resource misallocation. Findings imply that greater SME credit flows need supplementing with capacity building that improves bank transparency and efficiency.

Suggested Citation

  • Kobil Ruziev & Peter Midmore, 2015. "Connectedness and SME Financing in Post-Communist Economies: Evidence from Uzbekistan," Journal of Development Studies, Taylor & Francis Journals, vol. 51(5), pages 586-602, May.
    • Handle: RePEc:taf:jdevst:v:51:y:2015:i:5:p:586-602
    DOI: 10.1080/00220388.2014.989991
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    References listed on IDEAS

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    1. Richard Pomfret, 2010. "Central Asia after Two Decades of Independence," WIDER Working Paper Series wp-2010-053, World Institute for Development Economic Research (UNU-WIDER).
    2. Richard Pomfret, 2009. "Central Asia after Two Decades of Independence," School of Economics Working Papers 2009-32, University of Adelaide, School of Economics.
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    Cited by:

    1. Kobil Ruziev & Don Webber, 2017. "SMEs access to formal finance in post-communist economies: Do institutional structure and political connectedness matter?," Working Papers 20171701, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    2. Yuting Li & Tong Chen & Baogui Xin, 2016. "Optimal Financing Decisions of Two Cash-Constrained Supply Chains with Complementary Products," Sustainability, MDPI, vol. 8(5), pages 1-17, April.
    3. Kobil Ruziev, 2017. "Political connectedness and formal finance in transition economies," IZA World of Labor, Institute of Labor Economics (IZA), pages 398-398, November.
    4. Mirgul Nizaeva & Ali Coskun, 2019. "Investigating the Relationship Between Financial Constraint and Growth of SMEs in South Eastern Europe," SAGE Open, , vol. 9(3), pages 21582440198, September.
    5. Kobil Ruziev & Peter Midmore, 2014. "Informal credit institutions in transition countries: a study of urban money lenders in post-communist Uzbekistan," Post-Communist Economies, Taylor & Francis Journals, vol. 26(3), pages 415-435, September.

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