A systematic literature review on SME financing: Trends and future directions

Rao‐Melacini, Purnima; Kumar, Satish; Chavan, Meena; Lim, Weng Marc

doi:10.1080/00472778.2021.1955123

Cited by 116 publications

(79 citation statements)

References 110 publications

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“…According to Visser (2019), the funding gap in South Africa is estimated to be between R86 billion and R346bn. Although funding is available in South Africa (Bowmaker-Falconer & Herrington 2020;Visser 2019), SMEs fail to meet the funder's requirements given their inability to prove creditworthiness, present collateral and highfailure rate associated with start-up infancy stage (Rao et al 2021). The high prevalence of information asymmetry-related problems in the SMEs exacerbates the situation (Erdogan 2019).…”

Section: The Funding Gapmentioning

confidence: 99%

“…The high prevalence of information asymmetry-related problems in the SMEs exacerbates the situation (Erdogan 2019). Existing empirical evidence proves the existence of correlation between lack of access to external finance and lack of SME growth and development (Rao et al 2021).…”

Section: The Funding Gapmentioning

confidence: 99%

“…The South African society has a historical, economical and social character that needs entrepreneurship's contribution in reducing the high unemployment rate and fostering social cohesion. Small and medium enterprises have an edge in employment creation when compared to large firms (Rao et al 2021).…”

Section: Entrepreneurship In South Africamentioning

confidence: 99%

“…Commercial banks: Sourcing external finance from the banks remains the most viable option for SMEs in both developed and developing economies (Rao et al 2021). Dealings between private banks and SMEs confirm that SMEs are considered a riskier investment asset class (Beck 2013).…”

Section: Access To Fundingmentioning

confidence: 99%

“…Equity financing functions by way of exchanging capital with equity (shareholding) for investors (Rao et al 2021). Equity investor option does not impose monthly loan repayment obligation as it would be expected in the bank loan scenario.…”

Section: Public Fundingmentioning

confidence: 99%

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Innovative mechanisms to improve access to funding for the black-owned small and medium enterprises in South Africa

Baloyi

Khanyile

2022

SAJESBM

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Background: Small and medium enterprises (SMEs) in South Africa and globally struggle to gain access to external funding. The current lending instruments used by the banks are more suitable for large enterprises than for SMEs. Financially constrained SMEs are less likely to contribute to economic growth and job creation. Small and medium enterprises in South Africa are expected to create 90% of the 11 million jobs as per the National Development Plan.Aim: The objective of this study was to deliver innovatively designed funding mechanisms through which improved access to external funding can be achieved.Setting: Participating stakeholders in this research were entrepreneurs and suppliers of funding, policymakers and experts.Methods: The purposive sampling method was used in this study where 24 in-depth interviews were conducted, and 160 survey questionnaires were recorded. Mixed-methods approach was used to incorporate both qualitative and quantitative techniques. A literature review related to entrepreneurship and capital structure theories was conducted. Thematic and statistical graphical data analyses were applied in both the qualitative and quantitative data, respectively.Results: The critical findings of this study are the blended SME funding model and the SME risk reduction model. Designing the lending instruments in a way that blends both private and public financial resources increases the risk appetite on the side of the private lending institutions.Conclusion: The proposed model requires more improved public–private partnerships. Furthermore, the findings include the need for supportive regulatory framework and embracing alternative emerging technology-enabled funding options.

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Section: The Funding Gapmentioning

confidence: 99%

Section: The Funding Gapmentioning

confidence: 99%

Section: Entrepreneurship In South Africamentioning

confidence: 99%

Section: Access To Fundingmentioning

confidence: 99%

Section: Public Fundingmentioning

confidence: 99%

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Innovative mechanisms to improve access to funding for the black-owned small and medium enterprises in South Africa

Baloyi

Khanyile

2022

SAJESBM

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How bank‐specific factors affect access to financing for small and medium enterprises: Evidence from an emerging economy

Khan

2023

Int. J Fin Econ

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In this study, hypotheses were tested regarding the impact of bank size, ownership structure, branch location, and distress condition on access to financing for small and medium‐sized enterprises (SMEs). The empirical analysis was conducted using data obtained from scheduled banks of Bangladesh (banks listed under the Bangladesh Bank Order, 1972) and SMEs operating in Bangladesh. The results suggest that SMEs in Bangladesh have greater access to financing when their application for financing is made to a small bank, a domestic private bank, or a rural branch. Bank distress appears to have a negative impact on the provision of financing to SMEs. SME access to financing is also lower if the application is made to a state‐owned bank or a foreign bank.

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Entrepreneur characteristics and financing patterns in SMES of MENA countries: Overcoming the burdens of liability of newness

Lassoued,

Khanchel,

Fakhfakh

et al. 2023

J of Intl Development

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This study examines the impact of entrepreneur attributes on financing channels of small and medium‐sized enterprises (SMEs) as well as the moderating role of firm age on this relationship. It examines a comprehensive dataset of 4139 firm‐year observations operating in the Middle East and North Africa (MENA) region observed over the 2013–2019 period. The results are four‐fold. First, our overall findings reveal that experienced entrepreneurs tend to use internal funds. Second, the university education of entrepreneurs positively correlates with debt financing. Third, female entrepreneurs are more eager to use internal funds and less debt. Fourth, firm age is found to moderate these relationships. Indeed, in young SMEs, experienced entrepreneurs are shown to rely on debt, graduated entrepreneurs on internal funds, and in older SMEs, female entrepreneurs use debt. Our results bear on the proposals of upper echelons and organizational lifecycle theories.

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A systematic literature review on SME financing: Trends and future directions

Cited by 116 publications

References 110 publications

Innovative mechanisms to improve access to funding for the black-owned small and medium enterprises in South Africa

Innovative mechanisms to improve access to funding for the black-owned small and medium enterprises in South Africa

How bank‐specific factors affect access to financing for small and medium enterprises: Evidence from an emerging economy

Entrepreneur characteristics and financing patterns in SMES of MENA countries: Overcoming the burdens of liability of newness

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