This is especially stressed in small firms whose financial information is opaque to the lending institution due to a greater degree of informality in management practices but also to more limited compliance requirements with rules and regulations. The lack of sufficient collaterals to guarantee the bank loan often makes access to credit even harder for SMEs. In theory, banks could put a higher premium on loans floated to firms for which they do not have sufficient information to assess the credit risk. But this would pull out safer borrowers and pull in riskier ones, resulting in adverse selection.