Foreign Bank Entry and Credit Allocation to SMEs: Evidence from ASEAN Countries☆

Abstract This study assesses the impact of foreign banks penetration based on their mode of entry: Greenfield and takeover of previously domestic-owned banks on the credit allocation to SMEs. The results reveal that Greenfield banks tend to lend smaller proportion to SMEs than take-over banks. This result implies that greenfield banks have comparative disadvantages in lending to more opaque borrowers, therefore ‘cream-skimming’ them and prefer to lend to “credit-worthy” customers like large corporations. The findings suggest that without any specific policy from regulators to fulfill the needs of SMEs, foreign banks will always tend to benefit only large corporations.

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