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Article

Mukhammadfoik Bakhadirov, Zakir Pashayev and Omar Farooq

The paper answers the following questions: (1) Do firms located in rural areas experience greater problems in accessing financial services? (2) If this is the case, what…

Abstract

Purpose

The paper answers the following questions: (1) Do firms located in rural areas experience greater problems in accessing financial services? (2) If this is the case, what can these firms do to improve their access to finance?

Design/methodology/approach

This paper uses the pooled logistic regression and the data collected by the World Bank's Enterprise Surveys during the period between 2008 and 2018 to answer the aforementioned questions.

Findings

The results of this paper show that firms headquartered in rural (urban) areas experience greater (lower) problems in accessing finance than other firms. This paper attributes these findings to higher (lower) levels of information asymmetry and lower (higher) levels of density of banking operations in rural (urban) areas. The results of this paper also show that firms headquartered in rural areas can improve their access to finance by increasing the skill levels of their employees.

Originality/value

This paper highlights the actions that rural firms can undertake to overcome the adverse impact of their geographic location.

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

Keywords

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Article

Shaista Wasiuzzaman, Nabila Nurdin, Aznur Hajar Abdullah and Gowrie Vinayan

The purpose of this study is to empirically assess the relationship between the dimensions of creditworthiness and access to finance of small and medium-sized enterprises…

Abstract

Purpose

The purpose of this study is to empirically assess the relationship between the dimensions of creditworthiness and access to finance of small and medium-sized enterprises (SMEs) in Malaysia, with creditworthiness as the mediating variable. The lack of empirical research on the relationship between creditworthiness and access to finance forms the motivation of this study.

Design/methodology/approach

Questionnaires covering various characteristics of the firms, their access to finance and creditworthiness were distributed to a total of 456 SMEs in the Kuala Lumpur and Selangor region for this purpose. A total of 158 responses were returned, of which 145 were usable responses and the relationships are tested using SEM-PLS.

Findings

This study finds that an SME and its owner’s character have significant influences on access to finance. An SME’s condition and its ability to provide high quality collateral are found to be highly significant in influencing its access to finance. Capacity is significant but its significance is low, while capital is insignificant. Creditworthiness has a significant positive influence on access to finance.

Originality/value

This study contributes to the important yet under-researched issue of access to finance for SMEs. It highlights the issue of character of applicant as an important dimension of creditworthiness that can significantly influence access to finance for SMEs.

Details

Management Research Review, vol. 43 no. 3
Type: Research Article
ISSN: 2040-8269

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Article

Shaista Wasiuzzaman

This study aims to investigate the role of interfirm alliances in the form of resource sharing in influencing the access to finance of small- and medium-sized enterprises…

Abstract

Purpose

This study aims to investigate the role of interfirm alliances in the form of resource sharing in influencing the access to finance of small- and medium-sized enterprises (SMEs) in Malaysia. Further, the effect of different forms of resource sharing – tangible and intangible – is also studied.

Design/methodology/approach

Survey questionnaire was distributed to 456 SMEs in the manufacturing sector and a total of 146 responses were gathered. However, out of these, only 88 responses could be used as only these SMEs had alliances with large firms. Investigation into the relationship between interfirm alliances and SME access to finance was carried out using structural equation modeling – partial least squares.

Findings

It is found that interfirm alliances play a significant positive role in influencing SME access to finance. As interfirm alliances are measured as the extent of resource sharing, further analysis is carried out on the different forms of resource sharing, i.e. tangible and intangible. Tangible resource (asset and cost) sharing significantly influences SME access to finance but intangible resource (knowledge and information) sharing does not.

Originality/value

This study contributes to the understanding of the effects of interfirm alliances on the financing of SMEs. So far, most studies have only focused on the management and technological gains of interfirm alliances. Therefore, this study contributes significantly to literature on resource sharing among firms.

Details

Management Research Review, vol. 42 no. 12
Type: Research Article
ISSN: 2040-8269

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Article

George Okello Candiya Bongomin, John C. Munene, Joseph Mpeera Ntayi and Charles Akol Malinga

The purpose of this paper is to test the interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access

Abstract

Purpose

The purpose of this paper is to test the interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and small, medium, and micro enterprises (SMMEs) survival in post-war communities in Northern Uganda.

Design/methodology/approach

Cross-sectional research design was used in the study and quantitative data were collected from 304 SMMEs located in Gulu District using a semi-structured questionnaire. Structural equation modeling (SEM) through the use of analysis of moment structures was adopted to establish the interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival in post-war communities in Northern Uganda. Furthermore, Pearson’s correlation analysis was used to show the association between the variables under study.

Findings

The results revealed that there is a significant interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival in post-war communities in Northern Uganda. Besides, the results indicated that business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and government support have significant and positive impacts on SMMEs survival in post-war communities in Northern Uganda.

Research limitations/implications

The study employed cross-sectional research design, thus, ignoring longitudinal study approach. Besides, the sample was selected from only Gulu District, therefore, leaving out other Districts located in Northern Uganda.

Practical implications

Advocates of recovery programs and interventions in developing countries should consider government support as a vital factor in promoting business skill, capital adequacy, access to finance, access to market, and entrepreneurial education in order to enhance SMMEs growth in post-war communities. In addition, governments in developing countries should offer investment incentives and tax waivers to infant SMMEs in post-war communities like in Northern Uganda.

Originality/value

The study examined the interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival in post-war communities in developing countries. Thus, to the best of the authors’ knowledge, this is the first attempt to test the interaction effect of government support in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival in post-war communities in Northern Uganda. The use of government support as a moderator in the relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival is scarce in entrepreneurship literature and theory. This creates uniqueness in this study.

Details

World Journal of Entrepreneurship, Management and Sustainable Development, vol. 14 no. 1
Type: Research Article
ISSN: 2042-5961

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Article

George Okello Candiya Bongomin, Joseph Mpeera Ntayi, John C. Munene and Charles Akol Malinga

The purpose of this paper is to establish the moderating effect of financial literacy in the relationship between access to finance and growth of small and medium…

Abstract

Purpose

The purpose of this paper is to establish the moderating effect of financial literacy in the relationship between access to finance and growth of small and medium enterprises (SMEs) in developing economies. Thus, this study seeks to establish whether financial literacy moderates the relationship between access to finance and growth of SMEs in a developing economy like Uganda.

Design/methodology/approach

Cross-sectional research design was used in the study and data were collected from 169 SMEs located in Jinja and Iganga central markets. ModGraph (excel programme) was used to test for the moderating effect of financial literacy in the relationship between access to finance and growth of SMEs in developing economies.

Findings

The findings reveal a positive and significant moderating effect of financial literacy in the relationship between access to finance and growth of SMEs in developing economies. In addition, financial literacy and access to finance also have significant and positive effects on growth of SMEs in developing economies.

Research limitations/implications

The study collected data from only SMEs located in Uganda, and there is an opportunity to test this finding in other developing economies. Furthermore, the findings from the study are based on quantitative data collected through use of semi-structured questionnaires. Besides, the study was purely cross-sectional; hence, it ignores the characteristics of SMEs, which could be investigated using a longitudinal study design.

Practical implications

The study highlights the importance of financial literacy in promoting access to finance, which is necessary for the growth of SMEs in developing economies. Owners of SMEs could attend financial literacy programmes provided by entrepreneurial skill development organizations to enable them to acquire financial knowledge and skills to make wise and better financial decisions and choices.

Originality/value

The study contributes to existing international entrepreneurship literature by indicating the moderating effect of financial literacy in the relationship between access to finance and growth of SMEs in developing economies. The study shows that for SMEs to access finance to grow there is a need for financial literacy that promotes effective and efficient use of loans/credits. SMEs in developing economies need financial literacy, which helps them make wise financial decisions and choices before accessing financial services like loans.

Details

Review of International Business and Strategy, vol. 27 no. 4
Type: Research Article
ISSN: 2059-6014

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Article

Javed Hussain, Samuel Salia and Amin Karim

The purpose of this paper is to examine the relationship between financial literacy, access to finance and growth among small- and medium-sized enterprises (SMEs) within…

Abstract

Purpose

The purpose of this paper is to examine the relationship between financial literacy, access to finance and growth among small- and medium-sized enterprises (SMEs) within the Midlands region of the UK. It assesses whether financial literacy assists SMEs to overcome information asymmetry, mitigates the need for collateral, optimizes capital structure and improves access to finance.

Design/methodology/approach

To gain a deeper insight into the complex relationship between financial literacy, access to finance and growth, a qualitative research is carried out among SMEs that have operated for over five years or longer. Using the purposive sampling technique, 37 firms were selected based on size, location and characteristics, mainly from the city of Birmingham and the joining conurbations. Open-ended and a combination of dichotomous questions were used for the survey. Interviews were recorded, transcribed and thematically analyzed.

Findings

Financial literacy is an interconnecting resource that mitigates information asymmetry and collateral deficit when evaluating loan applications, therefore financial literacy should be part of school curriculum. The analysis suggests enhanced financial literacy, reduces monitoring cost and serves to optimize firms’ capital structure that positively impacts on SMEs growth. Financial management knowledge is recognized as the core resource that aids an effective decision making by owners of SMEs.

Research limitations/implications

The limitation of this research is the small sample that limits its generalization. Its findings could be enhanced by a larger sample and by conducting comparative studies in other regions or economies. SMEs growth is seen as a strategic policy to stimulate enterprise but the finance gap tends to constrain that objective. The UK Government’s effort to improve access to finance and to mitigate excessive collateral demands by lenders has proved elusive. This empirical research provides evidence that financial literacy enhances access to finance and, in turn, promotes growth potentials.

Practical implications

The results of this study advocate the provision of financial literacy at schools and target support for SMEs to acquire financial management skills in order to mitigate information asymmetry between lenders and borrowers.

Social implications

Findings suggest that financial literacy mediates access to finance, enables enterprises to use optimal financial structure to mitigate business failure, creates employment and reduces public sector support for social benefits.

Originality/value

This study is novel in that it examines financial literacy and its implications for access to finance and firm growth in the UK. The study is an effort to highlight the role of financial information in mitigating barriers to finance for SMEs.

Details

Journal of Small Business and Enterprise Development, vol. 25 no. 6
Type: Research Article
ISSN: 1462-6004

Keywords

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Article

Simrit Kaur and Cheshta Kapuria

Since finance is an efficacious instrument for economic development, social inclusion and women empowerment, the present paper examines the determinants of accessing

Abstract

Purpose

Since finance is an efficacious instrument for economic development, social inclusion and women empowerment, the present paper examines the determinants of accessing institutional and non-institutional finance across male- and female-headed households in rural India.

Design/methodology/approach

Multinomial logistic regression is applied for categorizing households' accessing finance in four categories, namely Only Institutional Finance (IF), Only Non-institutional Finance (NIF), Both Sources of Finance (BF) and Neither Source of Finance (N). Both household and state-level determinants have been analysed. Household data set is sourced from the Situation Assessment Survey (NSSO, 70th round) and state-level data sets from Basic Road Statistics 2016, Agricultural Statistics at a Glance 2016, Rainfall Statistics of India 2014, database on Indian Economy RBI and Census 2011. Econometric regressions have been evaluated for female-headed households (FHHs), male-headed households (MHHs) and overall pooled households (HHs).

Findings

Four important findings emerge. First, FHHs have a lower probability of accessing IF and a higher probability of accessing NIF vis-a-vis MHHs. Second, in general, education levels, monthly household consumption expenditure, land size holding, irrigated area and penetration of scheduled commercial banks favourably influence FHHs accessing IF. Third, FHHs belonging to socially disadvantaged castes have a lower probability of accessing IF. Fourth, a substantial proportion of FHHs accesses neither IF nor NIF relative to MHHs.

Practical implications

The paper thoroughly addresses the issue of accessing finance by FHHs and MHHs, which will further assist policymakers in formulating holistic financial policies for rural India.

Social implications

The paper recommends increasing women's access to financial services as an effective tool for reducing poverty and lowering income inequality in rural India.

Originality/value

This article contributes to the scant empirical literature on finance and gender.

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Article

Shaista Wasiuzzaman, Nabila Nurdin, Aznur Hajar Abdullah and Gowrie Vinayan

This study investigates the influence of inter-firm linkages between small and medium enterprises (SMEs) and large firms on the relationship between an SME's…

Abstract

Purpose

This study investigates the influence of inter-firm linkages between small and medium enterprises (SMEs) and large firms on the relationship between an SME's creditworthiness and its access to finance.

Design/methodology/approach

Survey questionnaire was distributed to 456 SMEs in the manufacturing sector in the Selangor and Federal Territory of Kuala Lumpur regions and a total of 145 useable responses were gathered. Investigation into the possible differences in the effect of creditworthiness – and its dimensions – on access to finance for SMEs with and without linkages are examined using Partial Least Squares-Multi Group Analysis (PLS-MGA).

Findings

It is found that the relationship between creditworthiness and access to finance is significant for both SMEs with and without links to large firms. However, no significant difference is found in the effect of creditworthiness on access to finance for both types of SME. Further analysis on the five different dimensions of creditworthiness shows statistically significant differences between SMEs with links and those without for the dimensions of collateral and condition. This implies that alliances formed between SMEs and large firms do not have much of an influence on the overall creditworthiness but do influence the collateral and condition of the SME.

Originality/value

This study contributes to the understanding of the effects of interfirm linkages on SME creditworthiness and access to finance. To the authors' knowledge no such study has been conducted on links between SMEs and large firms, especially in a developing country such as Malaysia.

Details

Journal of Small Business and Enterprise Development, vol. 27 no. 2
Type: Research Article
ISSN: 1462-6004

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Article

Bayu Arie Fianto, Christopher Gan and Baiding Hu

The purpose of this paper is to investigate factors that determine rural households’ access to finance provided by Islamic microfinance institutions (MFIs) in Indonesia.

Abstract

Purpose

The purpose of this paper is to investigate factors that determine rural households’ access to finance provided by Islamic microfinance institutions (MFIs) in Indonesia.

Design/methodology/approach

A two-year panel data set with logistic regression is used to identify the determinants of access to finance by rural households. The study sample comprises of 289 Islamic MFIs’ clients and 140 non-clients from East Java, Indonesia. The clients consist of 111 rural households with profit and loss sharing (PLS) schemes, 162 clients with non-profit and loss sharing (non-PLS) schemes and 16 clients with both schemes.

Findings

The empirical results show that age, gender and income influence rural households to access finance provided by Islamic MFIs. The results show an increase in age and income increase the respondents’ likelihood to access finance. Further, male respondents are more likely to access finance from Islamic MFIs than females.

Research limitations/implications

The empirical analysis is limited to data obtained from East Java province in Indonesia, and other provinces may show different results. However, this study is among the few studies that investigate access to finance from Islamic MFIs based on PLS and non-PLS schemes.

Originality/value

The novelty of this study lies in the unique financing accessibility between PLS and non-PLS schemes in Islamic MFIs. This study will be an important addition to the emerging literature on Islamic microfinance.

Details

Agricultural Finance Review, vol. 79 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

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Article

Parneet Kaur, Navneet Kaur and Paras Kanojia

Based on 9,281 firm-level survey data on micro, small and medium enterprises (MSMEs) in India, this study aims to investigate how access to different finance sources and…

Abstract

Purpose

Based on 9,281 firm-level survey data on micro, small and medium enterprises (MSMEs) in India, this study aims to investigate how access to different finance sources and collateral requirement facilitates the firm’s innovation activity across industries.

Design/methodology/approach

This paper used ordered logit regression models using Stata software for explanatory variables to measure the impact of explanatory variables on firm innovation performance. Firms’ innovation performance is measured through the aggregate innovation index obtained by adding up the no. of “new-to-firm” activities.

Findings

The empirical results reveal that external sources of funding impact innovation activity than other financing sources. Also, the requirement of collateral for financing impacts innovation performance significantly. This paper finds that firms funded by state-owned banks or government agency are more actively engaged in innovation activities. The firm’s size, ownership structure and location of the firm also show the varying innovation performance. This paper found variation in innovation performance across industries as well.

Practical implications

First, the present study underlines the significance of funding sources. Second, minimizing the need for collateral to obtain external finance boosts small firms’ innovation activity and will also trigger overall economic growth. Finally, while making policies for ownership transformation of state-owned institutions, policymakers should discuss these policies’ impact on innovative firms.

Originality/value

What facilitates innovation performance in an emerging market is missing in the literature for MSMEs, largely due to lack of data. It is reasonable not to generalize innovation knowledge in large firms to small firms because of the constraints, particularly MSMEs face.

Details

Journal of Financial Economic Policy, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1757-6385

Keywords

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