A More Complete Conceptual Framework for Financing of Small and Medium Enterprises

By Allen N. Berger, Gregory F. Udell. 2005

120 citations recorded by the source corpus.

The authors propose a more complete conceptual framework for analysis of credit availability for small and medium enterprises (SMEs). In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. They emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies, plus relationship lending. The authors argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque SMEs.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/136019b7cc816745f608376aca40ce599c8282da

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Citations in the corpus

Financing patterns of European SMEs – an empirical taxonomy (2016, unknown): “Empirical research considering a larger number of financing instruments and their substitutive and complementary effect is still scarce (exemptions are for example Beck et al. 2011; Berger and Udell 2006; Casey and O’Toole 2014; Cosh et al. 2009; Huyghebaert and Van de Gucht 2007; Robb 2002).”
Is Bank Income Diversification Beneficial? Evidence from an Emerging Economy (2013, unknown): “This may suggest that it pays for foreign banks to specialize in non-interest activities, consistent with the studies of Stein (2002), Berger and Udell (2006), which highlight the disadvantage of foreign-owned institutions in collecting soft information that is crucial in lending to small local…”
Lending terms, financial literacy and formal credit accessibility (2014, background): “The reasons for high interest rates have typically included risks associated with SMEs (Hossain, 1988) and, small and younger firms with shorter banking relationships (Berger and Udell, 2005).”
Finance, Financial Sector Policies, and Long-Run Growth (2008, background): “13 Also see Berger and Udell (2006) for a discussion of different innovative technologies that can expand access of small firms even in the absence of a strong institutional environment.”