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Wissam Younes

DBA Graduate - 2016

Thesis title

Bank Competition and Access to Finance: A Cross-Country Comparison


Virginie Monvoisin
The competition in the banking sector is recognized as a main driver of economic welfare, strength, stability and growth. The relationship between bank competition and access to finance is ambiguous in theory. Access to finance is often seen as problem in many developing countries, mainly for small and medium enterprises. The aim is to determine the importance of access to finance by studying the effects of financial development in increase of credit availability through banking competition. The Lebanese and Saudi banking industry were selected because of the few studies and surveys in MENA region. Expanding and improving data in terms of coverage and content will constitute an added value. In terms of content, the surveys will concentrate also on the supply side – banks; and, not only the demand side – firms. The demand is widely addressed in literature. The importance of both banking markets in terms of their resilience against market shocks, as well as the same objectives of their governments to steer their economy in increasing transparency of the companies’ data and in developing the financial market to help providing finances at a cheaper and lower cost, was considered an additional reason for selection. The methodology followed applied techniques that could find and determine answers to the research problem. We will study firstly the bank competition; secondly, will analyze the access to finance, and thirdly, will link them together. The degree of competition and chi-square were defined as a suitable model to be followed because of the need to handle a cross-tabulation for dependent and independent variables. A new designed concept based on supply and demand will be drawn, and a new ratio named loan rejection rate will be identified. The findings of the research were robust. They indicate a significant effect of bank competition and banking relationship on access to finance. Risks and cost of financing play a major role in the broadening access to finance. The research shows the importance of transparency between banks and SMEs to reduce information asymmetries. Banks should be looked as partner and not just a source of financing. Finally, the research concluded with recommendations for future researches to explore the Middle East in terms of data collection and present a conceptual framework for future analysis. Growing, interim and safety policies were exposed and if well applied, it will foster access to finance. Keywords: Bank competition, banking relationship, efficient financial system, access to finance, small and medium enterprises, supply and demand, loan rejection rate.