Credit Rationing and the financing of SMEs: supply and demand problems

This paper analyzes the credit rationing phenomenon starting from the theoretical arguments provided by literature which are then compared with empirical studies performed across the years and across the countries. The aim is to identify the main causes which determine the limited access to external finance for small and medium enterprises (SMEs), and to reveal the possible remedies to this phenomenon, with a focus on European and Italian situation. The possible determinants for supply and demand of credit are analyzed together with their impact on credit rationing, through the empirical research provided by literature. The characteristics of lenders and SMEs seem to affect credit rationing, together with the context in which they operate. Valuable remedies to the phenomenon are identified in collateral requirements and relationship banking, albeit their incidence is subject to specific conditions. Finally, the impact of COVID-19 pandemic is reported, by comparing the empirical evidence in 2020 with that of previous years, accompanied by some policies solutions that may reduce credit rationing.