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An Analysis of the Macroeconomic Conditions Required for SME Lending: The Case of Turkey

Author

Listed:
  • Hatice Jenkins

    (Department of Banking and Finance, Eastern Mediterranean University, North Cyprus)

  • Monir Hussain

    (Department of Banking and Finance, Eastern Mediterranean University, North Cyprus)

Abstract

Providing SMEs with access to external finance has been a major concern for many governments and international organizations for three decades. In recent years the experiences of emerging market countries suggest that a paradigm shift is taking place in SME finance. Particularly in fast-growing emerging market countries, banks are increasingly targeting SMEs as a new line of banking business. This research analyzes how the macroeconomic factors have contributed to the increased commercial bank lending to SMEs in Turkey, a fast-growing emerging market country. Based on an econometric analysis it is found that a high GDP growth rate and increasing competition in the Turkish banking sector have contributed to the growing banking sector credit to SMEs. The findings also reveal that curbing the high inflation rate and reducing government domestic borrowings have significantly helped to encourage bank lending to the SME segment. This research contributes to the literature by providing empirical evidence to much-discussed theoretical arguments on the characteristics of an enabling macroeconomic environment for SME finance.

Suggested Citation

  • Hatice Jenkins & Monir Hussain, 2014. "An Analysis of the Macroeconomic Conditions Required for SME Lending: The Case of Turkey," Development Discussion Papers 2014-06, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:261
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    References listed on IDEAS

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    More about this item

    Keywords

    SME lending; macroeconomics; banking sector; emerging markets; access to credit;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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