How does bank lending affect small and medium-sized businesses?

The article analyzes the influence of bank lending on the dynamics of small and medium-sized enterprises (SMEs) in the regions of Russia in 2012—2023. Was the dynamics of bank loans to SMEs an essential factor of development and employment of the sector? This is an important issue, since expanding the availability of lending is often considered as a key method for supporting SMEs and diversification of the economy. We use data of the Federal State Statistics Service on the turnover and the number of employees in small, medium and micro enterprises in Russian regions, on the one hand, and the data of the Central Bank of the Russian Federation on the bank lending to SMEs, on the other. We estimate how changes in SMEs lending amounts affect SMEs turnover and employment using the Alellano—Bond dynamic panel regression approach. It has been found that lending dynamics was a significant factor in changes of the turnover in the SMEs sector, and, to a lesser extent, employment in small enterprises. However, a significant increase in lending is required to significantly increase the size of the sector and its share in the country’s economy and employment.