Bank Lending to SME’s in Croatia

Abstract

Banks in transition countries face many challenges, including lack of historical data to base risk-assessment on; macroeconomic instability, which complicates assessment of clients’ past performance and increases uncertainty about future performance; weak legal frameworks, particularly in the enforcement of contract and the protection of creditor’ s rights; inexperience in crucial areas of banking such as risk assessment and lack of credit and shareholder culture.

The author would like to thank Marko Curavić, Michael Faulend, Mladen Mirko Tepuš, Mladen Duliba, Hrvoje Dolenec, Tomislav Galac and Vedran Šošić for their participation in the interviews and their comments on an earlier version of this paper. Additionally, the author would like to thank the former Governor of the Croatian National Bank, Dr. Marko Škreb, and former Executive Director for Research and Statistics, Velimir Šonje, for their support of this research project. The views expressed in this paper do not necessarily reflect the views of the Croatian National Bank All remaining errors are the responsibility of the author alone.