Bank Lending to Small Businesses in Latin America: Does Bank Origin Matter?

Recently, foreign bank participation has increased significantly in developing countries, fueling concerns that foreign banks might extend credit only to certain sectors, leaving customers like small businesses unattended. Using bank-level data for four Latin American countries during the mid-1990s, we investigate whether bank origin affects the share and growth of lending to small businesses. While, on average, foreign banks seem to lend less to small businesses, regression results reveal significant differences between small and large foreign banks. In general, we find that the latter surpass large domestic banks in their share and growth of lending to small businesses.