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Mr. Nicolas R Blancher, Maximiliano Appendino, Aidyn Bibolov, Mr. Armand Fouejieu, Mr. Jiawei Li, Anta Ndoye, Alexandra Panagiotakopoulou, Wei Shi, and Tetyana Sydorenko

2 Scaling Up Bank Credit to SMEs The analysis of SME credit drivers in emerging market and developing economies helps identify the key constraints to SME financial inclusion in MENAP and CCA countries . 1 In addition to the overall level of economic development, these include governance, credit information availability, the level of competition, and the quality of the business environment . Macro-Financial Aspects This section illustrates that economic fundamentals and financial sector characteristics are key determinants of SME financial inclusion. A

Majid Bazarbash and Ms. Kimberly Beaton

Front Matter Page Monetary and Capital Markets Department Contents Glossary I. Introduction II. Literature Review III. Stylized Facts IV. Enabling Conditions for Fintech Credit A. Methodology B. Results: Fintech Credit Drivers C. Results: Cross-country Differences in Fintech Credit V. Conclusions References Figures 1. Sample Coverage from the Universe of Fintech Financing 2. Marketplace Lending Across the Globe 3. Composition of Marketplace Lending Tables 1. Descriptive Statistics of Variables 2. Drivers

Majid Bazarbash and Ms. Kimberly Beaton
Can fintech credit fill the credit gap in the consumer and business segments? There are few cross-country studies that explore this question. Focusing on marketplace lending, an important part of fintech credit, we use data for 109 countries from 2015 to 2017 to study the relationship between fintech credit to businesses and consumers and various aspects of financial development. Marketplace lending to consumers grows in countries where financial depth declines highlighting the role of fintech credit in filling the credit gap by traditional lenders. This result is particularly strong in low-income countries. In the business segment, marketplace lending expands where financial efficiency declines. Our findings show that low-income countries take advantage of the fintech credit opportunity in the consumer segment but face important challenges in the business segment.
Ms. Ratna Sahay, Mr. Ulric Eriksson von Allmen, Ms. Amina Lahreche, Purva Khera, Ms. Sumiko Ogawa, Majid Bazarbash, and Ms. Kimberly Beaton

+ ϵ i t ( 1 ) where Y it is the logarithm of the size of marketplace lending in a country as a share of the country i ’s nominal GDP at year t . Separate regressions are run for total, business, and consumer fintech credit. β i is the country fixed effect accounting for any country-specific level differences. γ t is the time fixed-effect to control for international factors that affect all countries. X it collects fintech credit drivers: PPP GDP per capita, internet users, depth of credit information

Maria Arakelyan
We use bank-level data on 16 CESEE economies over 2005-2014 to assess the role of foreign banks in the region’s credit dynamics. We confirm that macroeconomic fundamentals of both host and home countries matter, as do the bank and parent bank characteristics. Moreover, we take a new approach by studying the drivers of differential credit growth between parent banks and their foreign subsidiaries. Host country macroeconomic fundamentals cease to play a significant role, while bank-level characteristics and in particular parent bank-level characteristics remain important. From policymakers’ perspective, the paper provides further empirical evidence on the importance of monitoring the health of foreign parent banks as well as the potential regulatory changes in their home jurisdictions.
Maria Arakelyan

that cannot solely be explained by macroeconomic or bank-level characteristics. For subsidiaries of foreign banks, we identify the important role that subsidiary and parent bank characteristics play for credit growth. Specifically, bank-level characteristics such as funding structure, asset quality, capitalization levels and profitability appear to be among the most important credit drivers. Regarding “differential” credit growth (namely differences in the pace of credit growth between subsidiaries and parents; home jurisdictions), parent bank characteristics

Majid Bazarbash and Ms. Kimberly Beaton

(2019) takes a similar approach in dealing with outliers and focuses on aggregate crowdfunding activity as the dependent variable, which includes equity financing, donation and rewards in addition to credit. However, it is unclear if these different forms of crowdfunding are driven by same factors and with similar sensitivities. B. Results: Fintech Credit Drivers Table 1 presents selected statistical properties and sources of variables used in our regressions. 20 Following our methodology, we present our results in two subsections. In this subsection, we

Mr. Nicolas R Blancher, Maximiliano Appendino, Aidyn Bibolov, Mr. Armand Fouejieu, Mr. Jiawei Li, Anta Ndoye, Alexandra Panagiotakopoulou, Wei Shi, and Tetyana Sydorenko
The importance of financial inclusion is increasingly recognized by policymakers around the world. Small and medium-sized enterprise (SME) financial inclusion, in particular, is at the core of the economic diversification and growth challenges many countries are facing. In the Middle East and Central Asia (MENAP and CCA) regions, SMEs represent an important share of firms, but the regions lag most others in terms of SME access to financing.
Ms. Ratna Sahay, Mr. Ulric Eriksson von Allmen, Ms. Amina Lahreche, Purva Khera, Ms. Sumiko Ogawa, Majid Bazarbash, and Ms. Kimberly Beaton
Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.
International Monetary Fund. Monetary and Capital Markets Department

gap since late 2016. Private credit growth, which has been robust against a backdrop of firm economic activity and continued financial deepening, moderated in 2016 and the first half of 2017, slowing to around 5 percent year-over-year in both years from 14 percent in 2015. Credit growth has, however, accelerated since the second half of 2017 supported by monetary policy actions, and improved terms of trade. Tighter global monetary conditions could moderate the pace of the credit recovery, but are unlikely to fully offset the impact of the credit drivers mentioned