Small And Medium Enterprises Financing Research Articles

Small and medium scale enterprises and economic growth in Nigeria

Due to the inconclusive situation of empirical studies on Small and Medium Enterprises ( SMEs) and economic growth in Nigeria and the need to promote growth accompanied by poverty alleviation, this study examined SMEs financing and economic growth in Nigeria from 1999 to 2021. The hypotheses formulated and tested in the study included that there is no significant relationship between commercial bank loans, total credit to the private sector (which captures other means of financing SMEs) and lending rate. Annual data was collected from the Central Bank Statistical Bulletin. The augmented Dickey-Fuller unit root test revealed that the variables were stationary at the first difference, while the Johansen co-integration test indicated a long-run relationship among the variables. The Vector Error Correction Mechanism (VECM) indicated commercial bank loans have a weak negative effect on economic growth. Total credit to the private sector has a positive effect on economic growth, while lending rates have a significant negative effect on economic growth. It was concluded that SMEs financing has significant positive effects on economic growth in Nigeria. It was recommended that the government encourage more commercial bank loans to SMEs by guaranteeing such loans, more development bank branches should be established; and the lending rate should be lowered.

Exploring global practices in providing small and medium enterprises access to sustainable finance solutions

This study investigates the role of sustainable finance in enhancing the growth and sustainability of Small and Medium Enterprises (SMEs), focusing on the integration of environmental, social, and governance (ESG) principles. The main objectives were to map the current landscape of sustainable finance for SMEs, identify barriers to access, evaluate the impact of sustainable finance on SME growth, explore the role of digitalization, and provide policy recommendations. Through a mixed-methods approach combining literature review, case studies, and empirical analysis, the study offers a comprehensive overview of the global practices in sustainable finance for SMEs. Key findings reveal that while there is a growing availability of sustainable financial instruments, SMEs face significant challenges in accessing these resources due to a lack of awareness, stringent eligibility criteria, and complex application processes. The study also highlights the positive impact of sustainable finance on SME growth and sustainability, with digitalization playing a crucial role in enhancing access to finance. However, the effectiveness of these financial instruments and digital platforms varies significantly across different regions and sectors. Based on the findings, the study recommends that policymakers and financial institutions implement more inclusive policies and develop financial products that cater to the unique needs of SMEs. It also calls for increased efforts in capacity building to raise awareness among SMEs about the benefits of sustainable finance. Future research should focus on the long-term effects of sustainable finance on SME competitiveness and resilience, and the potential of public-private partnerships in facilitating access to sustainable finance.

Exploring Small and Medium Enterprises Access to Finance: A Bibliometric Analysis

This study conducts a bibliometric investigation into the access of small and medium enterprises (SMEs) to finance. Access to finance significantly impacts SME success and growth, yet understanding this intricate matter still needs to be completed. Bibliometric analysis aims to uncover significant trends, research gaps, and influential contributors. The methodology involves extensively searching and assessing scholarly articles, journals, and publications related to SMEs' finance access. A systematic approach identifies relevant studies, extracts bibliographic data, and analyzes citation patterns, co-authorship networks, and thematic clusters. This detailed process maps the research landscape's structure, showcasing trends and new research areas. Results of the bibliometric analysis provide vital insights dominant themes like alternative financing methods, government policies, financial inclusion initiatives, and entrepreneurial finance. Influential authors, institutions, and journals contributing to SMEs' finance access knowledge are also identified. This research offers a comprehensive understanding of existing knowledge and addresses critical research gaps. Analyzing scholarly literature provides valuable insights for researchers, policymakers, and practitioners. Identified gaps and emerging areas guide future research, shaping agendas and prompting further investigations. Furthermore, the bibliometric analysis encourages interdisciplinary collaboration and knowledge exchange among scholars and practitioners. Identifying key authors and institutions supports collaborations and knowledge sharing. Ultimately, this research aims to aid evidence-based decision-making and policy formulation for improved SME finance access. By understanding the research's current state, identifying gaps, and noting emerging trends, this study strives to enhance SME growth and development by fostering a better understanding of finance access challenges and possibilities.

Empowering Growth: The Role of Commercial Banks in Financing Small and Medium Enterprises (SMEs) in India

This research explores the pivotal role played by commercial banks in facilitating the financial growth and sustainability of Small and Medium Enterprises (SMEs) in India. SMEs form the backbone of the Indian economy, contributing significantly to employment generation and economic development. This study employs a mixed-methods approach, combining qualitative insights and quantitative analyses, to comprehensively examine the mechanisms through which commercial banks support and finance SMEs. The qualitative component of the study involves interviews, case studies, and expert opinions to capture nuanced perspectives on the challenges and opportunities faced by SMEs in accessing financial services from commercial banks. Simultaneously, quantitative data analysis will be employed to identify trends, correlations, and statistical patterns associated with the financing of SMEs. Various aspects of the role of commercial banks in SME financing will be investigated, including credit facilities, financial products tailored for SMEs, risk assessment, and the impact of banking support on the growth and sustainability of small businesses. The study aims to provide insights into the strategic implications of commercial bank interventions for the SME sector in India. The findings from this research are anticipated to offer valuable insights for policymakers, banking professionals, and SME entrepreneurs. By understanding the intricacies of SME financing by commercial banks, stakeholders can refine strategies, improve financial inclusion, and contribute to the robust development of small and medium enterprises, fostering economic growth in India. This study serves as a foundation for informed decision-making and future research within the realm of SME financing by commercial banks.

ENHANCING GLOBAL COMPETITIVENESS OF U.S. SMES THROUGH SUSTAINABLE FINANCE: A REVIEW AND FUTURE DIRECTIONS

Small and Medium Enterprises (SMEs) play a vital role in the economic fabric of the United States, contributing significantly to employment generation, innovation, and economic growth. Amidst increasing globalization and growing environmental concerns, the imperative for SMEs to enhance their global competitiveness while embracing sustainability has become paramount. Sustainable finance offers a promising avenue for achieving these dual objectives by integrating environmental, social, and governance (ESG) criteria into financial decision-making processes. This paper provides a comprehensive review of the literature on enhancing the global competitiveness of U.S. SMEs through sustainable finance, while also suggesting future directions for research and practice. The review highlights the growing importance of sustainability considerations in finance and the evolving landscape of sustainable finance instruments available to SMEs. It underscores the potential benefits of integrating sustainability into SME financing, including improved risk management, enhanced access to capital, increased market competitiveness, and positive environmental and social impacts. Furthermore, the review examines the challenges and barriers faced by SMEs in adopting sustainable finance practices, such as lack of awareness, limited access to expertise, and perceived costs. In proposing future directions, the paper emphasizes the need for targeted research to address the specific needs and constraints of SMEs in sustainable finance adoption. This includes exploring innovative financial instruments tailored to SMEs, enhancing financial literacy and awareness among SMEs, fostering collaboration between financial institutions, policymakers, and SMEs, and leveraging technology for scalable and cost-effective solutions. Ultimately, the paper advocates for a holistic approach that recognizes the interplay between financial, environmental, and social factors in driving SME competitiveness. By embracing sustainable finance, U.S. SMEs can not only enhance their global competitiveness but also contribute to broader societal and environmental goals, thereby fostering a more resilient and inclusive economy.
 Keywords: Small and Medium Enterprises (SMEs), Sustainable Finance, Global Competitiveness, Environmental, Social, Governance (ESG), Financial Inclusion, Innovation, Economic Growth.

How the use of alternative information in risk management fintech platforms influences SME lending: a qualitative case study

Purpose The purpose of the study is to examine the use of alternative information in bank lending to small and medium enterprises (SMEs). Understanding alternative information and its use in bank lending to SMEs is important because it has become a growing part of the future of SME finance. The results and findings of my study not only enrich the finance literature but, more importantly, also address the use of Fintech in the risk management of SME lending, a new and complex problem that is specific to both the information technology and finance field. Design/methodology/approach To answer the research question, the author used a case study approach that relies upon qualitative data and analysis. By iterating between the existing literature, theoretical pieces and empirical findings, the author explain and interpret in detail how the use of alternative information impacts loan outcomes and develop insights to guide future research. Findings The case is outlined in two time periods including the prepartnership period and the postpartnership period. It highlights the establishment of a partnership between LoanBank and FintechInc (pseudonym), aimed at SME-focused Fintech lending. The findings underscore how the partnership has enabled a mutually beneficial situation where LoanBank and FintechInc leverage each other’s strengths to provide efficient and effective lending services. The adoption of alternative information in the risk management Fintech (RMF) platform of FintechInc has transformed LoanBank’s lending processes, showcasing how technological innovations can enhance SME lending practices. Originality/value The study’s originality mainly lies in the three detailed insights regarding alternative information’s impact on SME lending: information, platform properties and financial inclusion. The information part demonstrates that RMF platforms expand the information used for lending decisions, shifting from traditional hard and soft data to incorporating various alternative information sources. The platform properties part suggests that location, openness and technology also play a pivotal role in shaping lending outcomes. Finally, the financial inclusion part proposes that the use of alternative information has the potential to improve financial inclusion and offer better credit terms to previously underserved borrowers.

The Effects of Fiscal Policy and Monetary Policy on Borrowing Costs and Credit Access for SMEs: An Empirical Study

The objective of this study is to investigate the impact of fiscal policies (FP) on borrowing costs and credit access (BCAC) for SMEs, considering the role of monetary policy (MP) as a the second independent factor. This research aims to understand more deeply how fiscal and monetary policies can be utilized to support growth and access to finance for SMEs, as well as identify remaining barriers to access to finance. Through comprehensive analysis, this study is expected to provide effective policy recommendations to improve access to credit for SMEs, which in turn can support economic growth and job creation. This study adopts a quantitative research design using statistical analysis to examine the impact of fiscal policies on borrowing costs and credit access for Small and Medium Enterprises (SMEs). The analysis will be conducted using the SMARTPLS 3.0. Sample size based on valuable samples are 120 of SME. The sampling technique used in this study will be purposive sampling. This approach will involve selecting SMEs that meet specific criteria, such as size, sector, and eligibility for relevant government programs or incentives. Result of this study state Fiscal Policy (FP) and Monetary Policy (MP) have a significant effect on Borrowing Costs and Access to Credit (BCAC).

Digital inclusive finance: A lever for SME financing?

This paper systematically investigates the relationship between digital inclusive finance and small and medium enterprises (SMEs) financing constraints. We extrapolate the influence model between them from an economic theory perspective and conduct an empirical test using two-way fixed effects and a mediation effect model. The results show: (1) Digital inclusive finance significantly alleviates the financing constraints of SMEs; (2) Compared to the breadth of coverage, the depth of use of digital inclusive finance has a more noticeable effect; (3) The alleviation effect of digital inclusive finance exhibits heterogeneity. It can correct the attribute mismatch, field mismatch, and regional mismatch of traditional financial loan services; (4) Digital inclusive finance alleviates SME financing constraints by reducing financing costs and controlling leverage levels, increasing internal sources of enterprise funds. This research is significant for promoting digital inclusive finance to alleviate the financing difficulties of SMEs in China and provides valuable solutions for other countries to mitigate the “Macmillan Gap” phenomenon.

Does energy efficiency of UK SMEs affect their access to finance?

To effectively mitigate climate change, a crucial focus area is enhancing energy efficiency in firms and industries. This objective becomes even more imperative in light of the recent escalation in energy prices caused by the Russo-Ukrainian war. Given the limited financial resources of Small and Medium Enterprises (SMEs), facilitating their access to finance becomes a potential avenue for reducing carbon emissions. Based on our knowledge, this is the first study that analyses the potential impact of energy efficiency on access to finance for SMEs in the UK. We consider a dataset of 2855 UK firms from 2015 to 2021 collected from the Longitudinal Small Business Survey. We find that energy efficient companies and firms that show energy saving behaviours are facing fewer credit constraints. These results are robust if we control for several company characteristics, including age, size, turnover, industry, location, and legal status.

Determinants of Access to Bank Financing in SMEs in Mexico

Several empirical studies indicate that the lack of financing is one of the main barriers that affects the economic growth of small and medium enterprises (SMEs). The main objective of this investigation was to determine to what extent the economic sector, the enterprise size, the characteristics inherent to the enterprise, the legal status, the variables linked to the performance of the enterprise, and the attributes of the owner influence the access to the bank financing of SMEs in Mexico. Using a discrete-response probit regression model, the impact of enterprise characteristics on the probability of obtaining a bank loan was determined. The data collected are from the Enterprise Surveys of Mexico, carried out by the World Bank. The sample of 1480 enterprises is representative by enterprise size, by economic sector, and by region. The research has a quantitative approach with a correlational scope, and a nonexperimental and transectional design. One of the main results highlights that the determinants with the greatest influence on access to bank financing are: the age, the small size, foreign participation, and the manufacturing sector. These results are consistent with other empirical studies, as well as with the pecking-order theory and the financial life-cycle theory.

Blockchain Technology and Small and Medium Enterprises Access to Finance

Small and medium enterprises (SMEs) are essential in developing the world economy. However, they face financing distress due to high information asymmetry and lack of collateral and credit. From the enterprises sustainable development perspective in the big data era, this study explores whether and how blockchain technology can alleviate the information asymmetry problems of SMEs and further improve the convenience of accessing finance. Blockchain technologys decentralized, unchangeable, and transparent natures can reduce information asymmetry between SMEs and the financing parties. SMEs become more creditable to the bank with a more transparent share of businesses operation information and financial conditions based on blockchain. At the same time, market investors can also learn more about the operation of corporate funds. Overall, this study provides new insights on how to use blockchain technology to increase SMEs development efficiency by lessening information asymmetry, reducing the cost of equity and bond financing for SMEs, and effectively reducing SMEs financing difficulties in this age of big data.

Non-Traditional Agricultural Export Performance in Ghana. Exporting SMEs’ Characteristics, Export Mode, and Institutions

Increasing focus of African economies, including Ghana, on non-traditional agricultural exporting (NTAE) small and medium enterprises (SMEs) to counter declining earnings from traditional exports fall short to expectation. This study investigates this gap by looking at unstructured data, and the drivers of NTAE SMEs that can enhance performance and support sector policy initiatives. The research question to be answered is: Which SME characteristics, export mode and institutions (services and finance) are positively related to export performance in the NTAE sector in Ghana? This study applied PLS SEM analysis. The drivers of significance are export knowledge, corporate governance, product development, and professional and technical support. Although building social networks and export modes were found to be significant, they negatively affected the export performance. The cost implications limit the research to a cross-sectional study. Perceived export performance was used because the respondents did not provide export statistics. Most research on NTAEs in Ghana has focused on either subsectors or SMEs. This study adds value by focusing on SMEs in the NTAE sector, providing insights to policymakers and the government for intervention and policy formulation. Government policy implications include direct investments in shipping and air freight, tax rebates, concessions, and access to finance for NTAE SMEs. Managerial implications show that knowledge of export processes, export market regulations, and international consumer preferences is essential

Digitalisation promotes adoption of soft information in SME credit evaluation: the case of Indian banks.

Small and Medium Enterprises (SMEs) account for half of the employment in developing economies and are a significant part of their economic growth. In spite of this, SMEs are under-financed by banks, which have been disrupted by financial technology (fintech) firms. This qualitative multi-case study examines how Indian banks are utilising digitalisation, soft information, and Big data to improve SME financing. The participants shared their insights on the way banks adopt digital tools, sources of soft information (e.g., customer and supplier relationships, business plans), and factors that influence the implementation of Big data in the SME credit evaluation process. The major themes include: banks are improving SME financing operations through digitalisation, and IT tools can verify SME soft information. Soft information attributes that emerge from addressing SME information opacity include supplier relationships, customer relationships, business plans, and managerial successions. For SME credit managers, developing partnerships to access publicly available soft information created by industry associations and "online B2B trade platforms" is a high-priority recommendation. To enhance the efficiency of SME financing, banks should obtain the consent of SMEs before they access their private hard information through trade platforms.

Impact of COVID-19 on Small and Medium Enterprises in South Asian Countries

The research study finds the impact of COVID-19 on Small and Medium Enterprises (SMEs) in South Asian countries (excluding Afghanistan, due to the two-decades-long war on terrorism) by taking quarter-wise data from 2020 to 2021. By using the panel data random effect technique, the results demonstrate a negative relationship between COVID-19 spread and SMEs exports, as a one percent rise in the COVID-19 pandemic will result in a decline of 91 percent in exports of SMEs. The results also demonstrate that, with the exception of TTF (SME Financing as a % of Total Trade Finance), all explanatory variables are significant. SME Financing as a % of total trade finance (TTF) has a negative relationship with SMEs exports. Both BCS (Bank credit to SME sector) and NOB (percentage change in the number of SME borrowers) have a positive relationship with SMEE (Exports of SMEs), indicating that when BCS and NOB rise by one percent, SMEE will rise by .98 and 13.17 percent, respectively. The constant/intercept value shows that the SMEs exports will be 49.74 units when all other explanatory variables are set to zero. The research study also posed a policy recommendation in the situation of the COVID-19 epidemic, that what necessary and immediate action to be taken to save the lives and restore the economies of South Asian counties.

Analysis of The Effects of Ownership-Structure and Social Responsibility on Profitability and Company Value

This study aims to determine the orientation of Islamic financing for Micro, Small and Medium Enterprises (SMEs) in Makassar City. The research was conducted at BSI KC Makassar 2 using primary data sourced from interviews, observations, documentation, and secondary data sourced from news, journals, and books related to SMEs and Islamic financing. This research uses qualitative methods with an interpretive approach and uses interviews, documentation, and observation as data collection methods. The analysis technique used is Interpretive Phenomenology Analysis (IPA). The results show that the orientation of Islamic financing for SMEs is influenced by the customer's background, understanding of Islamic financing and the length of time the business has been operating. The main type of financing contract used for SMEs is Murabahah, which is offered in two methods: Murabahah with Wakalah and Murabahah without Wakalah. The factors supporting Islamic financing are public knowledge about Islamic financing and the benefits of Islamic banks, the availability of financial products and ervices that comply with sharia principles, regulations that support the development of Islamic banks and the challenges of its development, and comparison with financial products and services offered by conventional banks.

Factors Influencing SME Financing: Case in Indonesian Islamic Bank

Purpose: Islamic Commercial Banks is one of the institutions that provide financing for Small and Medium Enterprises (SMEs). This study aims to analyze the effect of Third Party Funds (DPK), Inflation, Non-Performing Financing (NPF), and Margin Levels on Small and Medium Enterprises (PUKM) financing in Islamic Commercial Banks. Method: The type of data used in this study is secondary data derived from monthly statistical reports on Islamic banking which are accessed through the official website of the financial services authority and the website of Bank Indonesia. The period of this research is from 2016 to 2021. The analytical method used is Ordinary Least Square (OLS). Result: The results of the study concluded that DPK and Margin Level had a significant effect on PUKM. While inflation and NPF have no significant effect on PUKM. Islamic commercial banks as intermediary institutions can increase financing for SMEs by maximizing DPK and margin levels in the hope that financing for SMEs can increase economic growth in Indonesia.

Expanding Access to Finance for Small and Medium Enterprises: An Analysis of Demand and Supply Side Constraints of Nepal

The objective of this article is to analyze the constraints on expanding access to finance with a special reference to Small and Medium Enterprises (SMEs) in Nepal. Following explorative research design, tools like review of literature, field observations, key informant interview with Banks and Financial Institutions (BFIs), and a quick questionnaire survey with SMEs in hilly districts of Nepal were deployed to collect data for this article. The descriptive statistics showed the financing gap very clearly. The constraints of SMEs on access to finance are found in policy and operational levels on both the demand and supply sides. There is a huge scope of modern technology to reduce the constraints towards expanding access to finance for SMEs in rural areas. The major constraints area includes the policy measures, lending approach and use of technology, rate of interest, availability of collateral with SMEs, risk-mitigating measures, the position of financial literacy, stage of SMEs’ market development and their business incomes, regulatory compliances, general price level, and development of the physical infrastructures.

The Prospect of Waqf in Financing Small and Medium Enterprises (SMEs) in Yemen

The role of small and medium enterprises (SMEs) in economic development has been duly recognised. However, SMEs encounter a number of challenges. The most pressing obstacle SMEs face is the lack of finance. Therefore, it is extremely important to find new and suitable finance sources in order to support SMEs either in their establishment or growth phases. Waqf is regarded one of the best sources of finance in the Islamic financial system. There is much potential in its use to finance SMEs financing. The present study explored the prospect of Waqf as an Islamic financial instrument to finance SMEs. It further examined a proposed modified Waqf model and whether it was applicable in Yemen. The study has adopted a qualitative method in the form of semi-structured interviews with 6 experts from Waqf institutions and from SMEs developmental institutions. The experts interviewed are mainly SMEs owners, Waqf directors and beneficiaries specialized in the areas of Waqf and SMEs. The findings of the study indicate that Waqf appeared to be one of the most important instruments in financing such economic activities as it can play a crucial role in financing SMEs. Further, the study significantly contributed by suggesting a new method that will help in financing small and medium enterprises (SMEs) in Yemen. Thus, providing a finance for these firms will help to create more jobs for the low income, which in turn helps in the economic development.

Sources of SMEs Financing and Their Impact on Economic Growth across the European Union: Insights from a Panel Data Study Spanning Sixteen Years

Getting access to sufficient funding is the keystone for the development of any business, but especially for small and medium enterprises (SMEs). These economic entities are crucial players in the global economy since they include almost 90% of companies, provide jobs for nearly 50% of the global workforce, and enhance long-term economic growth. In this context, our study explores important sources concerning the financing of small and medium enterprises and their impact on economic growth during the period 2005–2020 with data from SMEs covering the 28 countries belonging to the European Union. The set of predictors included Strength of legal rights index, Days sales outstanding, Bad debt loss, Interest rate, Bank support, Business angels, Private lenders, and Public support. The set of dependent variables included Cost of loans, Equity fund, GDP growth rate, and Value added growth rate. Our methodological approach was complex, it considered a panel data analysis with a first-difference generalized method of moments estimator and a multiplex time series analysis. The novelty of the study resides in combining the two methods in order to investigate significant drivers of economic growth across the EU. Empirical results showed that economic growth was mainly triggered by predictors such as Interest rate, Business angels, Bank support, and Public support. Moreover, the valuable mathematical insights elicited by the multiplex time series analysis suggested that European economies cooperated intensively through SME activities. Based on our empirical results, national and regional authorities should enact adequate policies to support business endeavors of small and medium enterprises.

Fostering Green Finance for Sustainable Development: A Focus on Textile and Leather Small Medium Enterprises in Pakistan

The green financing landscape in Pakistan is evolving, which signifies the need for a comprehensive gap analysis that examines the present status and constraints in supporting green finance in the country. Textile and leather industries are key sectors in Pakistan’s economy and rely heavily on small and medium enterprises (SMEs). Excessive resource use and inadequate environmental management methods pose a significant danger to the sectors’ long-term viability and account for an extreme relevance to the embracement of the circular economy paradigm. Green finance aims to ensure that economic process, safeguarding the environment, and maintaining environmental integrity all grow together. This research used a literature review and interview-based methodology (in which we interviewed more than 20 people representing SME operators, government officials, and banking staff) to examine SME finance, green banking, and demand and supply side constraints to cleaner/sustainable manufacturing in Pakistan’s leather and textile sectors. The research findings show that policy uncertainty and financial short-termism are economic impediments and obstacles that constitute a path-dependent, lock-in, non-linear mechanism. This study found a lack of tailored business advisory and financing for SMEs to learn about and invest in sustainable consumption and production (SCP). Furthermore, many banks in Pakistan also show a strong commitment to the expansion of the State Bank of Pakistan’s Green Banking Guidelines (GBGs). The results also highlight the high value of government assistance for businesses participating in green initiatives and incentives for banking institutions and private limited companies to support and invest in green practices.