Bank Financing for SMEs around the World: Drivers, Obstacles, Business Models, and Lending Practices
Using data from a survey of 91 banks in 45 countries, the authors characterize bank financing to small and medium enterprises (SMEs) around the world. They find that banks perceive the SME segment to be highly profitable, but perceive macroeconomic instability in developing countries and competition in developed countries as the main obstacles. To serve SMEs banks have set up dedicated departments and decentralized the sale of products to the branches. However, loan approval, risk management, and loan recovery functions remain centralized. Compared with large firms, banks are less exposed to small enterprises, charge them higher interest rates and fees, and experience more non-performing loans from lending to them. Although there are some differences in SMEs financing across government, private, and foreign-owned banks -- with the latter being more likely to engage in arms-length lending -- the most significant differences are found between banks in developed and developing countries. Banks in developing countries tend to be less exposed to SMEs, provide a lower share of investment loans, and charge higher fees and interest rates. Overall, the evidence suggests that the lending environment is more important than firm size or bank ownership type in shaping bank financing to SMEs.
|Date of creation:||01 Nov 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allen N. Berger & Anil K. Kashyap & Joseph Scalise, 1995.
"The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It's Been,"
Center for Financial Institutions Working Papers
96-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Allen N. Berger & Anil K. Kashyap & Joseph M. Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trips It's Been," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 55-218.
- Thorsten Beck, 2004.
"The determinants of financing obstacles,"
Policy Research Working Paper Series
3204, The World Bank.
- Berger, Allen N. & Rosen, Richard J. & Udell, Gregory F., 2007.
"Does market size structure affect competition? The case of small business lending,"
Journal of Banking & Finance,
Elsevier, vol. 31(1), pages 11-33, January.
- Berger, Allen N. & Rosen, Richard J. & Udell, Gregory F., 2005. "Does Market Size Structure Affect Competition? The Case of Small Business Lending," CEI Working Paper Series 2005-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Beck, T.H.L. & Demirgüc-Kunt, A. & Maksimovic, V., 2008.
"Financing patterns around the world : Are small firms different?,"
Other publications TiSEM
7078f1cc-51a6-4556-b193-d, Tilburg University, School of Economics and Management.
- Beck, Thorsten & Demirgüç-Kunt, Asli & Maksimovic, Vojislav, 2008. "Financing patterns around the world: Are small firms different?," Journal of Financial Economics, Elsevier, vol. 89(3), pages 467-487, September.
- Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
- Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005.
"Private Credit in 129 Countries,"
NBER Working Papers
11078, National Bureau of Economic Research, Inc.
- Mirjam Schiffer & Beatrice Weder, 2001.
"Firm Size and the Business Environment : Worldwide Survey Results,"
World Bank Publications,
The World Bank, number 13988.
- Schiffer, M. & Weder, B., 2001. "Firm Size and the Business Environment: Worldwide Survey Results," Papers 43, World Bank - International Finance Corporation.
- Meghana Ayyagari & Thorsten Beck & Asli Demirguc-Kunt, 2007. "Small and Medium Enterprises Across the Globe," Small Business Economics, Springer, vol. 29(4), pages 415-434, December.
- Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November.
- Stephanou, Constantinos & Rodriguez, Camila, 2008. "Bank financing to small and medium-sized enterprises (SMEs) in Colombia," Policy Research Working Paper Series 4481, The World Bank.
- repec:ner:tilbur:urn:nbn:nl:ui:12-4731699 is not listed on IDEAS
- repec:ner:tilbur:urn:nbn:nl:ui:12-4295079 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4785. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.