Who Gets the Credit? And Does it Matter - Household vs. Firm Lending across Countries

41 Pages Posted: 20 Apr 2016

See all articles by Thorsten Beck

Thorsten Beck

City University London - The Business School; Tilburg University - European Banking Center, CentER

Berrak Buyukkarabacak

Ozyegin University

Felix K. Rioja

Georgia State University - Department of Economics

Neven T. Valev

Georgia State University - Department of Economics

Date Written: July 1, 2008

Abstract

While the theoretical and empirical finance literature has focused almost exclusively on enterprise credit, about half of credit extended by banks to the private sector in a sample of 45 developing and developed countries is to households. The share of household credit in total credit increases as countries grow richer and financial systems develop. Cross-country regressions, however, suggest a positive and significant impact on gross domestic product per capita growth only of enterprise but not household credit. These two findings together partly explain why previous studies have found a small or insignificant effect of finance on growth in high-income countries. In addition, countries with a lower share of manufacturing, a higher degree of urbanization, and more market-oriented financial systems have a higher share of household credit. It is thus mostly socio-economic trends that determine credit composition, while policies influencing banking market structure and regulatory policies are not robustly related to credit composition.

Keywords: Access to Finance, Banks & Banking Reform, Economic Theory & Research, Debt Markets

Suggested Citation

Beck, Thorsten and Bahadir, Berrak and Rioja, Felix Korman and Valev, Neven T., Who Gets the Credit? And Does it Matter - Household vs. Firm Lending across Countries (July 1, 2008). World Bank Policy Research Working Paper No. 4661, Available at SSRN: https://ssrn.com/abstract=1157129

Thorsten Beck (Contact Author)

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Berrak Bahadir

Ozyegin University ( email )

Kusbakisi Cd. No: 2
Altunizade Uskudar
Istanbul, 34662
Turkey

Felix Korman Rioja

Georgia State University - Department of Economics ( email )

University Plaza
35 Broad Street
Atlanta, GA 30303
United States
404-651-0417 (Phone)
404-651-4985 (Fax)

Neven T. Valev

Georgia State University - Department of Economics ( email )

Andrew Young School of Policy Studies
University Plaza
Atlanta, GA 30303
United States
404-651-0418 (Phone)
404-651-4985 (Fax)

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