Title: The decline of bank finance for SMEs in APEC

Authors: Chris Hall

Addresses: 37 Wandeen Rd., Clareville, 2107, Australia

Abstract: Banks are still the single largest supplier of debt funds to SMEs in most developed economies. This paper shows, on the basis of publicly available data for APEC economies, that the real growth of bank lending to SMEs appears to be negative or to have declined in almost all economies over the decade from 1997. Prior to 1997, the real rate of growth of bank finance to SMEs was positive. By contrast, throughout the period 1994-2007, the growth of real lending to large firms has usually been positive and growing. The paper explores these trends in detail and reaches the conclusion that there has been a decline in the availability of bank finance to SMEs in the developed economies in absolute and real terms. The paper also examines some possible reasons for this phenomenon and discusses the implications. It concludes that the problems banks face meeting BIS Basle II requirements, in accounting for intangibles, and thus assessing collateral, is a possible contributor. Finally, the paper suggests ways that the World Bank and Bank of International Settlements (BIS) could make more effective use of available data from banks to better understand the phenomenon.

Keywords: banks; banking supervision; debt finance; bank lending; intangible assets; Basle II; Asia-Pacific Economic Cooperation; Basel Accords; APEC economies; Bank for International Settlements; BIS; Asian financial crisis; dot com crisis; debt funds; developed economies; collateral; World Bank; financial data; small and medium-sized enterprises; SMEs; entrepreneurship; entrepreneurs.

DOI: 10.1504/IJESB.2010.034431

International Journal of Entrepreneurship and Small Business, 2010 Vol.11 No.1, pp.42 - 54

Published online: 03 Aug 2010 *

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