The European capital markets study: Estimating the financing gaps of SMEs

Joseph Mc Cahery, Florencio Lopez de Silanes, Dirk Schoenmaker, Dragana Stanisic

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In recent years, policymakers and researchers have increasingly begun to explore the differences in SME lending across countries and among bank ownership types (IFC, 2010). While the literature examines the impact of differences in institutional and organisational structures and pricing of bank financing to SMEs, researchers have rarely focused on the differences between the supply and demand of financing to SMEs to determine if a financing gap exists in the debt and equity markets (EIB, 2013).
This is the first pan-European study of its kind to estimate the difference between SME financing supply and demand of SME financing in order to quantify the financing gap in the Research Countries. We used publicly available data on SME outstanding loans and issued equity in order to estimate the supply of SME financing. In order to estimate the demand for loans and equity among SMEs, we used the Survey on the Access to Finance of Enterprises of the ECB (ECB SAFE Survey) and publicly available data.

The survey focussed on the EU member state countries, where small and medium enterprises were randomly selected and weighted based on economic importance. The survey relied on data from statistical offices, as well as on data collected through surveys which greatly helped in assessing financing demand. We relied on the methods used in the EIB (2013) study, but we expanded it in several dimensions. First, we estimated supply and demand using different sources of data in order to insure that our readers have a full overview of the currently available data on SME financing supply. Second, we applied different methods in order to estimate the financing demand. These different methods helped us to avoid the sample selection issue that the EIB study suffers from. Specifically, the EIB study estimated the average loan demand by observing only the sample of loans that were obtained. We corrected for this issue and included different sizes of obtained versus desired loans. In addition, we estimated the loan demand of those firms that applied for but were rejected for a loan. Finally, our study focuses on a different set of countries: France, Germany, the Netherlands, Poland and Romania ('Research Countries’). In order to provide a contextual meaning to the estimated numbers, we compared them with the SME loan and equity gap in the US. While not approaching pre-crisis levels, the credit conditions for US SMEs are better than for EU SMEs. At the same time, the EU and the US have similar institutions and market structures, which makes policy recommendations easier to benchmark. To estimate the US SME loan and equity finance gap, we relied on publicly available data and published studies.
Original languageEnglish
Place of PublicationAmsterdam
PublisherDuisenberg School of Finance
Commissioning bodyEuropean Bank for Reconstruction and Development
Number of pages179
Publication statusPublished - 15 Jul 2015

Publication series

NameDuisenberg School of Finance
PublisherStrategy Series


Cite this

Mc Cahery, J., Lopez de Silanes, F., Schoenmaker, D., & Stanisic, D. (2015). The European capital markets study: Estimating the financing gaps of SMEs. (Duisenberg School of Finance; Vol. 1, No. 3). Duisenberg School of Finance.