SME Financing

Small and medium-scale enterprises around the world go through several challenges in a bid to achieve success. Many studies argue SMEs face challenges in different areas; some are critical for success whilst other are not. One of the critical challenges put forward by several studies is finding appropriate funding. Academics have described funds as the blood of every business and a key element that prescribes the supply of entrepreneurship. The challenge of funding remains a problem around the world both in developing and underdeveloped environments. The chapter provides insight into the funding issues faced by SMEs and provides practiced ways in which businesses in developing and underdeveloped environments can address the issue of funding.

Problems and Prospects of SME Financing in Bangladesh

To conduct a comprehensive study on the SME sector of Bangladesh of its present state, prospects, issues and emerging challenges this “problems & Prospects of SME Financing in Bangladesh” research is carried out. The main objective of the study is to find out the SME financing’s different types of strategies & policies in Bangladesh. The SMEs are playing gradually more significant role as a mainstream of economic escalation in Bangladesh as well as all over the world. The SME usually creates the opportunities of employment at lower costs and render flexibility to the economy. The SMEs are playing an indispensable role for overall economic development. Since this sector is a manual labor intensivewith the short period of time, usually it is capable of increasing the national income as well as hasty employmentcreation by achieving the Millennium Development Goals (MDGs) as well as the abolition of extremepoverty and starvation, gender equality and women empowerment. This SME sector has played a vital role intheeconomic progress of some prosperous countries of Asia. In national economy of Bangladesh SMEs play mainly vital role by making manufacturing enterprises by providing the employment of industrial workers and contributing to the over one-third of industrial value-added to gross domestic product (GDP) and become accustomed quickly to change the market condition, create employment, help diversify economic activities, and also make a significantcontribution to the exports and trade. The economic competence and the overall performance of the SMEs are considerably depended upon the policy of environmental and specific promotional policies pursued for their benefits. Consequently, the policies and initiatives to develop the condition of SMEs and toincrease their competitiveness are a main concern of Bangladesh.

Does SME financing perform well from both demand and supply sides? The case of a developing country

This study provides a way of understanding to analyze the performance of SME credit both from the demand and supply sides. Both primary and secondary data are used which are collected from entrepreneurs of SMEs and the head office of Rajshahi Krishi Unnayan Bank, a leading SME loan providing government-owned agricultural development bank in the Rajshahi district of Bangladesh. Some descriptive statistics, accounting and financial techniques, and a regression model are used to analyze the data. The study finds that the average ROA of SMEs is 35.87% and the ROE of SMEs is 62.81%. It indicates that the SMEs are earning more than the cost of the fund collected from the institutional sources. It is also observed that there is a significant effect of institutional credit on ROE of SMEs but not on ROA. On the other hand, the growth rate of SME NPL is higher than the total NPL during the study years that is of course alarming regarding SME loan recovery. The institutional SME credit should be increased by applying proper strategies for increasing loan recovery performance.

SME Financing: A UAE Entrepreneur Perspective

This research is an investigation into the motivating factors driving choice of bank for SME entrepreneurs in the United Arab Emirates (UAE). The study aims to highlight the challenges and suggest solutions in addressing the credit gap between the cash flow needs of SME entrepreneurs and the finance policies of UAE banks. The data collected was generated from a sample of SME owner-managers in three emirates: Abu Dhabi, Dubai and Sharjah. A structured research questionnaire was distributed and the convenience sampling method resulted in 380 completed responses. These were analyzed using appropriate statistical tools. The results of the study will enable banks to better understand and analyze the key determinants that impact the SME entrepreneurs’ attitude in bank selection and the products and services this particular group values. Research findings are also envisaged to be of particular interest to scholars and practitioners of Islamic Banking specifically, inspiring further studies across the MENA region.

Small business debt financing: the effect of lender structural complexity

PurposeSmall- and medium-sized enterprises (SMEs) depend on a large measure on commercial banks for external capital, and US SMEs are increasingly experiencing bank credit constraints and resorting to costly alternatives. The purpose of this paper is to investigate the impact of lender organizational complexity on SME financing shortfalls. In particular, it examines the credit shortage effects associated with the SME's reliance on bank holding company (BHC) owned, as opposed to independent, lenders.Design/methodology/approachBuilding on agency–theoretic rationales, the authors posit that both hierarchical and horizontal complexity associated with present-day BHC structures will diminish an affiliated bank's ability and willingness to properly underwrite SME credit needs. Consequently, they hypothesize that SMEs whose commercial lenders are BHC affiliates are likely to experience greater credit shortages. This hypothesis was tested using exhaustive financial data from a large and nationally representative sample of US SMEs.FindingsGreater SME reliance on loans from BHC lenders was found to be associated with a greater use of late trade–credit payments. The latter is an expensive form of financing and a generally accepted indicator of shortages in conventional (and cheaper) bank credit.Originality/valueDespite the evolution toward more complex bank organizational forms, especially among community banks, the implications for SME lending are not yet fully understood. This paper's contribution is to offer a first examination of the impact of post-deregulation BHC structures on SME financing shortfalls.