Factors Affecting Collateralized Borrowing by SMEs: Evidence from Emerging Markets
Factors Affecting Collateralized Borrowing by SMEs: Evidence from Emerging Markets

Summary/Abstract: This study aims to enhance the empirical evidence on the determinants of collateralizedborrowing by small and medium-sized enterprises (SMEs) by presenting new empiricalevidence on emerging market countries. Using the data from World Bank EnterpriseSurveys from nine emerging markets, we find that older SMEs are less likely to providecollateral for bank loans. The results also reveal that loans received by firms whosetop managers are more experienced in the industry and firms with a higher percentageof material inputs and services purchased on account are less likely to be secured. SMEsin the manufacturing industry are more likely to provide collateral for bank loans thanservice industry firms. The likelihood that the loan is secured is higher for firms with largerloan sizes. Furthermore, our results indicate that the probability of pledging collateral ishigher for SMEs that operate in countries with higher borrower-bank proximity.

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