SME lending and banking system stability: Some mechanisms at work

Michael Brei, Blaise Gadanecz and Aaron Mehrotra

Emerging Markets Review, 2020, vol. 43, issue C

Abstract: This paper sheds light on the effects of SME lending on banking system stability. Using a dataset of 32 economies during 2007–15, we find that higher growth in SME lending is associated with greater banking system stability, as measured by greater distance to default, but only in emerging market economies (EMEs). In EMEs, financial development tends to be lower and information asymmetries higher so that profitable projects may remain unfinanced.

Keywords: Emerging markets; Financial inclusion; SME financing; Financial stability (search for similar items in EconPapers)
JEL-codes: D22 G21 G28 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:43:y:2020:i:c:s1566014118303789

DOI: 10.1016/j.ememar.2020.100676

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