TITLE:
Peril or Promise—How the SME Banking Sector Will Perform in 2022 and beyond? Do We See an Overreliance on Recovery?
AUTHORS:
Gayan Gunewardana, Ariyarathna Jayamaha
KEYWORDS:
SME, SME-Funding-Gap, NPL, Systemic-Risk, Risk-Response, Crowd-funding
JOURNAL NAME:
Technology and Investment,
Vol.13 No.3,
August
2,
2022
ABSTRACT: The study takes a specific
look at the microstructure of banking lending to SMEs and the latent trials in
maintaining a better balance between the loan demand and supply after the COVID-19 pandemic to upkeep the overall economic goals. The global “war” on the COVID-19 pandemic and related
economic waves indeed have led to the worldwide recession. The COVID-19 crisis becomes the most extensive systemic-risk
unification the world has ever comprehended in the commercial sense. More
actions are needed to avoid falling
these economies into life-support despite government initiatives regarding new
regulations and stimulus packages. Unfortunately, the smallest business
segment struggles and fails to claim essential funding through internal and
external sources due to inherent weaknesses and poor business architecture. Historically, the SME funding gap was one
of the critical areas of discussion and research. Before the current
situation, accessing financial services, crucial for SMEs’ growth, severely
constrained many economies. However, the problem has further deteriorated. The
prolonged low-interest environment, high
competition, and compressed interest margins made many banks under-priced
SME risk, particularly after the previous financial crisis. Against this backdrop, the predominant SME lenders
experience high NPL ratios, adversely affecting the entire banking system’s soundness and lending to the
real economy.