Bank concentration and SME financing availability: the impact of promotion of financial inclusion in China

Zhiqiang Lu, Junjie Wu, Jia Liu

    Research output: Contribution to journalArticlepeer-review

    267 Downloads (Pure)

    Abstract

    Purpose: The promotion of financial inclusion can disturb the composition of traditional bank concentration and change the relationship between bank concentration and the availability of small and medium-sized enterprise (SME) financing. This paper concentrates on a less frequently explored area of research by examining the relationships between bank concentration, financial inclusion and SME financing availability respectively, and the interaction between bank concentration and financial inclusion after the implementation of a financial inclusion strategy in China.

    Design/methodology/approach: Using firm-level data from 1,509 listed SMEs in China from 2007 to 2017 and applying rigorous analyses, we identify how bank concentration affects SME financing availability under the promotion of financial inclusion and also the mechanisms involved.

    Findings: We find that bank concentration and financial inclusion respectively have positive impacts on the credit available to listed SMEs, indicating that the promotion of financial inclusion in China has reached a new high watermark. The positive impact of bank concentration is reduced when the level of financial inclusion is high. Conversely, a higher level of financial inclusion favours SME credit availability at only a low degree of bank concentration. Our findings suggest that financial inclusion has a substitution effect on bank concentration and has enabled us to add new interpretations to relevant theories; namely, the Market Power and Information Theories respectively.

    Originality/value: This study provides new insights into the relationship between bank concentration and SME finance availability under the promotion of financial inclusion.
    Original languageEnglish
    JournalInternational Journal of Bank Marketing
    DOIs
    Publication statusPublished - 21 Jul 2020

    Keywords

    • Bank concentration
    • financial inclusion
    • SME financing availability
    • FinTech
    • China

    Fingerprint

    Dive into the research topics of 'Bank concentration and SME financing availability: the impact of promotion of financial inclusion in China'. Together they form a unique fingerprint.

    Cite this