Working Paper No. 1305

Do Local Bank Branches Reduce SME Credit Constraints? Evidence from Public-Private Bank Interaction

Published: November 20, 2019Pages: 9Keywords: Credit constraints; Relationship banking; State owned bank; Small businessJEL-codes: L52; O38; H81; L26; G28

Do Local Bank Branches Reduce SME Credit Constraints? Evidence from Public-Private Bank Interaction Anders Gustafsson, Agostino Manduchi and Andreas Stephan


In the past few decades, commercial banks have substantially reduced the number of their branch offices. We address the question of whether or not the increased distance from the lenders correspondingly faced by many small and medium sized enterprises (SMEs) translates into a lower volume of loans.

We use a unique dataset on loans from a state owned Swedish bank designed to support credit-constrained SMEs and interact their loan portfolio with the number of nearby commercial bank offices at the firm level along with an IV strategy to account for endogeneity. The estimation results strongly indicate that a larger number of local bank offices increases the local credit supply, and decreases the credit constraints of nearby SMEs.

Anders Gustafsson

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anders.gustafsson@ifn.se

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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