Bank lending in the micro, small and medium business financing strategy

Sheludko Sergii
Ph.D. in Economics, Associate Professor of the Department of Banking, Odesa National Economic University, Odesa, Ukraine e-mail: : s.szeludko@gmail.com, ORCID ID: http://orcid.org/0000-0003-0636-4940

Taranenko Danylo
Head Economist of Micro, Small and Medium Business Unit, JSC “Oschadbank”, Odesa, Ukraine e-mail: : : taranenkods777@gmail.com, ORCID ID: http://orcid.org/0000-0002-5049-9431

Cite this article:

Sheludko S., Taranenko D. Bank lending in the micro, small and medium business financing strategy. Scientific Bulletin of the Odessa National Economic University. 2021. № 5-6 (282-283). pp. 59-64.

Abstract

The aim of the paper is to define and analyze the role of bank lending in the micro, small and medium business financing strategy. A number of general and special methods were used: generalization – to identify key features of SMEs as borrowers; systemic, graphic methods – to present the results of establishing determinants of SME's financing strategy; analysis of dynamics and structure – in estimation the state and trends of bank corporate lending in Ukraine. It is determined, that a place of bank lending in general determines the SME financing strategy and allows establishing its nature. It is proposed to divide strategies into aggressive, conservative and moderate - depending on the state of the main determinants of its implementation: net working capital, current liquidity ratio and the degree of financing of fixed assets from equity. It is proved that the SME segment is currently the leader in terms of corporate lending of Ukrainian banks. A feature of the domestic market of bank corporate lending is the dominance of the SME segment, and within this segment - a significant position of the smallest micro-business (with an annual income of up to 50'000 euros). It has been established that there are “discouraged borrowers” in the SME segment who are high- or low-risk businesses which need additional capital but do not apply for a loan because of a fear of rejection by the bank. Among the main reasons: complex banking procedures; too high interest rate; excessive requirements for collateral; unclear way to provide loans. The existence of such a phenomenon significantly contributes to the slowdown not only in the banking system, but also in the economy as a whole. The practical significance of the obtained results lies in the necessity for banks to consider the identified trends in the formation of their own lending strategy and relationships with SME customers.

Keywords

bank, discouraged borrower, financing strategy, loan, SME.

JEL classification: G210, G320 DOI: 10.32680/2409-9260-2021-5-6-282-283-59-64

УДК: 336.7

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