Access to credit for SMEs in a European Union context: an SME perspective and a critical review of access to credit

SMEs represent about 99% of all businesses within a European Union context and their contribution is recognised as being relevant to economic sustainability and wealth. SMEs’ access to finance for development and innovation assumes relevance in the context of a sustainable economy (see European Commission, 2013b; Commission of the European Communities, 2008a).This study contributes to the existing literature in adding theoretical and empirical evidence on SMEs’ access to credit, to investigate those aspects recognised as drivers of SMEs’ access to credit. This research aims to address issues relating to SMEs’ ability to access credit and to analyse the possible hampering elements in relation to liquidity allocation exercised by financial institutions. The objective is to understand the nature of the phenomena by means of exploring social entities, by the application of an interpretative approach, to inductively discover embedded elements and encapsulate the essence of the research problem. To best probe different elements, the research attempts to analyse the topic through a different lens to provide a new perspective. These aspects represent embedded elements of a case study strategy application. The elements to be reviewed to provide an idiosyncratic perspective are elements of SMEs’ access to lending, approaches to lending and local lending effectiveness. These represent interrelated elements of SMEs’ access to lending. Transactional Analysis is the theoretical lens that guides the research. Primary data, through a descriptive survey-type approach, endeavours to add SMEs’ perspectives and adds to the empirical data. It is important to underline that although banks, as liquidity suppliers, constitute a focal point for this research, the study does not attempt to analyse institutions’ financial aspects, nor their perspectives on profit maximisation or sustainability. Rather, the study aims to understand SMEs’ perspectives on lending aspects. The research evidences that critical factors like opacity and asymmetry are connected to the risk of lending. The risk element is enhanced by factors like size, age and innovative sectors. These elements contribute negatively to credit distribution, to the total cost of lending and to banks’ willingness to lend, which adversely affects SMEs’ lifecycles. The study shows that local lending, enhanced by a relationship lending approach to exploit the proximity element, can support SMEs’ access to credit. Proximity to SMEs and the environment can, in fact, contribute effectively to promoting economic development and growth