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

Kobil Ruziev, Peter Midmore

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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.
Original languageEnglish
Pages (from-to)586-602
Number of pages17
JournalJournal of Development Studies
Volume51
Issue number5
Early online date16 Jun 2015
DOIs
Publication statusPublished - 30 Jun 2015

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