Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries

By Thorsten Beck, Berrak Büyükkarabacak, Felix K. Rioja, N. Valev. 2008

479 citations recorded by the source corpus.

While theory predicts different effects of household credit and enterprise credit on the economy, the empirical literature has mainly used aggregate measures of overall bank lending to the private sector. We construct a new dataset from 45 developed and developing countries, decomposing bank lending into lending to enterprises and lending to households and assess the different effects of these two components on real sector outcomes. We find that: 1) enterprise credit is positively associated with economic growth whereas household credit is not; and 2) enterprise credit is significantly associated with faster reductions in income inequality whereas household credit is not. We also find that the share of household credit is higher in more urban societies, in countries with smaller manufacturing sectors and more market-based financial systems, while market structure and regulatory policies are not related to credit composition.

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/835a2f99fb9042b32711051261003ce560de3c59

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Citations in the corpus

Financial Stability and Economic Performance (2015, unknown): “1 Beck et al. (2012) insist on the fact that finance growth effect stems from firms rather than households.”
Is More Finance Better? Disentangling Intermediation and Size Effects of Financial Systems (2014, unknown): “One reason for these non-linearities might be the beneficiary of the credit as argued by Beck et al. (2012) who explore the differential growth effects of enterprise and household credit.”
Financial Inclusion, Bank Concentration, and Firm Performance (2017, background): “Finally, the last strand of the literature to which this work can be related examines how the structure of the banking market (bank concentration) influences competitive behavior and hence the diversity and profitability of banking services (Beck et al., 2012; Northcott, 2004).”
Bank Financing for SMEs – Lessons from the Literature (2013, unknown): “9 There is cross-country aggregate evidence that the pro-growth and pro-poor effect comes through enterprise rather than household lending by banks (Beck et al., 2012) business environment obstacles are also important, these are often interrelated with finance, and even when these interactions are…”
The Role of Finance in Economic Development: Benefits, Risks, and Politics (2011, background): “Tentative cross-country evidence has shown that the positive effect of financial deepening comes mostly through enterprise credit, and there is no significant relationship between the importance of household credit and economic growth (Beck et al., 2009).”
Too much finance? (2015, unknown): “Theories that explain how financial development may affect economic growth tend to focus on how the financial sector can reduce credit market frictions faced by enterprises that want to finance their production or investment projects (Beck et al. 2012).”