Small and Medium Enterprises (SMEs) Financing Practice and Accessing Bank Loan Issues -The Case of Libya

Authors: Kalsom Abd Wahab, Khalid Hassan Abdesamed

Abstract:

The purpose of this paper is to examine the financing practices of SMEs in Libya in two different phases of business life cycle: start-up and matured stages. Moreover, SMEs- accessing bank loan issues is also identified. The study was conducted by taking into account the aspect of demand. The findings are based on a sample of 76 SMEs in Libya through the adoption of questionnaires. The results have pinpointed several things- evidently, SMEs use informal financing sources which prefer personal savings; SME owners are willing to apply for bank loan, that the most pressing problem has been identified, not to apply bank loan is loan with interest (religion factor).

Keywords: SMEs, Formal Finance (loan from bank), Informal Finance, Loan with interest (religion factor), Libya.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1084698

References:

[1] Beck, Thorsten, Levine R. and Loayza N, "Finance and the sources of growth," Financial Economics. J., vol. 58, pp. 261-300, 2000.
[2] Beck, Thorsten, and Asli Demirguc-Kunt. Ross Levine, "Manufactured in The Netherlands SMEs, Growth, and Poverty: Cross-Country Evidence," Economic Growth. J., vol. 10, pp. 199-229, 2005.
[3] Kerr, William R. and Ramana Nand. "Democratizing entry: Banking Deregulations, financing constraints, and entrepreneurship" Financial Economics. J., vol. 94, pp. 124 -149, 2009.
[4] Davila, Antonio. George Foster and Mahendra Gupta, "Venture capital financing and the growth of startup firms" Business Venturing. J., vol. 18, pp. 689 -708, 2003.
[5] Smolarski, Jan and Can Kut, "The impact of venture capital financing method on SME performance and internationalization," International Entrepreneurship and Management. J., vol. 7, pp. 39 -55, 2011.
[6] Tsoukas, Serafeim, "Firm survival and financial development: Evidence from a panel of emerging Asian economies," Banking & Finance. J., vol. 35, pp. 1736-1752, 2011.
[7] Beck, Thorsten and Asli Demirguc-Kunt, "Small and medium - size enterprises: Access to finance as a growth constraint," Banking and finance. J., vol. 30, pp. 2931-2943, 2006.
[8] Deakins, David. David North, Rob Baldock and Geoff Whittam, "SMEs Access to finance: Is still a debt finance gap?," Institute for Small business and Entrepreneurship.J.,vol.3.pp.11-1,2008.
[9] Riding, Allan. Barbara J., Orser. Martine Spence and Brad Belanger, "Financing new venture exporters," Small Business Economics. J., vol. 38, pp.147-163, 2010.
[10] Falah. K. Ali, " An Analysis Study to the problems of financing small projects with reference to experience of Libyan Development Bank in Darna city ,"Munich .J.,2006. Available http://mpra.ub.
[11] Kuehi, Charles R and Peggy A, Lambing, Small Business: Planning and management.1990 2 (ed).
[12] Small Business Administration (n. d.). Financing for the small business, financial management series http: //www. sba.gov/idc/groups/public/documents/sba homepage/pub_fml4. Pdf.
[13] Kang, Abdw .k, "strategy of finance and investment in small enterprises: study applied on city of Halab" (In) Proceedings of the conference organized by Valdivia University, 2007. Available at http://iefpedia.com/arab/?p.
[14] Bovee, Courtand L. John V. Thill, Marian Burk Wood, and George P. Dovel. "Management", 2003.
[15] Hasan, Mahrous Ahmed, "The Problems of Financing Small Business in Egypt" (PhD Thesis), University of Durham, 1990.
[16] Rozali, Mohd Badri., Hasniza Mohd Taib., Fauziah A. Latif and Mahfuzah salim, "Small firms demand for finance in Malaysia," Universiti Utara Malaysia. Available at bai2006.atisr.org/CD/Papers/2006bai6119.doc.
[17] Omar, Marzunisham, "Enhancing Access to Financing by Small &Medium Enterprises in Malaysia," (In) Proceedings at 2nd International Conference on financial System: Competitiveness of the Financial Sector Tokyo.15 December,2006. Available at http://www.fas.go.jp/frtc/20061205/09.pdf.
[18] Janne, Peltoniemi, "The Benefits of Relationship Banking: Evidence from Small Business Financing in Finland," Finance Service Research. J., vol. 31, pp. 153-171, 2007.
[19] Riding, Allan. Barbara J., Orser. Martine Spence and Brad Belanger, "Financing new venture exporters," Small Business Economics. J., DOI10.1007/s11187-009-9259-6, 2010.
[20] Saridakis, George. Kevin Mole and David J. Storey, "New Small firm survival in England," Empirica. J., vol. 35, pp. 25-39, 2008.
[21] Wattanapruttipaiasan, Thitapha, "Four proposals for improved financing of SME development in Asian," (In) Proceedings working paper, in Asian development review, vol. 20, 2003.
[22] Romano, Claudio A., Ceorge A. Tanewski and Kosmas X. smyrnios, "Capital structure decision making: A model for family business," Business venturing. J., vol. 16, pp. 285-310, 2002.
[23] Omar, Marzunisham, "Enhancing Access to Financing by Small &Medium Enterprises in Malaysia," (In) Proceedings at 2nd International Conference on financial System: Competitiveness of the Financial Sector Tokyo.15 December,2006. Available at http://www.fas.go.jp/frtc/20061205/09.pdf
[24] Irwin, David and M. Scott, "Barriers to rising bank finance faced by SMEs," International Entrepreneurial Behaviour & Research .J., vol. 16, pp .245 - 259, 2010.
[25] World Bank, "Finance for all? Policies and Pitfalls in Expanding Access" World Bank Policy Research Report, 2008. Available at http://siterecouces.worldbank.org .
[26] Annual the report of the National Programme for small and medium enterprises in Libya 2010. Unpublished.
[27] Almahrouq, Maher. H, "The Small Firm Lone Guarantee Scheme in Jordan: An Empirical Investigation (PhD Thesis) University Of Newcastle, 2003.
[28] Hasan, Mahrous Ahmed, "The Problems of Financing Small Business in Egypt" (PhD Thesis), University of Durham, 1990.
[29] Cassar, Gavin, "The financing of business start-ups," Business Venturing. J., vol. 19 .pp. 261-283, 2004.
[30] Binks, M. Ennew, C. and Reed, G, "Information Asymmetries and the Provision of Finance to Small Firms" International Small Business. J., vol. 11. pp. 35-46, 1992.
[31] Pissarides, Francesca, Miroslav Singer, and Jan Svejnar, "Objectives and Constraints of Entrepreneurs: Evidence from Small and Medium Size Enterprises in Russia and Bulgaria," Comparative Economics .J., vol . 31, pp. 503-531, 2003.
[32] C├ínovas, Ginés Hern├índez and Pedro Mart├¡nez-Solano, "Relationship lending and SME financing in the continental European bank-based system," Small Business Economics. J., vol. pp, 465 - 482, 2010.
[33] C├ínovas, Ginés Hern├índez and Pedro Mart├¡nez-Solano, "Relationship lending and SME financing in the continental European bank-based system," Small Business Economics. J., vol .34, pp.465- 48, 2010.
[34] Bhaird, Ciara n mac and Brian Lucey, "Determinants of capital structure in Irish SMEs". Small Business Economics. J., vol. 35, pp. 357-375, 2010.
[35] Rozali, Mohd Badri., Hasniza Mohd Taib., Fauziah A. Latif and Mahfuzah salim, "Small firms demand for finance in Malaysia," Universiti Utara Malaysia. Available at bai2006.atisr.org/CD/Papers/2006bai6119.doc.
[36] Falah. K. Ali, " An Analysis Study to the problems of financing small projects with reference to experience of Libyan Development Bank in Darna city ,"Munich .J.,2006. Available http://mpra.ub.
[37] Irwin, David and M. Scott, "Barriers to rising bank finance faced by SMEs," International Entrepreneurial Behaviour & Research .J,. vol. 16, pp .245 - 259, 2010.
[38] Bhaird, Ciara n mac and Brian Lucey, "Determinants of capital structure in Irish SMEs". Small Business Economics. J., vol. 35, pp. 357-375, 2010.
[39] Storey, D.J., "Understanding the small business sector". London, USA and Canada: Routledge.1994.
[40] Hasan, Mahrous Ahmed, "The Problems of Financing Small Business in Egypt" (PhD Thesis), University of Durham, 1990.
[41] Almahrouq, Maher. H, "The Small Firm Lone Guarantee Scheme in Jordan: An Empirical Investigation (PhD Thesis) University Of Newcastle.2003.
[42] World Bank, "Finance for all? Policies and Pitfalls in Expanding Access" World Bank Policy Research Report. 2008. Available at http://siterecouces.worldbank.org .
[43] Annual the report of the National Programme for small and medium enterprises in Libya 2010. Unpublished.