Bank Involvement with SMEs: Beyond Relationship Lending

14 Pages Posted: 8 Nov 2012 Last revised: 3 Jan 2013

See all articles by Augusto de la Torre

Augusto de la Torre

Columbia University, School of International & Public Affairs (SIPA), Students

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2010

Abstract

The “conventional wisdom” in academic and policy circles argues that, while large and foreign banks are generally not interested in serving SMEs, small and niche banks have an advantage because they can overcome SME opaqueness through relationship lending. This paper shows that there is a gap between this view and what banks actually do. Banks perceive SMEs as a core and strategic business and seem well-positioned to expand their links with SMEs. The intensification of bank involvement with SMEs in various emerging markets is neither led by small or niche banks nor highly dependent on relationship lending. Moreover, it has not been derailed by the 2007-2009 crisis. Rather, all types of banks are catering to SMEs and large, multiple-service banks have a comparative advantage in offering a wide range of products and services on a large scale, through the use of new technologies, business models, and risk management systems.

Keywords: Small and medium enterprises, bank finance, financial constraints, banking market structure

JEL Classification: G21, G28, L25, O12, O16

Suggested Citation

de la Torre, Augusto and Martinez Peria, Maria Soledad and Schmukler, Sergio, Bank Involvement with SMEs: Beyond Relationship Lending (September 1, 2010). Journal of Banking and Finance, Vol. 34, Issue 9, September 2010: pp. 2280-2293. Available at SSRN: https://ssrn.com/abstract=2172463

Augusto De la Torre (Contact Author)

Columbia University, School of International & Public Affairs (SIPA), Students ( email )

420 West 118th Street
New York, NY
United States

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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