Despite the fact that small and medium enterprises (SMEs) play very crucial role in
economic growth and job creation, limited or no access to formal credit still remains
one of the major obstacles to their growth. Providing an easy access to external
finance to this sector has been a major concern for many governments and
international organizations. However, in recent years the experiences of emerging
markets suggest that a paradigm change is taking place in SME finance. This thesis
investigates six major emerging markets economies and determines the factors that
creating the enabling environment for the banks to provide sustainable finance to
SMEs. First we analyzed the growth of SME loan in Turkey, using World Bank
Enterprise Surveys (WBES) data. Then run regression analysis using historical data
on SME loan as dependent variable and some other macroeconomics and financial
variables as explanatory variables. Then we carried out similar analysis using panel
data from five other countries namely Argentina, Brazil, Chile, Mexico and Poland.
Based on the theoretical and empirical analysis from these emerging countries we
found that GDP growth and competition in the banking sector accelerate banks?
finance to SMEs whereas high inflation and the extent of government borrowing
affect SME finance negatively. This study benefits the governments and
policymakers who are aiming to promote SME finance through financial institutions.
Our analyses will help them to develop an economic and financial environment that
enables banks to finance SMEs.