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An analysis of the SME–bank match made in heaven: the case of New Zealand main banks and their relationship-managed SMEs

Zakaria Boulanouar (College of Business Administration, Umm Al-Qura University, Makkah, Saudi Arabia and Muslim Marketing Matters, Hamilton, New Zealand)
Stuart Locke (University of Waikato, Hamilton, New Zealand)
Mark Holmes (University of Waikato, Hamilton, New Zealand)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 17 June 2020

Issue publication date: 24 October 2020

461

Abstract

Purpose

The purpose of this paper is to answer the increasing calls to analyse how lending relationship between banks and their small- and medium-sized enterprises (SMEs) work. More precisely, the main aim is to investigate the lending approach(es) and criteria used by banks to assess loan applications from their relationship-managed (RM) SMEs’ clients. Other objectives include investigating the level of congruence in terms of lending practices and processes among the sample banks in New Zealand (NZ) and to discern how the assessment of the SME owner/manager is done within the relationship-banking framework.

Design/methodology/approach

The research objectives concern investigating processes and not variances. Thus, a qualitative research approach was used. Extensive data was collected via interviews across representative banks in NZ and thematic analysis was used to analyse the data.

Findings

The findings include a detailed analysis of how relationship banking actually works; how in NZ, the main bank brands use three criteria of lending (financials, security and character) as a framework of assessing loan applications from RM-clients – which is different from the character, capital, capacity, conditions, and collateral (5Cs) that are widely used and discussed as the framework of lending; and an elucidation as to why and how character assessment is different from the other criteria of lending.

Originality/value

To the best of authors’ knowledge, this is the first study to investigate the mechanisms and processes that banks use to deal with their RM-SMEs, show the existence of a different framework of lending other than the 5Cs and attempt an explanation as to why character evaluation is different from that of the other criteria of lending.

Keywords

Acknowledgements

The authors would like to thank the anonymous reviewers for drawing our attention to this suggestion and we suggest investigating the demand side as future research.

Citation

Boulanouar, Z., Locke, S. and Holmes, M. (2020), "An analysis of the SME–bank match made in heaven: the case of New Zealand main banks and their relationship-managed SMEs", Qualitative Research in Financial Markets, Vol. 12 No. 4, pp. 391-411. https://doi.org/10.1108/QRFM-12-2018-0139

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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