Impact of Foreign Bank Entry on SME Credit in the Indonesian Banking Sector

Using data from ninety commercial banks in the Indonesian banking sector, this paper investigates the impact of the acquisition of domestic private banks by foreign banks on lending behaviour, particularly SME credit. Among foreign banks, we differentiate between acquired banks and greenfield foreign banks, and examine whether the acquired banks changed their lending behaviour following their acquisition. Our empirical results of effects on the credit supply of acquired banks are not clear except SME credit; between 2000 and 2009, the acquired banks did reduce credit to SMEs after acquisition.