Discouraged Borrowers: Evidence for Eurozone SMEs

CFA Digest ◽  
2017 ◽  
Vol 47 (3) ◽  
Author(s):  
Butt Man-Kit
Keyword(s):  
Discouraged Borrowers

scholarly journals Only the brave: improving self-rationing efficiency among discouraged Swiss SMEs

2021 ◽  
Author(s):  
Reto Wernli ◽  
Andreas Dietrich
Keyword(s):  
Unique Feature ◽  
Bank Loans ◽  
The Self ◽  
Bank Loan ◽  
Firm Characteristics ◽  
Policy Makers ◽  
Banking Market ◽  
Application Procedure ◽  
Discouraged Borrowers ◽  
New Evidence

AbstractWe conduct a survey among 1922 Swiss SMEs to analyze their access to bank loans. Credit-constrained SMEs are six times more likely to be discouraged than rejected. The most dominant reasons for being discouraged are too high collateral requirements, cumbersome application procedure, and the expectation of being turned down. Through a unique feature in the Swiss banking market, we also find new evidence for the importance of a strong firm–bank relationship. We challenge the assumption that discouraged borrowers are very similar to rejected borrowers. Our results indicate that the group of discouraged borrowers is more similar to the denied borrowers than to the group of approved borrowers, but only with respect to firm characteristics. For variables describing business development and firm–bank relationship, discouraged SMEs have less in common with credit-constrained firms than with their unconstrained counterparts. Even with a conservative prediction, about 60% of the discouraged firms would have obtained a bank loan if they had applied for one. The self-rationing mechanism observed is thus rather inefficient, and banks and policy makers should think about how to foster SMEs’ courage to apply for the bank loans they need.

Discouraged borrowers: Evidence for Eurozone SMEs

2016 ◽  
Vol 44 ◽  
pp. 46-55 ◽  
Author(s):  
Ciarán Mac an Bhaird ◽  
Javier Sanchez Vidal ◽  
Brian Lucey
Keyword(s):  
Discouraged Borrowers

scholarly journals Innovation and borrower discouragement in SMEs

2022 ◽  
Author(s):  
Ross Brown ◽  
José M. Liñares-Zegarra ◽  
John O.S. Wilson
Keyword(s):  
Application Process ◽  
Additional Risk ◽  
External Finance ◽  
Policy Interventions ◽  
Joint Product ◽  
Product And Process Innovation ◽  
Negative Perceptions ◽  
Product And Process ◽  
Discouraged Borrowers ◽  
Fear Of Rejection

AbstractIn this paper, we investigate whether innovative small- and medium-sized enterprises (SMEs) are more likely to be discouraged from applying for external finance than non-innovators. These so-called discouraged borrowers are credit worthy SMEs who choose not to apply for external finance despite the fact that this is needed. We find that SMEs undertaking pure product and joint product and process innovation have a significantly higher incidence of borrower discouragement than non-innovative counterparts. Moreover, radical and incremental product innovators are more likely to be discouraged relative to non-innovative counterparts. Innovative activity can increase borrower discouragement for a myriad of reasons including fear of rejection, reluctance to take on additional risk, negative perceptions of the funding application process and perceived negative economic conditions. Overall, our results suggest a need for targeted policy interventions in order to alleviate borrower discouragement within innovative SMEs, as well as a closer alignment between innovation and SME finance policy.

Firm-bank trusting relationship and discouraged borrowers

2016 ◽  
Vol 11 (3) ◽  
pp. 519-541 ◽  
Author(s):  
Ying Tang ◽  
Chao Deng ◽  
Andrea Moro
Keyword(s):  
Discouraged Borrowers
Sign in / Sign up

Export Citation Format

Share Document