Hi Mykola,

Would you please elaborate a bit on what do you cover by "bank financing" - do you only mean long term financing or just any form of money/credit provided by commercial banks? Also I think that a bit of more information on why do you consider "impossible to measure using accounting data" would be very valuable. Depending on the market and availability of information you should be able to get more data from SEC fillings for example.

Best regards,

 Stan

Dear Mykola,

One method of splitting borrowers into those that rely on banks vs market financing is to look at the absence of public- debt rating. This is used as a proxy for bank-dependence in some studies such as: 

Sudheer Chava , Amiyatosh Purnanandam, 2011, The effect of banking crisis on bank-dependent borrowers, Journal of Financial Economics,99 116–135.

Kashyap,A., Lamont, O., Stein, J., 1994. Credit conditions and the cyclical behavior of inventories. Quarterly Journal of Economics 109, 565–592.

Best,

Oana

Before we go on to this topic to measure the financing of banking system and the market practice we must know what is financing. Landing and borrowing system emerge with the birth of the world but financing method develop with certain restriction guided by the Holy Quran by giving the status of the money which in Islamic economic money is medium of exchange and not the commodity and its volume is the value of commodity and services. Financing simple definition are:

• Finance is the intermediary source in shape of money having a value to act in production, trading and exchange of commodities, services and assets. 
• Financing is the source that makes the money service for specific purpose within specific period, in between person to person, person to institution or institution with group or institution on an understanding to share the result in profit and loss.
• Financing is the source that develops ownership, support entrepreneurship and line-up procurement, production, distribution, utilization through participation and cooperation between skill and capital on the basis of profit and loss acceptability upon the maturity.

Now let us see what is the difference between financing and lending as the present practice in the name of financing no matter it is by banking or by market practice deviate the norms and rules of financing system as not many people are aware that:

•  Financing is Equity and not Liability
• Lending is liability and not participation.
• Financing is made and Loan is given
• Loan is secure financing is support.
• Financing is an investment and loan is facility.
• Loan cannot be financing until it is agreed on Profit and loss sharing 
• Financing cannot be a loan till return is guaranteed.
• Loan is given at a price of money on application of Rate
• Financing outcome to be profit, shared in an agreed Ratio.
• Loan has to be secure by external factor of collateral
• Financing is collateralize within its own system
• Financing cannot be made until the user is able to use it 
• Lending is given against the confirmation of guarantee.
• Lending leads to inflation and liquidation
• Financing ends at ownership
• Financing increase the capital base as well net-worth 
• Lending increase liability, cost and decrease the net worth 

with the above one can easily understand if the practice of the market and system of the banking are following the above perimeters define for financing or not?