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Bank involvement with SMEs : beyond relationship lending
 
Author:de la Torre, Augusto; Soledad Martinez Peria, Maria; Schmukler , Sergio L.; Collection Title:Policy Research working paper ; no. WPS 4649
Country:Latin America; World; Date Stored:2008/06/18
Document Date:2008/06/01Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:Finance
Rel. Proj ID:6L-Sme Finance -- -- P104001;Region:The World Region; Latin America & Caribbean
Report Number:WPS4649Sub Sectors:General finance sector
SubTopics:Access to Finance; Banks & Banking Reform; Debt Markets; ; Financial IntermediationVolume No:1 of 1

Summary: 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 in doing so 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 recent intensification of bank involvement with SMEs in various emerging markets documented in this paper is neither led by small or niche banks nor highly dependent on relationship lending. Rather, all types of banks are catering to SMEs and larger, multiple-service banks have in fact 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.

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