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See detailFinancial Constraint, Entrepreneurship and Sectoral Migrations
Leon, Florian UL; Baraton, Pierrick

E-print/Working paper (2016)

Using an original database of over 3,000 micro and small enterprises (MSEs) that were microfinance institution (MFI) clients in Madagascar over the period of 2008-2014, we observe that around one third of ... [more ▼]

Using an original database of over 3,000 micro and small enterprises (MSEs) that were microfinance institution (MFI) clients in Madagascar over the period of 2008-2014, we observe that around one third of these entrepreneurs switched business sectors in the first five years after starting their business. We find that the probability of an entrepreneur’s changing sectors is highly correlated with the size of the first loan obtained from the MFI. This result survives multiple robustness checks, including treatment for endogeneity and attrition. We interpret this finding in terms of financial constraint: a lack of financing prevents an entrepreneur from initially investing in his first choice sector, causing him to change sectors only when he has become financially able to do so. This result challenges the classic distinction made between ”necessity entrepreneurs” and ”opportunity entrepreneurs” and raises important questions concerning entrepreneurial talent allocation. [less ▲]

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See detailInformation sharing, credit booms and financial stability
Leon, Florian UL; Guérineau, Samuel

E-print/Working paper (2016)

This paper analyzes the impact of credit information sharing on financial stability, drawing special attention to its interactions with credit booms. A probit estimation of financial vulnerability ... [more ▼]

This paper analyzes the impact of credit information sharing on financial stability, drawing special attention to its interactions with credit booms. A probit estimation of financial vulnerability episodes – identified by jumps of the ratio of non-performing loans to total loans, is run for a sample of 159 countries dividing in two sub-samples according to their level of development: 80 advanced or emerging economies and 79 less developed countries. The results show that: i) credit information sharing reduces financial fragility for both groups of countries; ii) for less developed countries, the main effect is the direct effect (reduction of NPL ratio once credit boom is controlled), suggesting a portfolio quality effect; iii) for advanced and emerging countries, credit information sharing (IS) also mitigates the detrimental impact of credit boom on financial fragility, iv) the depth of IS has an negative impact on the likelihood of credit booms (but not the coverage of IS). [less ▲]

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See detailIslamic Banking Development and access to credit
Leon, Florian UL; Weill, Laurent

E-print/Working paper (2016)

The recent expansion of Islamic banks raises questions on its economic implications. The aim of this paper is to investigate the impact of Islamic banking development on access to credit. We combine data ... [more ▼]

The recent expansion of Islamic banks raises questions on its economic implications. The aim of this paper is to investigate the impact of Islamic banking development on access to credit. We combine data from a unique hand-collected database that covers Islamic banks over the period of 2000 to 2005 with firm-level data covering developing and emerging countries. We find that Islamic banking development has overall no impact on credit constraints, while banking development and conventional banking development alleviate obstacles to financing. However Islamic banking development exerts a positive impact on access to credit when conventional banking development is low. Hence we support the view that Islamic banking does not overall alleviate obstacles to financing, but it can act as substitute to conventional banking. [less ▲]

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See detailDoes the expansion of regional cross-border banks affect competition in Africa? Indirect evidence
Leon, Florian UL

in Research in International Business and Finance (2016), 37

This article investigates how bank competition has evolved in Africa following the recent penetration and expansion of regional cross-border banks over the past decade. We examine changes in competition ... [more ▼]

This article investigates how bank competition has evolved in Africa following the recent penetration and expansion of regional cross-border banks over the past decade. We examine changes in competition in the banking industry of seven African countries highly affected by this recent phenomenon. The evolution of competition is evaluated through three different non-structural measures of competition (Lerner index, Panzar–Rosse model, and Boone indicator). With the exception of results from the Lerner index, our findings show an intensification of competition since the mid-2000s. This period corresponds to the rapid expansion of regional cross-border banks in the zone, indicating that this expansion has promoted competition in banking sectors in Africa. [less ▲]

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See detailDoes bank competition alleviate credit constraints in developing countries?
Leon, Florian UL

in Journal of Banking and Finance (2015), 57

Whether competition helps or hinders firms’ access to finance, particularly in the developing world, is in itself a much debated question in the economic literature and in policy circles. This paper ... [more ▼]

Whether competition helps or hinders firms’ access to finance, particularly in the developing world, is in itself a much debated question in the economic literature and in policy circles. This paper considers the consequences of bank competition on credit constraints using firm level data covering 69 developing and emerging countries. In addition to the classical concentration measure, competition is assessed by computing three non-structural measures (Boone indicator, Lerner index and H-statistic). The results show that bank competition alleviates credit constraints and that bank concentration measure is not a robust predictor of a firm’s access to finance. The study highlights that bank competition not only leads to less severe loan approval decisions but also reduces borrower discouragement. [less ▲]

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