Cass Finance Blog

June 23, 2014
by Thorsten Beck
1 Comment

SME Finance – back to the future?

My agenda last week was dominated by SME Finance. First, in Yerevan, for the annual meetings of the European Fund for Southeast Europe, where the dominating theme was how banks can better target SME clients.  Relationship building was top of the agenda – a focused approach to customers in specific sectors or with specific profiles; possibly by offering additional services.  One interesting example of an Armenian bank was to share the market and sectoral information that the bank collects in the loan application process with the borrower, thus improving his/her marketing.  My second encounter with this topic was as lunch speaker at a meeting of fund managers in Amsterdam who are  interested in investing in SME focused banks in developing countries.  Finally, on Friday I met with a friend interested in exploring new opportunities in SME banking in the UK.  The UK High Street banking sector has long  been accused of ignoring SMEs at the expense of corporate clients and investment banking. While already five years ago, the crisis seems to have destroyed a lot of trust in High Street banks, which gives an opening for new players.

A common thread through these conversations was not only the high financing constraints faced by SMEs, but the fact that they are an attractive market for financial institutions.  The challenge for financial institutions is how to best cater to this market segment.  Beyond all the talk about new non-bank players in the market and the importance of transaction-based (hard assets, hard information) lending, there seems to be a rediscovery of traditional relationship-based lending!

June 17, 2014
by Thorsten Beck
0 comments

Cross-border Banking in Africa – Facts, Opportunities and Challenges

For a long time, banking in Africa was dominated by European banks, often focusing on the former colonies.  This has dramatically changed over the past two decades, with regional banks gaining more importance.  After the end of Apartheid, South African banks started expanding north.  Nigerian banks started expanding throughout the region after they found themselves with excess capital after a consolidation wave in the early 2000s.  In recent years, Moroccan and Kenyan banks have also started moving across borders.  And then there is the pan-African bank par excellence, Ecobank, present in 34 countries across the continent.  What does this trend imply for financial deepening in Africa?  And what are the risks?  What can international experience and the recent European crises teach Africa, if anything?  In a recent policy report, sponsored by Association of African Central Banks, the German Development Corporation and the World Bank,,  I have addressed these and other issues together with Michael Fuchs, Dorothe Singer and Makaio Witte.  Last week saw the launch of the report in Dakar, Senegal. Continue Reading →

June 9, 2014
by Thorsten Beck
0 comments

Postcard from Lusaka – some thoughts on financial inclusion

One topic that came up several times on my recent visit to Tanzania and Zambia was the definition of financial inclusion. For a long time, being financially included was seen as a simple yes or no. Either someone has a connection with a formal financial institution or not. This also led the Gates foundation a few years ago to declare the 100% financial inclusion goal as all households in a country having access to a deposit or savings account.   Looking at recent data collections, however, shows that many have a bank account but use it rarely.  As shown by the recent Global Findex survey, 10 percent of adults in developing countries make neither withdrawals from nor deposits into their account in a typical month. And the majority of account holders use it rarely, a few times per month.  This raises the question of the depth of financial inclusion. Continue Reading →

May 15, 2014
by Thorsten Beck
0 comments

Social value of finance – is there a Goldilocks level of financial depth?

In previous blog entries I have discussed both the contributions to growth and social welfare that the financial system can make and the damage that too much finance, especially connected to excessive lending to households and enterprises, can do to economies. Where does this leave policy makers in terms of encouraging financial deepening or putting on the brakes?   This policy trade-off is behind the concept of a financial possibility frontier that I have developed with several colleagues over recent years (see for example here and here). Comparing a country’s financial sector to where this frontier lies allows analysts not only to take a financial system’s temperature but also to design adequate policies in terms of faster speed or applying the brakes. Continue Reading →

May 2, 2014
by Thorsten Beck
0 comments

Friday links

Carmen Reinhart and Kenneth Rogoff remind us in this paper that advanced economies are historically not that different from emerging markets when it comes to resolution of crises, including the use of debt restructurings, higher inflation and tools of financial repression.

Stijn Claessens and Laura Kodres ask some uncomfortable questions on the regulatory responses to the recent global financial crisis, empasizing that not everything can be fine-tuned and that more emphasis should be put on crisis prevention.

..and a recent survey over new work on the role of financial intermediaries in monetary policy transmission, an introduction into a special issue of the Journal of Economic Dynamics and Control, by Andrea Colciago, Damjan Pfajfar and yours truly.

April 17, 2014
by Thorsten Beck
0 comments

Postcard from Johannesburg

South Africa received some less than magnifying news recently as Nigeria released new GDP estimates, which showed that South Africa is now the second largest rather than the largest economy in Sub-Saharan Africa. As a side note that also implies that the Nigerian financial sector just shrank relative to the real economy. Not that it matters much for the financial sector in South Africa, which seems on the upswing, even though with its own and new set of challenges. A rather developed and diversified financial system, both host to European banks and home country to cross-border banks reaching out across the continent, it offers some interesting lessons both for its neighbouring countries on the continent as for more developed countries. Continue Reading →

April 3, 2014
by Thorsten Beck
0 comments

Friday links

A recent presentation by Lord Turner, former head of FSA, at Cass a few weeks ago, relating new technological trends, income inequality, low interest rates and overexpansion of the financial system.

An interesting paper on crowd-funding and how it depends on securities laws.

Is finance in the genes?  This paper on Financial Development and Genetic Diversity argues that yes.

Next week will see a conference on Corporate Governance in Banks: Five Years After the Walker Review, organized by our colleague and follow-blogger Peter Hahn.  We will make sure to report on it.

March 20, 2014
by Thorsten Beck
0 comments

SME Finance – an ongoing challenge across the globe

SME finance is a hot topic in developing and developed countries alike, though for different reasons.  While in many developing countries, access to finance for SMEs has been traditionally very restricted, SMEs in many European countries have been suffering during the recent crisis.  It comes therefore as no surprise, that SME finance has been on the agenda of the G20 over the past five years.   I was asked to give an introductory presentation on SME finance at a recent G20 seminar in Riyadh to take stock of what we know about SMEs’ financing sources and to discuss some of the more recent innovations.

Over the past years, there have been lots of initiatives, both on quantifying the SME credit gap and on identifying policies and institutions that help close the SME financing gap. It has been relatively easy for politicians to agree on the importance of SMEs for innovation, job creation and growth and reiterate their commitment to improve SMEs’ financing situation.  But obviously, the real action is going on in the financial sector and it is here, where there have been quite some innovations in recent years.   Continue Reading →

March 5, 2014
by Thorsten Beck
0 comments

Who needs branches?

There is an on-going debate in the UK about competition in the banking system.  When it comes to retail banking, this is often mixed with a discussion on the branch networks of UK banks. Recent announcements by high-street banks that they will cut their branch networks are greeted with warnings of loss of competition and lower access to banking services.  But is the focus on branch networks really justified when talking about access to banking services and competition?  Maybe a look south to the developing world or, more specifically, to East Africa, might be helpful. Continue Reading →

February 28, 2014
by Thorsten Beck
0 comments

Friday links

Charles Calomiris was at Cass yesterday, presenting his book with Stephen Haber on Fragile by Design.  Slides are here in case you missed it.  Bottom line:  it is all about politics!

Dirk Schoenmaker and Toon Peek take a look at the development of Europe’s banking systems. Lots of interesting data and facts.

And more on shadow-banking – an attempt at mapping the shadow banking system through a global flow of funds analysis.

Coming up next week: do dividends signal economic growth and some thoughts on bitcoins.

Skip to toolbar