The impacts of technology and governance over access to capital for SMEs in emerging markets

This study examines how information and communication technology (ICT) adoption and governance practices are associated with access to credit for small and medium-sized enterprises (SMEs) in emerging markets. Using firm-level data from the World Bank Enterprise Surveys covering more than 150,000 SMEs across 155 countries between 2005 and 2022, the analysis applies a two-part hurdle model to distinguish between two stages of the lending process: loan approval and loan size conditional on approval. ICT adoption is proxied by business website ownership and the use of licensed technology from foreign firms, while governance is proxied by the existence of externally audited financial statements. The results indicate that ICT adoption and governance are positively associated with the probability of loan approval, suggesting that digital capabilities and audited financial information operate as informational signals that reduce borrower opacity and improve lender confidence. In contrast, loan size is mainly explained by traditional financial fundamentals, particularly sales and firm size, indicating that once firms pass the approval stage, lenders rely more heavily on indicators of repayment capacity and operational scale. This distinction between the extensive and intensive margins is a central finding of the study. The results are interpreted as robust empirical associations rather than strict causal effects, given the observational nature of the data and the possibility of endogeneity. The study contributes to the SME finance literature by integrating ICT adoption, governance, and traditional financial indicators within a sequential lending framework. It also offers practical implications for financial institutions, policymakers, and SMEs by showing that improvements in transparency, digital visibility, and externally verified information may strengthen SME positioning in formal credit markets.