Bank Ownership Structure, SME Lending and Local Credit Markets
INE PAN Working Paper Series
53 Pages Posted: 18 Aug 2014 Last revised: 28 Aug 2014
There are 3 versions of this paper
Bank Ownership Structure, SME Lending and Local Credit Markets
Bank Ownership Structure, SME Lending and Local Credit Markets
Bank Ownership Structure, SME Lending and Local Credit Markets
Date Written: August 17, 2014
Abstract
In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at lower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreign-owned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries.
Keywords: small-business lending, cooperative banks, foreign banks, post-transition countries
JEL Classification: G21, G28
Suggested Citation: Suggested Citation