1.

SME financing in the UK and in China: A comparative perspective

Objectives
The purpose of this research is to outline the preliminary results of an empirical investigation into
access to finance and related issues, as experienced by SME owner/managers in the UK and in China.

Methodology

The authors employed a telephone survey involving a sample of SME owner/managers operating in
the UK and in China. A detailed, semi‐structured questionnaire was administered to a selected sample
of 32 matched SMEs. The survey requested quantitative and qualitative information on sources of
finance, both preferred and actually used by owner/managers, during three stages in their firm's
business cycle: at start up, after two years and over the next five years.

Findings

 Evidence suggests that there are similarities as well as differences between SME financing in
the UK and in China.
 In terms of initial (start‐up) funding, a large proportion of respondents relied exclusively on
financial support from their immediate family.
 After two years in business, respondents exhibited a higher reliance on own savings and the
financial support of bank and other financial institutions.
 At the end of five years of uninterrupted economic activity, most of the owner/managers in the
UK sample relied for their borrowing needs primarily on financial institutions and to a lesser
extent upon their own savings.
 In contrast, owner/managers in China depended mainly upon financial support from their
immediate family and to a lesser extent on financial institutions.

Research limitations/implications
The sample for this research study is both small and selective. It is not meant to represent a random or
statistically significant selection of either the UK or Chinese SME sectors.
2. The perceived impact of the Covid-19 epidemic: evidence from a sample of 4807 SMEs in
Sichuan Province, China

The outbreak of Covid-19 in January, 2020, began in Wuhan and spread across the world. On March11,
the World Health Organization’s (WHO) Director General announced that Covid-19 was a pandemic,
which led to significant economic shutdowns around the world in an effort to contain the virus. In
addition to the loss of life, the Covid-19 pandemic has also severely interrupted trade and supply
chains, which in turn has had a significant effect on the Chinese economy (McCloskey & Heymann,
2020).

Methodology
This study was based on data collected from a questionnaire-based survey and interviews that were
conducted in early February, 2020. To assess the perceived impact of the Covid-19 epidemic on
Chinese SMEs, a survey was conducted on SMEs based in Sichuan Province, China. As Sichuan
Province is quite close to Wuhan, Hubei Province, the epicenter of the epidemic, SMEs in Sichuan
were seriously affected by the epidemic.

Data collection
As the data collection was conducted under epidemic lockdown conditions they had time to answer
the questionnaire and express their perceived impacts of the epidemic. The questionnaire had four
parts: (1) work resumption challenges; (2) the main pressures faced by the enterprises; (3) enterprise
policy requirements; and (4) enterprise characteristics.

Findings

 The delay of work resumption was primarily because most employees were unable to return to
work. Therefore, nearly 30% of the SMEs surveyed had a re-work rate of less than 70%.
 Another reason for the expected low re-work rate was local government regulations on
epidemic control. The human resource shortage and the increase in the human cost caused by
the low employee re-work rate put unprecedented pressure on SME production and operations.
 Modernization and technological advancement must be aided by Government and financial
institution.
 The epidemic led to a significant reduction in market demand, with 35.5% of SMEs and nearly
40% of the SMEs in the primary and tertiary industry sectors citing this as the reason for not
being able to resume work.
 Nearly 30% of primary and secondary industry SMEs were also concerned over raw materials
shortages, and 35.9% of primary industry and 29.5% of new economy SMEs were worried
about their cash flow shortage.
3. Constraints and Challenges of SME Development in the Developing Countries: A Case Study
of India, Pakistan and Bangladesh

Small and medium enterprises (SMEs) have slightly different definitions indifferent countries, but
their role in the economic development is recognized in every developing nation. Not only do SMEs
provide alternative sources of income for those who do not have access to formal sources, but the
contribution of SMEs in total GDP is ever on the increase. The SMEs also serve the domestic demand
of specific products quite effectively.

Objectives

This paper, therefore, aims at providing a comprehensive conclusion about the constraints SMEs in
Bangladesh, India and Pakistan are facing and how they are affecting their market performance. This
conclusion would be derived through firstly, determination of the constraints faced especially by the
Small and Medium Enterprises (SMEs); secondly, analyzing the opinions of the SME owners about
the constraints using simple statistical techniques; and finally, econometric techniques would be used
to find out the impact of the constraints on the sales.

Methodology

Qualitative analysis of constraints faced by different business enterprises is quite common, so the main
analysis of this study would include quantitative analysis. General statistical analysis would reveal the
types of constraints the SMEs in the three countries face while econometric analysis would show how
these constraints affect the sales of the SMEs, where sales represent the performance of the enterprises.
The enterprise surveys data collected from over a thousand firms in each country would be used for
the analysis.

Findings

 One constraint which receives much attention especially in Bangladesh and Pakistan is the lack
of electricity. Both in the general analysis and in the econometric analysis in some cases, lack
of electricity seems to be a very severe obstacle which can hamper the sales of the products as
well.
 Most of the respondents of India, Pakistan and Bangladesh have indicated lack of electricity
to be the main barrier towards successful SME growth. This indicates the shortage of electricity
supply in these parts of the world, indicating that there is a need for a much better supply and
production of electricity for SME development.
 The access to better power supply also needs to be made available for the SMEs in the
countries. Also, tax rates seem to be another obstacle for the SMEs of Bangladesh, as most of
the SME owners surveyed identified it as the most severe problem.
 Many of the Bangladeshi SME owners identified political instability as another serious
problem as well.
 The next constraint which has received much attention throughout this analysis is access to
finance. For SMEs especially, this seems to be a very big problem and is also seen to be
hampering their sales in some cases.
 No doubt, lack of access to finance can pose very severe problems for any business, and SMEs
in South Asia tend to have little or no access to formal sources of finance, be it capital market
or money market. Banks have specialized SME loans, but these are not sufficient.
 The area of SME loans need to be further enhanced, as financing needs are one of the most
important.
 Corruption has been a big problem in South Asia, particularly in the countries under study.
4. Determinants of SMEs Financing Pattern in India-A Rotated Factor Analysis Approach
The financing of small and medium enterprises (SMEs) has attracted much attention in recent years
and has become an important topic for economists and policymakers working on financial and
economic development. In recent times, Small and Medium Enterprises (SMEs) have come into
the forefront of development agenda due to the recognition of their contribution in fostering
growth, sustaining global economic recovery, generating employment and reducing poverty
(CarbóValverde, S., F. Rodríguez-Fernández & G. F. Udell, 2008).

Methodology
The sample size of the present study is 280 SMEs from North India. The study focused on five
large metropolitan cities, New Delhi, Chandigarh, Dehradun, Ludhiana and Patiala as primary
sampling units. Only those units have been considered to exist in each city which seems to disclose
their financial data for the general research studies. The selection of these cities is based on the
basis of concentration of SMEs to these cities.
Research Instrument
The data were secured by means of a ten-page questionnaire. Following the suggestions of many
management research academics, an effort was made to avoid leading and unambiguous questions,
paying particular attention to the wording and the sequence of questions and ensuring a
professional style and format. Information was collected by adopting various kinds of scales such
as binary, ordinal and Likert type.

Suggestions
 It is evident from this study that the SME sector is not adopting any particular finance mix.
It depends on the need and internal factors of an enterprise to choose that finance mix which
suits best to their objectives and provides lowest cost of capital.
 The study further reveals that self-raised finance appears to be most effective in promoting
partnership firms to grow, and commercial bank loan also seems to be more supportive to
partnership firms.
 The study analyses the diversified area of corporate financing patterns adopted by
partnership firms, most of the times partnership firms have used the different source of
finance to managed themselves with that optimum finance mix which deems fit to maintain
consistency in low cost of capital on capital employed.
 To utilize the services of money lenders for the fulfillment of finance requirement is best
suited to partnership firms. Partnership firms are the ones who utilized the services of
commercial banks frequently as compared to the other forms of organizations.
 The commercial banks are providing keen financial assistance to sole proprietorship and
partnership firms. They should also liberalize the terms and conditions for granting the
loans to Private limited company because Private limited companies are not able to get the
appropriate source of finance from commercial banks due to the stringent policies of banks.
Though, the industrial credit carries certain fiscal and banking restrictions, there is a need
to cut short the undue procedural requirements so as to avoid all delay and problems of
Private limited company in obtaining the bank finance.
 Organizations often asked their friends and relatives to finance their business during
periods of poor sales.
5. Wealth Creation through Micro Financing: Evidence from Small Scale Enterprises in Ghana
In the contemporary economy, Small Scale Enterprises (SSEs) in the industrialization process have
gained much prominence in developing countries. SMEs contribute to the economy in terms of
creating employment, income generation and the increase in output of the production sector of the
economy they stimulate. These notable contributions cannot be realized without the government
creating the enabling environment for these SSEs to operate. Hence, government support will serve
as a strong base for industrial development of the nation, making these contributions realizable.

Objectives
 To examine the various sources of finance needed by SSEs for start-up, survival and future
expansion
 To ascertain the current MFI arrangements to finance SSEs toward wealth creation and
poverty reduction”
 To determine the main challenges MFIs, face in advancing credit to SSEs
 To identify new and sustainable ways MFIs can utilize to advance credit to SSEs

Methodology
Survey research design was adopted in this study to assess the impact of microfinance on Small
Scale Enterprises. The study target MFIs and SSEs that operate within Abossey Okai a suburb of
Accra. Abossey Okai was chosen because it is one of the areas with huge commercial activities in
Accra, particularly in the sale of spare parts and allied products. This is attested to by the fact that
the area alone can boast of eleven banks and five MFIs. There is a population of 600 SSEs in
Abossey Okai, which is made up of spare parts operators, food vendors, kiosk operators among
others. Out of this number, questionnaires were sent to 85. This means that, the researcher selected
SSEs that were willing to be part of the study.

Findings
 On the first objective, which states “To examine the various sources of finance needed by
SSEs for start-up, survival and future expansion”, it can be concluded that personal sources,
funds from family and friends are the main sources of funding for SSE start-up and
expansion. Other sources such as commercial and microloans contribute marginally to
start-up and growth relative to these sources. This is more so in the case of commercial
bank loans than microloans.
 On the second objective, which states “To ascertain the current MFI arrangements to
finance SSEs toward wealth creation and poverty reduction” it was found that these
arrangements cover susu loans, commercial loans, short term credit, fixed deposit, super-
golden susu loans, fast-track loans, travel loans, group loans, clearance loans and consumer
loans. However, only four of these products, ie, susu loans, group loans, fixed deposits and
fast-track loans were readily mentioned by the SSE operators, indicating that the other
products might not have been marketed to them.
 On the third objective, which states “To determine the main challenges MFIs face in
advancing credit to SSEs” it can be concluded that the major challenge MFIs face in
advancing credit to SSEs pertains mainly to default and their inability to recover loans due
to loan diversion, information asymmetry, fronting for other businessmen, giving fake
collaterals, frequent fire outbreaks and revenue leakage due to financial illiteracy.
 On the fourth objective, which states “To identify new and sustainable ways MFIs can
utilize to advance credit to SSEs” it can be concluded that the MFIs have not designed new
products, besides what they are already running, despite claiming that there is the existence
of such innovations. In other words, respondents could not mention many products that are
in the offing.