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Distance to Banks and SME Exit: Evidence of Threshold Effects in an Urban Gulf Economy

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  • Saito,Jun

Abstract

This study examines how bank access is associated with SME exit, using firm-level data on café businesses in Kuwait. Focusing on distance to the nearest bank branch as a spatial indicator of financial access, the paper tests whether its effect on firm exit is linear or concentrated beyond a threshold. Logit estimates show that exit probability rises significantly beyond 1 km, especially in the 1–2 km range. Similar patterns are observed when bank density is used as an alternative measure of financial access. Although exploratory and descriptive, the findings suggest that spatial differences in access to banking services are associated with SME exit and highlight the importance of the spatial distribution of financial services in Gulf urban economies.

Suggested Citation

  • Saito,Jun, 2026. "Distance to Banks and SME Exit: Evidence of Threshold Effects in an Urban Gulf Economy," IDE Discussion Papers 1011, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper1011
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    File URL: https://ir.ide.go.jp/record/2001948/files/IDP001011_001.pdf
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    References listed on IDEAS

    as
    1. Beck, Thorsten & Ongena, Steven & Şendeniz-Yüncü, İlkay, 2019. "Keep walking? Geographical proximity, religion, and relationship banking," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 49-68.
    2. Havrylchyk, Olena, 2012. "The effect of foreign bank presence on firm entry and exit in transition economies," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1710-1721.
    3. Olena Havrylchyk, 2012. "•The effect of foreign bank presence on firm entry and exit in transition economies," Post-Print hal-01410592, HAL.
    4. Ngo Minh Hai & Le Minh-Tu & Nguyen Dac Dung, 2025. "Survival of SMEs: business environment, financial performance, bank credit, and accounting errors," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 18(1), pages 63-80, January.
    5. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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