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Is small beautiful ? financial structure, size and access to finance

  • Beck, Thorsten
  • Demirguc-Kunt, Asli
  • Singer, Dorothe

Combining two unique data sets, this paper explores the relationship between the relative importance of different financial institutions and their average size and firms'access to financial services. Specifically, the authors explore the relationship between the share in total financial assets and average asset size of banks, low-end financial institutions, and specialized lenders, on the one hand, and firms'access to and use of deposit and lending services, on the other hand. Two findings stand out. First, the dominance of banks in most developing and emerging markets is associated with lower use of financial services by firms of all sizes. Low-end financial institutions and specialized lenders seem particularly suited to ease access to finance in low-income countries. Second, there is no evidence that smaller institutions are better in providing access to finance. To the contrary, larger specialized lenders and larger banks might actually ease small firms'financing constraints, but only at low levels of gross domestic product per capita.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5806.

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Date of creation: 01 Sep 2011
Date of revision:
Handle: RePEc:wbk:wbrwps:5806
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  1. Allen N. Berger & Iftekhar Hasan & Leora F. Klapper, 2004. "Further evidence on the link between finance and growth: An international analysis of community banking and economic performance," Finance 0404016, EconWPA.
  2. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
  3. Thorsten Beck & Asli Demirguc-Kunt & Luc Laeven & Ross Levine, 2008. "Finance, Firm Size, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1379-1405, October.
  4. Rousseau, Peter L. & D’Onofrio, Alexandra, 2013. "Monetization, Financial Development, and Growth: Time Series Evidence from 22 Countries in Sub-Saharan Africa," World Development, Elsevier, vol. 51(C), pages 132-153.
  5. de la Torre, Augusto & Martínez Pería, María Soledad & Schmukler, Sergio L., 2010. "Bank involvement with SMEs: Beyond relationship lending," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2280-2293, September.
  6. Beck, T.H.L. & Munzele Maimbo, S. & Faye, I. & Triki, T., 2011. "Financing Africa : Through the crisis and beyond," Other publications TiSEM 334b6bd2-a7a6-47d5-be82-3, Tilburg University, School of Economics and Management.
  7. 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.
  8. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  9. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
  10. Antonio Ciccone and Elias Papaioannou, 2015. "Estimating Cross-Industry Cross-Country Models Using Benchmark Industry Characteristics," Working Papers 504, Barcelona Graduate School of Economics.
  11. Beck, Thorsten & Cull, Robert & Fuchs, Michael & Getenga, Jared & Gatere, Peter & Randa, John & Trandafir, Mircea, 2010. "Banking sector stability, efficiency, and outreach in Kenya," Policy Research Working Paper Series 5442, The World Bank.
  12. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Funding growth in bank-based and market-based financial systems: evidence from firm-level data," Journal of Financial Economics, Elsevier, vol. 65(3), pages 337-363, September.
  13. Ayyagari, Meghana & Beck, Thorsten & Demirguc-Kunt, Asl, 2003. "Small and medium enterprises across the globe : a new database," Policy Research Working Paper Series 3127, The World Bank.
  14. 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.
  15. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, June.
  16. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  17. Thorsten Beck & Ross Levine, 2002. "Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?," NBER Working Papers 8982, National Bureau of Economic Research, Inc.
  18. Beck, T.H.L. & Demirgüc-Kunt, A. & Martinez Peria, M., 2011. "Banking financing for SME's : Evidence across countries and bank ownership types," Other publications TiSEM c4d491c9-2cc6-40f6-ad55-a, Tilburg University, School of Economics and Management.
  19. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2006. "The influence of financial and legal institutions on firm size," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2995-3015, November.
  20. Thorsten Beck & Samuel Munzele Maimbo & Issa Faye & Thouraya Triki, 2011. "Financing Africa : Through the Crisis and Beyond," World Bank Publications, The World Bank, number 2355.
  21. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," William Davidson Institute Working Papers Series 442, William Davidson Institute at the University of Michigan.
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