ABSTRACT

This chapter explores the role of proximity and social nearness in the creation and maintenance of trust in the relationships between banks and their small and medium-sized enterprise (SME) clients in rural Germany as banks have closed branches and reduced their networks. It also explores whether trust-based bank-business-relationships can be created and developed over greater geographical distances and help SMEs to access external finance more easily. The chapter assesses how German businesses in rural areas cope with the spatial concentration of financial institutions and whether the development of close working relationships founded on trust is affected. It outlines the changes the German banking sector has undergone during the last three to four decades and the role trust plays in the relationships between banks and businesses. The chapter focuses on the nature of bank-business-relationships in two rural areas in the federal state of Thuringia both from the viewpoint of local businesses and from the perspective of banks.