Importance Recently, the segment of lending to small and medium-sized enterprises (SME) has been growing rapidly enough to become the most important area of business development for many Russian commercial banks, especially for small and medium-sized banks that traditionally have competitive advantage in this sphere. Prior to the Ukrainian crisis of 2014, multilateral development banks supported the market power of many banks having a limited access to capital markets. The share of partnering financial institutions (PFI) was and is quite significant, for instance, in 2013, their total loan portfolio was about 31.5 % of the total market. Objectives The objective of the research is to assess competition in the segment of SME financing and analyze the degree of market power of different groups of banks. Methods I chose the Lerner index as the main method of the research. It allows comparing the market power of different groups of banks with respect to the scope of their operations and their access to funding from development banks (PFI or non-PFI). Results The results of the study show that the structure of the SME lending market can be described as monopolistic competition with dominant positions of state-owned banks. The market power of these banks can be explained by the economies of scale, access to cheap funding and lower risks on issued loans. The effect of the support of development banks to small and medium-sized banks is not reflected in their market power. The most successful development banks, in terms of the market power of their partner banks, are the EBRD and SME Bank. Conclusions and Relevance The work makes a significant contribution to the study of banking competition. It shows the existence of competition among development banks.
Keywords: banking competition, SME, lending, development banks, Lerner index, EBRD, IFC, SME Bank
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