Bank efficiency and access to credit: International evidence

This paper examines the impact of bank efficiency on access to credit. We test the hypothesis that
higher bank efficiency, meaning a better ability of banks to operate at lower costs, favors access
to credit for firms. To this end, we perform a cross-country analysis with firm-level data on access
to credit and bank-level data to compute bank efficiency, using a sample of about 54,000 firms
from 76 countries. We find that greater bank efficiency improves access to credit for firms. The
beneficial impact of bank efficiency to alleviate credit constraints takes place through the demand channel by reducing borrower discouragement to apply for a loan. Whereas the positive
impact of bank efficiency on credit access is observed for firms of all sizes, the effect tends to be
more pronounced in countries with a better economic and institutional framework. Our results
therefore support policies favouring bank efficiency to enhance access to credit