Banks That Talk, Banks That Lend: Institutional Structures of SME Finance in the GCC

ABSTRACT

This study examines small and medium‐sized enterprise (SME) finance in the Gulf Cooperation Council (GCC) through a two‐layer framework distinguishing banks' discursive engagement with SMEs (policy layer) from lending behavior (practice layer). Using an unbalanced panel of GCC banks from 2005 to 2024, we combine a text‐based indicator from annual reports with bank‐level SME lending data and estimate fixed‐effects and fractional response models. Large banks place greater emphasis on SME support, yet such policy‐aligned discourse has only a weak and statistically insignificant association with subsequent lending outcomes across alternative lag specifications. Controlling for annual oil prices does not alter this result. For SME lending shares, SME mention density remains positive but statistically insignificant, with no systematic difference between Islamic and non‐Islamic banks. These findings indicate limited alignment between SME‐related discourse and lending practice and should be interpreted as descriptive associations rather than evidence of a causal transmission mechanism.