Is Small Beautiful? Financial Structure, Size and Access to Finance

34 Pages Posted: 20 Apr 2016  

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Dorothe Singer

World Bank

Date Written: September 1, 2011

Abstract

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.

Keywords: Access to Finance, Banks & Banking Reform, Debt Markets, Microfinance, Non Bank Financial Institutions

Suggested Citation

Beck, Thorsten and Demirgüç-Kunt, Asli and Singer, Dorothe, Is Small Beautiful? Financial Structure, Size and Access to Finance (September 1, 2011). World Bank Policy Research Working Paper No. 5806. Available at SSRN: https://ssrn.com/abstract=1932590

Thorsten Beck (Contact Author)

City University London - Sir John Cass 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

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Dorothe Singer

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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