Financing Obstacles of Bangladeshi Firms: Evidence from Pre-Crisis and Post-Crisis Periods

Access to finance appears to be among the most severe obstacles of the private firms’ growth particularly in developing and less developed countries. Using the micro data over 1,500 enterprises, our study aims to understand the determinants of firm-level access to external finance before and after the global financial crisis 2008-09, and how in general the crisis affected the financing obstacles across the firms in Bangladesh. We find that the small, domestically owned enterprises and firms with small capacity utilization are facing higher financing obstacles than other firms. There is statistically significant increase in financing obstacles of Bangladeshi firms, which can perhaps be explained by the “implicit” or indirect effect of the global financial crisis. We found that the root cause of increase in financing obstacles of Bangladeshi firms in post-crisis period is at least partly related to banks’ credit procedures, which became tighter and more sophisticated.