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Article
Publication date: 13 April 2015

Masato Abe, Michael Troilo and Orgil Batsaikhan

The purpose of this paper is to propose policy suggestions for the financing of small and medium enterprises (SMEs) in the Asia-Pacific region. Recent literature suggests…

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Abstract

Purpose

The purpose of this paper is to propose policy suggestions for the financing of small and medium enterprises (SMEs) in the Asia-Pacific region. Recent literature suggests that lack of capital is the most severe constraint for SME survival and growth. Enabling policymakers to assist SMEs in their search for financing will boost economic growth.

Design/methodology/approach

The methodology includes both quantitative and qualitative components. Current World Bank data on the strength of various financial institutions in the countries of interest is analyzed to discover areas of improvement. Additionally, 32 experts from East and South Asia were interviewed several times to determine areas of concern in financing SMEs. Their responses and the evidence from the World Bank data form the basis of the policy prescriptions in the paper.

Findings

Financing is a critical constraint for SMEs for several reasons. Many SME owners do not manage working capital effectively, information asymmetry between banks and SMEs retards the loan application and approval process, and underdeveloped equity markets deny SMEs future growth opportunities. Policymakers can ameliorate conditions by serving as facilitators and communicators; governments should not provide financing directly if possible.

Practical implications

It is hoped and expected that the policy prescriptions offered herein will enhance the growth and survival prospects of SMES, thereby creating more employment, innovation, and economic growth.

Originality/value

The main contribution of this work is its scope. While the financing of SMEs is a familiar topic, the review of issues and policies in East and South Asia, and their distillation into practical advice for officialdom, is what makes this manuscript unique.

Details

Journal of Entrepreneurship and Public Policy, vol. 4 no. 1
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 12 October 2015

Jarunee Wonglimpiyarat

Today, the financing mechanisms to support small-and medium-sized enterprises (SMEs) development have been a subject of great interest and a challenge to policy makers as…

4512

Abstract

Purpose

Today, the financing mechanisms to support small-and medium-sized enterprises (SMEs) development have been a subject of great interest and a challenge to policy makers as SMEs are regarded as an important sector contributing to economic growth and stability. This paper is concerned with the bank financing policies to support SME development in China. The purpose of this paper is to examine the governmental financing policies and the innovation financing system of China. The discussions are focused on the bank financing policies to support SME development in China.

Design/methodology/approach

This study is a qualitative research with the use of case study methodology (Eisenhardt, 1989; Yin, 2003). The research is focused on the policy perspectives of bank financing to support SME development in the case of China, the world’s fastest-growing economy. To explore the role of financial institutions and banks in SME financing in China, the research also derives evidence from a collection of documentary investigation. The research fieldwork and interviews were undertaken in Beijing and Shanghai, major financial centers in China, with the use of semi-structured questionnaire. The analyses are undertaken to answer the key questions of: What are the Chinese government’s strategies to support the development of SMEs? To what extent the government policies in bank financing can support SMEs and promote the development of an innovative economy?

Findings

The empirical study has shown that despite the introduction of the 12th Five-Year National Economic and Social Development Plan to support SMEs development, China still needs to improve regulatory policies in support of innovative businesses which would help its transition to an innovation-driven economy. The study provides lessons and policy guidelines to improve the competitiveness of SMEs in China. The insights from this study can also be applied to other developing and emerging economies attempting to understand the role of financing mechanisms in building an innovative economy.

Originality/value

The study has addressed the policy challenges to support SME development in China, a major Asian emerging country and one of the fastest-growing economies in the world (with averaged growth rate of 10 percent per annum). The empirical study of policy challenges was undertaken in Beijing and Shanghai, major financial centers in China. The study offers insights which can be applied to other developing and emerging economies attempting to understand the role of SME financing policies and mechanisms in building an innovative economy.

Details

World Journal of Entrepreneurship, Management and Sustainable Development, vol. 11 no. 4
Type: Research Article
ISSN: 2042-5961

Keywords

Article
Publication date: 30 August 2018

Shaista Wasiuzzaman and Nabila Nurdin

The purpose of this paper is to examine the various factors that influence a small and medium enterprise’s (SME) decision to apply for bank loans.

1947

Abstract

Purpose

The purpose of this paper is to examine the various factors that influence a small and medium enterprise’s (SME) decision to apply for bank loans.

Design/methodology/approach

Data from survey responses of 145 SMEs from Selangor and the Federal Territory of Kuala Lumpur are used for this purpose. Exploratory factor analysis, logistic regression and SEM-PLS are used to analyze the data.

Findings

The findings from the survey show that an SME’s financial performance, its access to finance and its legal form play a significant positive role in its decision to apply for debt financing. Private limited SMEs that perform well and are able to access to various financing options are more likely to apply for financing. However, there is also evidence of a significant negative influence of credit history on the decision to apply for financing, as SMEs with a poor credit history are more likely to apply for financing. The age of an SME has weak influence while its size is found to be insignificant in influencing its decision to apply for financing.

Originality/value

The results imply the role of financial market imperfections such as adverse selection and information asymmetry in defining the SME’s demand for debt financing. The study contributes to a deeper understanding of the debt financing decisions of SMEs.

Details

International Journal of Bank Marketing, vol. 37 no. 1
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 10 September 2018

Moinak Maiti

The purpose of this study is to highlight the key challenges and opportunities that lie with some of the alternative avenues/tools to promote financial access to MSME in India.

Abstract

Purpose

The purpose of this study is to highlight the key challenges and opportunities that lie with some of the alternative avenues/tools to promote financial access to MSME in India.

Design/methodology/approach

Initially, the study discusses the scope of various alternative avenues/tools for MSME financing along with traditional bank SME credits, highlighting some of the factors that will boost the high performance and growth of MSME in future.

Findings

There is a dominance of domestic banks in the MSME financing over cross-border banks in India. The study finds several opportunities lie in the MSME financing for the banks and other alternative avenues/tools: friendly government policies and improving the legal system make the business environment suitable for MSME financing business. There are several obstacles like discrete presence of clients, high operating cost and low profitability, lack of proper risk management and low literacy rate that make MSME financing difficult for the SME finance business. Active government initiatives and other supporting factors will act as the game changer and promoter for the banks and other alternative avenues/tools for MSME financing.

Originality/value

The paper is original and brings out some valuable findings that will help the SME business clients to choose alternative access to finance.

Details

International Journal of Law and Management, vol. 60 no. 5
Type: Research Article
ISSN: 1754-243X

Keywords

Open Access
Article
Publication date: 3 April 2019

Yasmeen Al Balushi, Stuart Locke and Zakaria Boulanouar

Small and medium enterprises’ (SMEs) capital structure and financial policies are important areas of policy concern. Only a limited number of studies on capital structure…

8375

Abstract

Purpose

Small and medium enterprises’ (SMEs) capital structure and financial policies are important areas of policy concern. Only a limited number of studies on capital structure have, however, been conducted on SMEs, and this deficiency is particularly evident when investigating what influences funding decisions around Islamic finance. This paper accordingly aims to investigate whether Omani SME owner-managers’ intention to adopt Islamic finance is influenced by their knowledge of Islamic finance, their own characteristics and/or their firms’ characteristics.

Design/methodology/approach

The authors administered a questionnaire survey via face-to-face interviews to 385 SME owner-managers operating in Muscat, Oman’s capital city. The Kruskal–Wallis one-way analysis of variance (ANOVA) non-parametric test was used to analyse the questionnaire survey data.

Findings

The findings indicate that while SME owner-managers’ Islamic financial knowledge and personal characteristics do influence their intention to adopt Islamic finance, their firms’ characteristics have no significant influence on SME owner-managers’ decisions to accede to Islamic financing.

Research limitations/implications

The research’s first limitation is that it gathered data from SME owner-managers in Muscat only. Future studies could survey a wider sample of Omani SME owner-managers. Second, the study’s findings cannot be generalised to large and public firms, as the sample includes owner-managers of SMEs only. Finally, there is a need to investigate other factors such as nonfinancial and behavioural factors, which were not explored in the present study, but which may influence SME owner-managers’ Islamic financial decisions.

Originality/value

Theoretical and empirical studies on capital structure have focused primarily on large listed firms. Only a few studies have paid attention to the capital structure of SMEs, particularly in the context of an emerging market such as Oman. This gap in the literature is mostly evident when investigating the factors that influence the funding decision towards Islamic financing in a country, such as Oman, where Islamic finance represents a new banking sector offering.

Details

ISRA International Journal of Islamic Finance, vol. 11 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Article
Publication date: 24 August 2021

Nazik Fadil and Josée St-Pierre

The purpose of this paper is to identify business practices that may promote internal financing of growing SMEs. The authors expand the literature on entrepreneurial…

Abstract

Purpose

The purpose of this paper is to identify business practices that may promote internal financing of growing SMEs. The authors expand the literature on entrepreneurial finance that reduces business practices to either financial management or bootstrapping, by exploring all management practices that may have an impact on liquidities. This study enriches the literature on business practices. This is an important consideration for managers of SMEs who intend to preserve their financial independence and their capacity to survive different crises.

Design/methodology/approach

The empirical study involved a sample of 235 growing Canadian SMEs. The sample was extracted from a private database using a questionnaire that covered a wide range of business practices. Variance testing of business practices between SMEs with a line of credit and those without (and lower overall debt) was supplemented by a logistic regression.

Findings

SMEs which make use of efficiency-promoting technology, carry out preventive maintenance and control their costs and turnover during their growth are more inclined to use less external financing.

Originality/value

This is the first study that associates business practices, beyond bootstrapping, with financing and which answers a critical question posed by SME executives on how to preserve their financial and decision-making autonomy through growth stages. In addition, the desire to retain control of the company does not compel the SME manager to limit the size of the company.

Details

Journal of Small Business and Enterprise Development, vol. 28 no. 7
Type: Research Article
ISSN: 1462-6004

Keywords

Book part
Publication date: 28 March 2022

Mistrean Larisa, Buşmachiu Eugenia and Staver Liliana

Introduction: Micro and small and medium-sized enterprises (SMEs) represent approximately 99.7% of enterprises in the EU, USA, Japan and about 98.7% in the Republic of

Abstract

Introduction: Micro and small and medium-sized enterprises (SMEs) represent approximately 99.7% of enterprises in the EU, USA, Japan and about 98.7% in the Republic of Moldova. They provide two-thirds of private sector jobs and contribute more than half of the total value added created by existing businesses. Under these conditions, various action programmes are adopted to increase the competitiveness of SMEs through research and innovation and to improve access to finance. In addition, the impact of the COVID-19 pandemic has stimulated new reflections on economic recovery, reconstruction and strengthening the resilience of SMEs.

Aim: This chapter aims to give an overview of the SME development, the credit market, access to finance and leasing and to analyse the regulatory framework in terms of quantitative and qualitative criteria for SME classification and the advantages and shortcomings of credit guarantees in the Republic of Moldova. Moreover, in doing this it aims to examine the credit market trends in the SMEs sector and their impact on SMEs’ performance and development.

Method: This chapter uses quantitative data for trend analyses in order to investigate the SMEs access to the credit market, the effectiveness of SME potential funding sources in the Republic of Moldova and the impact of the pandemic on SME development.

Findings: The study found significant and positive role of the credit market in the SME sector development and positive impact on SME performance and economic development. Thus, the study concluded that in order for SMEs to remain competitive and profitable it is very important that they focus on innovation and continuously seek ways to access financial resources on the credit market. During the recent financial crisis, numerous commercial banks focussed considerable attention to SME funding via lending facilities and programmes specifically dedicated to the SME sector.

Originality of the Study: This chapter provides evidence on SME access to finance on the Moldovan credit market over the 2015–2020 period by using statistics on credit to both financial and non-financial markets and offers new insights into the topic area by emphasising the importance of the SMEs financing portfolio for the Moldova economic development.

Implications: The results of this chapter suggest that the future research would be aided by improvements in the collection of more data on the pandemic period and new financial techniques and practical products available on the credit market of SME.

Details

Managing Risk and Decision Making in Times of Economic Distress, Part B
Type: Book
ISBN: 978-1-80262-971-2

Keywords

Article
Publication date: 8 February 2022

Avinash Ghalke, Satish Kumar and S.V.D. Nageswara Rao

Timely access to reasonably priced financing is critical to promote and sustain small and medium sized businesses (SMEs). This study aims to examine the role of the newly…

Abstract

Purpose

Timely access to reasonably priced financing is critical to promote and sustain small and medium sized businesses (SMEs). This study aims to examine the role of the newly constituted SME exchanges in funding the growth of Indian SME firms. The impact of obtaining public equity capital on the firm’s growth prospects, capital structure and credit profile is the focus of this paper. In addition, this study compares the cost and speed of raising capital on specialised SME exchanges to the main board.

Design/methodology/approach

To examine the impact of raising public equity capital, this study uses a difference-in-difference (DID) regression analysis. SMEs that raised financing on the SME exchange between 2013 and 2018 make up the treatment sample. This study uses a propensity score matching technique to find the control group from a sample of unlisted enterprises to reduce the likelihood of selection bias.

Findings

This study finds that SME profitability drops after an initial public offering (IPO), which is consistent with previous research. This study also discovered that after a company is listed, its total debt falls. This study also shows that after the IPO, there is no change in the borrowing costs of SME enterprises. Finally, this study finds an evidence of a decline in sales growth following the IPO, implying that the firms use the IPO money to rebalance their accounts after a period of heavy investment rather than for growth finance.

Originality/value

A thriving and efficient equity financing market for SMEs has the potential to establish itself as a viable alternative to the existing dominant bank financing option. To the best of the authors’ knowledge, this research is the first to examine the role of SME exchanges in the funding of Indian SME firms.

Details

Indian Growth and Development Review, vol. 15 no. 1
Type: Research Article
ISSN: 1753-8254

Keywords

Article
Publication date: 2 May 2017

Purnima Rao, Satish Kumar, Vidhu Gaur and Deepak Verma

This exploratory study aims to investigate the financing issues faced by Indian small and medium enterprise (SME) owners. It also classifies the financing constraints into…

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Abstract

Purpose

This exploratory study aims to investigate the financing issues faced by Indian small and medium enterprise (SME) owners. It also classifies the financing constraints into four financing gaps, namely, demand, knowledge, supply and benevolence.

Design/methodology/approach

The study uses the convergent interviewing technique to highlight the key issues being faced by SME owners in financing. Forty-four owners from different industries and having dispersed demographics have been interviewed in the study.

Findings

The findings reveal the real-time issues being faced by SME owners. SMEs faced both demand- and supply-side constraints. The most common financing challenges are high cost of credit, complex procedures of lending institutions, information asymmetry, creditworthiness and self-abstaining from external financial resources. Issues pertaining to lack of knowledge and awareness about the financial products and services are also being noticed by the researchers.

Research limitations/implications

This study identifies the major financing concerns of SMEs and thereby provides a directional approach to the policymakers in the area of SME financing.

Originality/value

The study offers a better and data-based understanding of financing issues being faced by the SME owners. The usage of convergent interviewing allows the researchers to highlight the common issues raised by the SME owners.

Details

Qualitative Research in Financial Markets, vol. 9 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 29 June 2012

Darek Klonowski

Access to finance appears to be the largest challenge for entrepreneurial firms from the small to medium‐sized enterprise (SME) sector in Poland. To address this concern…

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Abstract

Purpose

Access to finance appears to be the largest challenge for entrepreneurial firms from the small to medium‐sized enterprise (SME) sector in Poland. To address this concern, the government embarked on a program to yield financial and know‐how assistance to the SME sector. The purpose of this paper is to evaluate public intervention in this area.

Design/methodology/approach

The study focuses on the analysis of primary data. The sampling frame for the study consisted of 278,088 firms from the SME sector in the Warsaw region. The sample size was equal to 500 firms from the SME sector. Questionnaires from 262 respondents were included in the study, for an effective response rate of 52 percent.

Findings

The study concludes that there are still pronounced liquidity gaps for firms in the SME sector in Poland and that the government programs are not effective in closing these liquidity gaps.

Originality/value

Problems with access to capital continue to be a challenge to developing a vibrant SME sector in Poland and a lack of access to capital is consistently quoted as the major obstacle to the development of the SME sector in Poland. The paper offers three policy recommendations in relation to closing liquidity gaps in the SME sector.

Details

International Journal of Emerging Markets, vol. 7 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

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