Providing small and medium enterprises (SMEs) with access to external finance
has been a major concern for many governments and international
organizations for three decades. In recent years the experiences of emerging
market countries suggest that a paradigm shift is taking place in SME
finance. Particularly in fast-growing emerging market countries such as
Turkey, banks are increasingly targeting SMEs as a new line of banking
business. This research analyzes how macroeconomic factors have contributed
to increased commercial bank lending to SMEs in six emerging market
countries: Turkey, Argentina, Brazil, Mexico, Chile, and Poland. Based on
time series and panel data analysis, we find that a high GDP growth rate and
increased competition in the banking sector have contributed to increased
banking sector credit to SMEs. The findings also reveal that curbing the
high inflation rate and reducing government domestic borrowing have
significantly encouraged bank lending to the SME segment.
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