Commercial Bank Behaviour in Micro and Small Enterprise Finance

This study reports on the findings of a global survey of commercial banks with respect to their micro and small enterprise financing activities. A sample of banks representing seventy-eight countries was examined in detail. It is found that there are a large number of commercial banks that have been making micro and small loans for decades. The results also indicate that banks have higher arrears in small business loans in comparison to micro enterprise loans. These arrears are found to be significantly related to the level of interest rates charged on small business loans, which indicates a sensitivity of small businesses to loan interest rates. It is also found that the reliance on collateral to back small business loans is positively related to the level of banks' arrears. Furthermore, the minimum deposit requirement of banks to open a bank account has a negative impact on the overall level of savings collected by these banks.

[Author's Abstract]