Does Foreign Bank Penetration Reduce Access to Credit in Developing Countries? Evidence from Asking Borrowers

Abstract

Recently, foreign bank participation has risen significantly in developing countries. Opponents of this process argue that it might reduce access to credit, particularly for small and medium-sized enterprises (SMEs). Given that in many developing countries SMEs account for more than 50 percent of employment, access to financing by these firms can be vital for the overall economy. This paper uses data from a large cross-country enterprise level survey to investigate the impact of foreign bank penetration on access to credit. The results suggest that foreign bank participation improves financing conditions (both quantities and terms) for enterprises of all sizes.

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@inproceedings{Clarke2001DoesFB, title={Does Foreign Bank Penetration Reduce Access to Credit in Developing Countries? Evidence from Asking Borrowers}, author={George R. G. Clarke and Robert J. Cull and Maria Soledad Martinez Peria}, year={2001} }