Beck, Τ., Degryse, H., De Haas, R. & Van Horen, N. (2014) “When arm’s length is too far“, VoxEU Organisation, 25 Ιουλίου.
The small and medium-size enterprises (SMEs) were among the most severely affected in the Global Crisis. This column discusses new evidence on how different lending techniques affect lending in bad and good times. Data from 21 countries in central and eastern Europe show that ‘relationship lending’ alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.
In the wake of the global financial crisis, policymakers’ attention has focused on lending to small and medium-sized enterprises (SMEs) as these were among the most affected firms when the credit cycle turned. In the US, president Obama signed the Small Business Jobs Act in 2010, which authorised the creation of the Small Business Lending Fund Programme to increase the availability of credit for small businesses. In the UK, policymakers have put a lot of pressure on banks to increase, or at least not reduce, lending to SMEs – often seen as the backbone of the economy.
But what is the best way for banks to reach out to SMEs? While the traditional literature has focused on ‘relationship lending’ as the prime lending tool for SMEs, recent evidence shows that transaction-based or arms-length lending – using hard information to screen firms and hard assets as collateral – can be more cost-effective (Berger and Udell 2006). It also allows larger and non-local banks to lend to SMEs (Beck et al. 2011).
Σχετικές αναρτήσεις:
- The Central Bank of Ireland (2014) “SME Market Report 2014, H1“, Eurosystem, Ιούνιος.
- Buti, M., Mohl, Ph. (2014) “Lacklustre investment in the Eurozone: Is there a puzzle?“, VoxEU Organisation, 4 Ιουνίου.
- Infelise, F. (2014) “Supporting Access to Finance by SMEs: Mapping the initiatives in five EU countries“, Financial Markets, ECMI Research Reports, CEPS, 23 Απριλίου.