A new EBRD working paper shows small businesses suffer fewer credit constraints during a financial crisis when local banks know them well.
Following the global financial crisis, policy-makers’ attention has focussed on lending to SMEs, as these were among the most affected when the credit cycle turned. Governments have introduced various measures that may alleviate short-term funding constraints but are unlikely to be a long-term solution. So is there a way to protect entrepreneurs in a more structural way from the cyclicality of credit?