Abstract
This study investigates the firm- and country-specific factors that affect SMEs’ access to finance and the relationship between financial constraint and firm growth in emerging economies of Central Asia. To address the research questions, a two-stage empirical analysis including ordered probit, probit, and feasible generalized least squares (FGLS) specifications were conducted. Firm-level data used in the analysis is obtained from the fifth round of the Business Environment and Enterprise Survey (BEEPS V) and country-level data acquired from national and international datasets. The study's findings implied that in the Central Asian economies, country-specific factors are more likely to affect access to external finance of SMEs than firm-specific determinants. Among firm-specific factors, only foreign ownership is significantly related to financing constraint perception of SMEs; where, the interest rate is positively, and domestic credit market, inflation, and log of GDP per capita are negatively related to financing constraint level. In Central Asia, an insignificant relationship between growth and financing constraints was found. The determinants of financing constraints and access to finance–growth relations, which address the issue of great significance for SME growth in the selected countries, were interpreted with region-specific factors.
Highlights
The role of small- and medium-sized enterprises (SMEs) in the development of former command emerging economies demands peculiar attention
Enterprise-level data used in the analysis is obtained from the fifth round of the Business Environment and Enterprise Survey (BEEPS V) that is the joint project of the European Bank for Reconstruction and Development (EBRD) and World Bank Group (WBG)
The database provides the following advantages. It uses a standard questionnaire across all countries, which makes it possible to compare firm-level data between countries. It covers the data on firm attributes, their performance, and perception of business environment features, including physical and financial infrastructure, legal, administrative, political, and regulative systems in different economies, which enable us to assess the impact of financial constraint on SME growth in similar country groups and compare and contrast between countries
Summary
The role of small- and medium-sized enterprises (SMEs) in the development of former command emerging economies demands peculiar attention. The creation of SMEs in formerly planned economies can be considered an important part of economic transition (Carree et al, 2002). The entry of new firms in the early stages of transition had a crucial role in the economic progress of previously planned economies. Economic restructuring and mass privatization in most of the postcommunist countries resulted in labor shedding, and the newborn smaller firms assisted economies in retaining the employment level in that stage (Hashi & Krasniqi, 2011). Small firms create the largest share of jobs and have the highest sales growth (Ayyagari et al, 2014). Facilitating access to finance and land, reforms in taxation and administration, licensing, permits, and customs would advance the performance of private firms (Gogokhia & Berulava, 2020)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
