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Drivers and Obstacles to Banking SMEs: The Role of Competition and the Institutional Framework

  • de la Torre, Augusto

    ()

    (The World Bank)

  • Soledad Martinez Peria, Maria

    ()

    (The World Bank)

  • Schmukler, Sergio L.

    ()

    (The World Bank)

Registered author(s):

    This paper studies the factors banks perceive as drivers and obstacles to financing small and medium enterprises (SMEs), focusing on the role of competition and the institutional framework. Using a survey of banks in Argentina and Chile, the paper shows that, despite alleged differences in the countries' environments regarding rules, regulations, and ease of doing business, SMEs have become a strategic segment for most banks in both countries. In particular, banks have begun to target SMEs due to the significant competition in the corporate and retail sectors. They perceive the SMEs market as highly profitable, large, and with good prospects. Moreover, banks are developing coping mechanisms to overcome the particular institutional obstacles present in each country and to compete for SMEs. Banks' interest in SMEs is not based on government programs, yet policy action might help reduce the cost of providing financing, especially long-term lending.

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    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/12/01/000158349_20081201095551/Rendered/PDF/WPS4788.pdf
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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4788.

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    Length: 51 pages
    Date of creation: 01 Dec 2008
    Date of revision:
    Handle: RePEc:wbk:wbrwps:4788
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    1. Thorsten Beck, 2004. "The determinants of financing obstacles," Policy Research Working Paper Series 3204, The World Bank.
    2. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    3. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all? : Policies and pitfalls in expanding access," Other publications TiSEM aec73d3a-d6eb-457f-9182-3, Tilburg University, School of Economics and Management.
    4. Augusto de la Torre & Sergio L. Schmukler, 2004. "Coping with Risks through Mismatches: Domestic and International Financial Contracts for Emerging Economies," International Finance, Wiley Blackwell, vol. 7(3), pages 349-390, December.
    5. Beck, Thorsten & Klapper, Leora F. & Mendoza, Juan Carlos, 2008. "The typology of partial credit guarantee funds around the world," Policy Research Working Paper Series 4771, The World Bank.
    6. Schiffer, M. & Weder, B., 2001. "Firm Size and the Business Environment: Worldwide Survey Results," Papers 43, World Bank - International Finance Corporation.
    7. 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.
    8. repec:ner:tilbur:urn:nbn:nl:ui:12-4295079 is not listed on IDEAS
    9. 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.
    10. repec:ner:tilbur:urn:nbn:nl:ui:12-4731699 is not listed on IDEAS
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