Impact of Financial Constraints on the Performance of SMEs - A Study of Sindh Province

Abstract

SMEs have been efficiently used as the vehicles for promoting innovation, productivity, and the competitiveness of a country's national economy. Across the globe, SMEs have been playing a distinctive role in achieving the socioeconomic objectives such as employment generation, poverty reduction, equalizing the distribution of national wealth, fostering innovation, and nurturing institutional competitiveness. The main objective of this study is to empirically examine the extent to which financial constraints hamper the growth of SMEs in Sindh, Pakistan. To collect the primary data, survey questionnaires were distributed to 100 SMEs from different economic sectors and registered in the Chamber of Commerce Offices in Sindh. Seven (7) critical financial constraints to SMEs were determined through the literature and included in the questionnaire. The data were analyzed through descriptive analysis and correlation techniques. The results show that SMEs in Pakistan are severely constrained by financing, particularly external equity. Financial ecosystem for SMEs in Pakistan is not friendly and one-size fits all rules and regulations may not suffice the financing needs of SMEs in Pakistan. It has been observed that the institutional weaknesses and market failures exacerbate the financial constraints of SMEs. The government, exclusively, should develop specialized banks and funds to cater to the financing needs of SMEs in their various stages of the business cycle. Furthermore, the Credit Guarantee Schemes (CGS) should also be launched to share the risk of Financial Institutions for lending to the SMEs.

Thriving in Constraints: Exploring the Interplay of Human Capital, Social Capital, and Financial Constraints in Frugal Innovation within Family Businesses

“…Third, financial constraints are a first-order construct of which questions were adapted from Shaikh & Khoso (2019). There are seven questions focusing on internal financing obstructions, external financing, stringent collaterals, inadequate facilities, financial institutions' constraints, cost of borrowing, and procedure of obtaining loans.…”

Impact of Gross Domestic Product on Small & Medium Enterprises

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“…In an examination directed by Beck and Demirguc-Kunt ( 2006 (1999)(2000) led in 80 nations with an example size of 10,000 firms indicated that the organizations which announced access to financing as an extreme limitation has encountered a moderate yield development (Beck, Demirguc-Kunt, and Levine, 2005). A lot of the observational writing on the investigation of financing requirements has inferred that SMEs face financing hindrances as a result of organization issue and lopsided data among banks and the little firms (Blundell, Dearden, and Meghir, 1996;Bond, Harhoff, and Van Reenen, 1999;Shaikh & Khoso, 2019a)…”

Determinants of small and medium enterprises with the interaction effect of managerial activities

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