Availability and cost of credit for small businesses: Customer relationships and credit cooperatives

The paper investigates the effects of bank-firm relationships on the cost and the availability of credit for a sample of small Italian firms, focusing on possible differential effects related to the local and/or cooperative nature of lending banks, We find that with banks other than cooperative banks, lending rates tend to increase with the length of the relationship for all customers, whereas with local cooperative banks (CCBs) this is the case for non-member customers only; by contrast, long-standing relationships have no significant effect on lending rates for CCBs' own members. This evidence is in line with bank capture theories, which may not apply to CCB members. We also find that CCB members enjoy easier access to credit, unlike non-member customers. Our results indicate that the main distinctive features of CCBs relative to commercial banks stem from their cooperative ownership rather than their local nature. (C) 1998 Elsevier Science B.V. All rights reserved.