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    Local Financial Development, Access to Credit and SMES' Performance: Evidence from Bangladesh

    Hossain, Monzur; Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad | December 2018
    Abstract
    This paper tests whether local financial development matters for SMEs’ growth performance. We develop a theoretical model framework based on banks’ and firms’ profit-maximizing behavior that critically hinges upon credit default risk ratio. We argue that an expansion of branch network would increase competition among banks to find good borrowers, which will likely to reduce credit default risk of banks. Our empirical analysis based on the theoretical framework confirms that decreasing credit default risk would decrease interest rates and therefore increases the demand for loans. Thus, bank branch growth has positive and significant impact on firms output growth and productivity. For the empirical analysis, we have used 3 groups of data of Bangladesh including i. firm level data; ii. financial development data; and iii. subdistrict level geographical data. The main policy implication of this paper is that local financial development, particularly bank branch network expansion at subdistrict level could ease access to finance and thereby improve performances of SMEs in developing countries.
    Citation
    Hossain, Monzur; Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad. 2018. Local Financial Development, Access to Credit and SMES' Performance: Evidence from Bangladesh. © Asian Development Bank Institute. http://hdl.handle.net/11540/9478.
    Keywords
    Development
    Finance
    Development Challenges
    Development Issues
    Development Problems
    Microenterprises Finance
    Commercial Finance Companies
    Enterprise Financing
    Financial Analysis
    Banking Finance And Investment
    SMEs
    Small Business Finance
    ADB
    Project finance
    Development plans
    Strategic planning
    Business Financing
    Investment Requirements
    Insurance Companies
    International Monetary Relations
    International Financial Market
    Exchange Rate
    Insurers
    Insurance stocks
    Insurance holding companies
    Insurance carriers
    Insurance agencies
    Business subsidies
    Investment companies
    Foreign investment
    Equity Finance
    International banks and banking
    Stock exchanges
    Grants
    Loans
    Communication in rural development
    Communication in community development
    Economic development projects
    Development banks
    Economic forecasting
    Environmental auditing
    Cumulative effects assessment
    Human rights and globalization
    Small business
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    Citable URI
    http://hdl.handle.net/11540/9478
    Metadata
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    adbi-wp906.pdf (447.5Kb)
    Author
    Hossain, Monzur
    Yoshino, Naoyuki
    Taghizadeh-Hesary, Farhad
    Theme
    Development
    Finance
    Small Medium Business
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise