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Funding vs. real economy shock : the impact of the 2007-2009 crisis on small firms'credit availability

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Listed:
  • Berg, Gunhild
  • Kirschenmann, Karolin

Abstract

This paper analyzes the impact of two distinct shocks stemming from the cross-border transmission of the 2007-2009 crisis on credit availability for small firms. The paper uses data from AccessBank Azerbaijan which was affected in its liquidity position during the second and third quarters of 2008 by delays in its refinancing. The Azeri real economy was hit by the global crisis from the fourth quarter of 2008 onwards with a combined decline in oil prices, exports, remittances, and domestic demand. Therefore, a pure supply side shock con be contrasted with a real economy shock that hit exactly when the bank's funding position strengthened again. The paper finds that during the funding shock (potential) borrowers are discouraged from applying for loans. However, for those applications made, the likelihood of loan approval is not affected. The real economy shock, in contrast, reduces the approval likelihood for SME loans in particular, while agro and micro loans are considerably less affected. Finally, bank relationships increase credit availability in good as well as in bad times.

Suggested Citation

  • Berg, Gunhild & Kirschenmann, Karolin, 2012. "Funding vs. real economy shock : the impact of the 2007-2009 crisis on small firms'credit availability," Policy Research Working Paper Series 6030, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6030
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    References listed on IDEAS

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    Cited by:

    1. Steven Ongena & Ibolya Schindele & Dzsamila Vonnak, 2014. "In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit," CERS-IE WORKING PAPERS 1424, Institute of Economics, Centre for Economic and Regional Studies.
    2. Ongena, Steven & Schindele, Ibolya & Vonnák, Dzsamila, 2021. "In lands of foreign currency credit, bank lending channels run through?," Journal of International Economics, Elsevier, vol. 129(C).
    3. Hering, I. & Mußhoff, O., 2016. "Dynamic Incentives in Microfinance – What about the Farmers?," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 51, March.

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    Keywords

    Access to Finance; Debt Markets; Microfinance; Bankruptcy and Resolution of Financial Distress; Banks&Banking Reform;
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