Connectedness and SME Financing in Post-Communist Economies: Evidence from Uzbekistan

Ruziev, Kobil; Midmore, Peter

Abstract

© 2015 Taylor & Francis. Abstract: This paper investigates effects of interpersonal links with bureaucrats on SME access to formal finance. A survey of 502 SMEs in post-communist Uzbekistan shows fewer SMEs with government connections express a need for external finance, but success rates of applications are higher than for SMEs without connections. Econometric models show government-connected SMEs receive more formal credit than their counterparts. The small share of SME credit available is thus distributed in favour of those capitalising on bureaucratic links, with consequent resource misallocation. Findings imply that greater SME credit flows need supplementing with capacity building that improves bank transparency and efficiency.

• Journal Article Type: Article
• Publication Date: Jan 1, 2015
• Deposit Date: Dec 8, 2014
• Publicly Available Date: Dec 16, 2016
• Journal: Journal of Development Studies
• Print ISSN: 0022-0388
• Electronic ISSN: 1743-9140
• Publisher: Taylor & Francis (Routledge)
• Peer Reviewed: Peer Reviewed
• Volume: 51
• Issue: 5
• Pages: 586-602
• DOI: https://doi.org/10.1080/00220388.2014.989991
• Keywords: interpersonal connections, social capital, formal finance, SME financing, transition economies, post-communist economies, Central Asia, Uzbekistan
• Public URL: https://uwe-repository.worktribe.com/output/844291
• Publisher URL: http://dx.doi.org/10.1080/00220388.2014.989991
• Additional Information: Additional Information : This is an Accepted Manuscript of an article published by Taylor & Francis in the Journal of Development Studies on 16 June 2015, available online: http://wwww.tandfonline.com/10.1080/00220388.2014.989991
• Contract Date: Nov 15, 2016