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Article
Publication date: 10 January 2023

Bijoy Rakshit and Samaresh Bardhan

The primary purpose of this study is to investigate the effects of bank competition on SMEs' access to finance in selected Indian states. Using 9,281 firm-level observations from…

Abstract

Purpose

The primary purpose of this study is to investigate the effects of bank competition on SMEs' access to finance in selected Indian states. Using 9,281 firm-level observations from World Bank Enterprises Survey (WBES), this study tests the market power hypothesis versus the information hypothesis to determine whether bank competition promotes access to finance for financially constrained firms.

Design/methodology/approach

The authors measure state-level bank competition using two structural indicators: the Herfindahl Hirschman Index (HHI) and three bank concentration ratios (CR3). The authors apply simple probit regression, probit model with sample selection (PSS) and two-stage least squares (2SLS) to examine the effects of bank competition on firms' financing constraints.

Findings

The results obtained through PSS and 2SLS indicate that bank competition alleviates firm's financing constraints and positively impacts its need for a bank loan and the decision to apply for bank credit. However, the prevalence of bank competition in promoting access to finance is more pronounced for small and medium-sized firms than for large firms. Higher bank competition also alleviates the credit constraints faced by female entrepreneurs.

Practical implications

Reserve Bank of India (RBI) and other government stakeholders should ensure bank competition without hampering the agenda of bank consolidation to facilitate access to credit for SMEs. Regulators should also identify and monitor the financial institutions that make an insignificant contribution to promoting competitiveness in the financial system.

Originality/value

Previous studies primarily investigate the effect of bank competition on a firm's access to finance from advanced and cross-country perspectives. This study contributes to the literature on bank competition by examining its role in promoting access to finance from an emerging economy standpoint. Measurement of bank competition indicators at the state level is an additional contribution.

Details

Asian Review of Accounting, vol. 31 no. 2
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 28 November 2019

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 (SMEs…

1364

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

Keywords

Article
Publication date: 10 November 2020

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 can these…

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. 14 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 31 May 2022

Ploypailin Kijkasiwat, Ahmad Usman Shahid, M. Kabir Hassan and Ahmed Imran Hunjra

This study examines the influence of access to finance and social capital on the improvement of the corporate performance of non-listed firms of Southeast Asian countries…

Abstract

Purpose

This study examines the influence of access to finance and social capital on the improvement of the corporate performance of non-listed firms of Southeast Asian countries. Furthermore, this paper also explores the mediating role of firms' access to finance between the association of social capital and the improvement of corporate performance.

Design/methodology/approach

This study utilizes the Bank Business Environment and Enterprise Performance Survey from 2015 to 2017. Specifically, the survey was administered by the World Bank. Data were analyzed using structural modeling in Smart-PLS.

Findings

The findings show that firms' access to finance and social capital significantly influences the improvement of corporate performance. Additionally, the study’s analysis further reports the mediating role of firms' access to finance between the association of social capital and the improvement of corporate performance.

Practical implications

This study has implications for governments, regulators and policymakers for enhancing access to finance and social capital, and improving corporate performance.

Originality/value

This paper establishes the importance of firms' access to finance and social capital for improving firms' overall performance in the broader context of Southeast Asia.

Details

Managerial Finance, vol. 48 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 February 2018

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 to…

1293

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

Keywords

Article
Publication date: 6 November 2017

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 enterprises…

6797

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

Keywords

Article
Publication date: 17 July 2019

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 (SMEs…

1304

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

Keywords

Article
Publication date: 13 August 2018

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 the…

4947

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

Article
Publication date: 19 October 2022

Omar Farooq and Khondker Aktaruzzaman

The aim of this paper is to document the effect of democracy on the financing constraints faced by private firms.

Abstract

Purpose

The aim of this paper is to document the effect of democracy on the financing constraints faced by private firms.

Design/methodology/approach

This paper uses the data from the World Bank's Enterprise Surveys to test the arguments presented in this paper in a large sample of private firms from 92 developing countries.

Findings

The results show that firms headquartered in more democratic countries have better access to finance than firms headquartered in less democratic countries. The findings are robust to the comprehensive inclusion of relevant controls and to a number of sensitivity tests. The authors' findings highlight an important channel through which democracy can affect the business environment of a country.

Originality/value

The authors believe that this paper is an initial attempt to document the effect of democracy on the financing constraints faced by private firms.

Details

Review of Behavioral Finance, vol. 15 no. 6
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 26 August 2022

Masresha Belete Asnakew and Minale Kassahun Amogne

The accessibility of housing for many purposes is more influenced by the functioning of housing market. As access to housing is an expensive and long-term exertion of household…

Abstract

Purpose

The accessibility of housing for many purposes is more influenced by the functioning of housing market. As access to housing is an expensive and long-term exertion of household, looking for appropriate housing fund is necessary whether the source of fund is private saving or mortgage. However, insufficient finance in Ethiopia is a reason for inaccessible of land and housing by the low- and middle-income people. This study aims to identify the barriers to access finance in the study area.

Design/methodology/approach

This study adopted a qualitative and quantitative research approach to investigate the barriers of housing finance. To undertake and increase the relevance of this study, primary and secondary, qualitative and quantitative data were used. Primary data were collected from respondents; focal person’s and key informants. Both descriptive statistical analysis and relative importance index analysis was deployed for this study. In addition, the quantitative data were analyzed using logistic regresion model.

Findings

The result of this study found that in Ethiopia at all, there is no enough mortgage and long-term lending banks. The result of this study inspects some variables significantly affect the access to finance. The result of this study will help the government in buildup of financial institutions in many perspectives. Financial institutions and clients may also be beneficiary through stiffen housing finance system.

Originality/value

The barriers of access to finance were not sufficiently studied in Ethiopia. Therefore, this study may be a pioneer for the researchers, as it did not cover the whole area of the country to study and also appoint the government to reform the financial sector based on the findings of the researches.

Details

International Journal of Housing Markets and Analysis, vol. 16 no. 6
Type: Research Article
ISSN: 1753-8270

Keywords

1 – 10 of over 66000