Bank Branch Closings and Local SME Economic Activity in Slovakia – Good Servant but a Bad Master?
Better access to finance has been shown to improve economic growth, both globally and locally. Yet, the ongoing financialization relying on alternative distributional channels (FINTEC industry) challenges the need for physical presence of credit intermediators, local bank branches in particular. Hypothetically, reduction in local bank network, if compensated by new online distributional channels, should therefore have a neutral impact on local businesses activities as well as overall regional economic performance. This project aims to investigate how bank branch closings affect economic performance of individual firms in Slovakia. I will specifically focus on change in economic performance of SME segment (productivity) that represents the cornerstone of regional development in Europe and is hypothesised to be mostly affected by the bank branch closures.
This research aims to deliver relevant knowledge to different groups of stakeholders: policy makers, banking industry, or bank customers. First and foremost, policy makers in charge of competitiveness and industrial policy need to comprehend implications of ongoing structural changes in banking industry. This is true especially when it comes to funding of SME sector, which in Europe constitutes more than 99.8% of all businesses, contributes to 54.6% of total value added and provides employment for 67% of the total active labour force (EC, 2019). However, this sector is also the one most exposed towards the potential credit rationing by banking sector. On the one hand, restricted access to credit due to natural creative destruction in banking industry might be compensated by targeted support of new innovative technological solutions. Potentially, the creative destruction itself might result in market-based innovative solutions without any further involvement of economic policy.
“I am deeply honoured and very grateful to the Regional Studies Association to become a recipient of the MeRSA grant. This award will help me to analyse effects of recently observed re-design of bank branch network that may affect business activity of small and medium enterprises which form a backbone of Slovak economy. Thanks to the grant I hope I will be able to ignite the passion for research also among young generation of students.”