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Obstacles to bank financing of micro and small enterprises: empirical evidence from the Pacific with some policy implications

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Author Info

  • Parmendra Sharma

    (Department of Accounting, Finance and Economics, Griffith University, Nathan Campus, 170 Kessels Road, Brisbane, Queensland 4111, Australia.)

  • Neelesh Gounder

    (Department of Accounting, Finance and Economics, Griffith University, Nathan Campus, 170 Kessels Road, Brisbane, Queensland 4111, Australia.)

Abstract

In recognizing on one hand the importance of the micro and small enterprise (MSE) sector for the growth and development of economies in the Pacific subregion and on the other, the financing constraints of the sector, the authors surveyed a group of MSEs in a Pacific island country and found that the sector may be particularly constrained by bank interest rates, fees and charges, and collateral requirements. This situation holds implications for policy, and the authors propose an initiative led by the banking sector to improve the situation. Keeping in mind an economy’s specific financial, regulatory, economic and other structures and circumstances, voluntary or mandatory, it seems as if direct or indirect bank involvement appears vital. The implications for economic growth and development are considerable.

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Bibliographic Info

Article provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its journal Asia-Pacific Development Journal.

Volume (Year): 19 (2012)
Issue (Month): 2 (December)
Pages: 49-75

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Handle: RePEc:unt:jnapdj:v:19:y:2012:i:2:p:49-75

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Related research

Keywords: Fiji; Pacic; financing obstacles; micro and small enterprises (MSEs); bank loans;

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References

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  1. Parmendra Sharma & Mark Brimble, . "2012-11 Sustainable development in the small states of the South Pacific: Toward a corporate social responsibility for international banks in small economies," Discussion Papers in Finance finance:201211, Griffith University, Department of Accounting, Finance and Economics.
  2. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  3. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  4. Mark L. Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," NBER Working Papers 2559, National Bureau of Economic Research, Inc.
  5. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
  6. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
  7. Parmendra Sharma & Duc-Tho Nguyen, 2009. "Law and banking development in a South Pacific island economy: The case of Fiji, 1970–2006," Discussion Papers in Economics economics:200902, Griffith University, Department of Accounting, Finance and Economics.
  8. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  9. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
  10. Beck, Thorsten & Klapper, Leora F. & Mendoza, Juan Carlos, 2008. "The typology of partial credit guarantee funds around the world," Policy Research Working Paper Series 4771, The World Bank.
  11. Attila Havas, 2002. "Does Innovation Policy Matter in a Transition Country? – The case of Hungary," IEHAS Discussion Papers 0205, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  12. Ayyagari, M. & Beck, T.H.L. & Demirgüç-Kunt, A., 2007. "Small and medium enterprises across the globe," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4731699, Tilburg University.
  13. Parmendra Sharma & Neelesh Gounder, 2011. "Supply Side Obstacles to Financing the Private Sector: Empirical Evidence from a Small Island Developing State," Discussion Papers in Finance finance:201101, Griffith University, Department of Accounting, Finance and Economics.
  14. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  15. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
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