interviewed by country, with an overall total of 10,090 firms. The aim was to have at least 15% of the firms in the “small” category (fewer than 50 employees), and in all, 40% were in this category. Nevertheless for the purpose of obtaining statistically significant results on access, the sample remains rather small in almost all of the countries.<sup>21</sup> In addition to general information about the firm and its governance, most of the questions are qualitative ones about the firm’s perception of the institutional environment in which it operates. The questions are grouped under the headings: quality and integrity of public services; rules and regulations; legal system; bureaucratic red tape; predictability; financial sector services and corporate governance; and competition.

There are five financial sector services questions in the WBES survey, relating to (i) the firm’s confidence in the ability of the financial sector to deliver needed services; (ii) a breakdown of the source of the firm’s financing; (iii) time taken to transfer funds; (iv) firm’s rating of the extent to which 11 identified financial sector service difficulties such as bank collateral requirements; high interest rates, corruption of bank officials etc. represent an obstacle to the firm. (v) whether the firm uses international accounting standards (IAS) and provides shareholders with audited accounts.

The survey’s findings have been summarized by Batra et al. (2003) and they reveal the importance of perceived financial constraints in most regions (though not in Africa). There are differences by size of firm: unsurprisingly, the use of internal funds, family and friends and of money lenders declines as firms get larger, while the use of local and foreign commercial banks and state funds increases. Small and medium sized firms have a greater propensity to report moderate or major financial obstacles than do large firms, though not in relation specifically to high interest rates which is overall the most highly rated financial constraint. The other major constraints reported were lack of access to long-term funds, collateral requirements, lack of credit information on clients and bank paperwork. (Curiously, small firms had a poorer image of the quality of the central bank than medium or large firms).

An early use of the WBES data was to explore the impact of foreign bank penetration on firm access to credit (Clarke et al.2001). Since then there have been many other uses including examination of the relation between firm growth, firms’ perceived constraints and independently measured country environment variables such as bank concentration in RPED panel study of 6 African countries in the mid-1990s and selectively updated around 1999. This covered about 200 firms per country ranging from micro (less than five employees) up to large scale employing over 1000. In the survey, questions were asked about whether firms applied for loans, if not, why not and if they applied whether applications were approved. Only about 10 per cent of firms had received a loan in the past year (2 per cent of the micro firms, 5 per cent of the small) with trade credit and informal sector debts together about three times as important as bank debt in the balance sheet. Interestingly, the rejection rate for firms that applied for credit was about 45 per cent—75 per cent for micro firms, 60 per cent for small, 45 per cent for medium and 20 per cent for large. Fully 20 per cent of firms (38 per cent of micro) said they didn’t apply because they didn’t have collateral or thought they would be rejected. A further 8 per cent of firms (13 per cent of micro) didn’t apply because they thought the process too onerous. Others mentioned cost and overindebtedness as reasons for not applying. Only a third of all firms said they did not need credit. (Bigsten et al. 2003, who also present regressions explaining the credit rejections and discouraged borrowing as functions of national and firm characteristics). 21 Furthermore, firms with fewer than five employees were generally not covered.

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