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How are SMEs Financed? Evidence from the Ghanaian Nontraditional Export Sector

Author

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  • Joshua Abor
  • Nicholas Biekpe

Abstract

The study explored the determinants of small and medium-sized nontraditional exporters' choice of type of finance (formal or informal). The empirical results revealed a negative relationship between age and formal finance, suggesting that newer firms depend more on formal finance and less on informal finance. In addition, the study found positive and significant relationships between formal finance and size and growth of the firm. This suggests that larger and high-growth firms require more funds to finance their expansion and growth opportunities and therefore employ formal finance. Finally, the results of the study also indicated that the proportion of formal finance increases with increasing international activities, suggesting that, as firms engage more in international business, they employ more formal finance and less informal finance. Recommendations are made in this regard.

Suggested Citation

  • Joshua Abor & Nicholas Biekpe, 2006. "How are SMEs Financed? Evidence from the Ghanaian Nontraditional Export Sector," Environment and Planning C, , vol. 24(1), pages 71-81, February.
    • Handle: RePEc:sae:envirc:v:24:y:2006:i:1:p:71-81
    DOI: 10.1068/c0454
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    References listed on IDEAS

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    1. Aryeetey, Ernest, 2001. "Priority Research Issues Relating to Regulation and Competition in Ghana," Centre on Regulation and Competition (CRC) Working papers 30619, University of Manchester, Institute for Development Policy and Management (IDPM).
    2. Aleem, Irfan, 1990. "Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan," The World Bank Economic Review, World Bank, vol. 4(3), pages 329-349, September.
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    4. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," The World Bank Economic Review, World Bank, vol. 4(3), pages 251-269, September.
    5. Steel, William F. & Aryeetey, Ernest & Hettige, Hemamala & Nissanke, Machiko, 1997. "Informal financial markets under liberalization in four African countries," World Development, Elsevier, vol. 25(5), pages 817-830, May.
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    Cited by:

    1. Samuel Yaw Akomea & Olav Jull Sørensen & Kweku Amponsah-Efah, 2014. "Export Drivers And Barriers: Evidence From Ghanaian Pharmaceutical Manufacturing Firms," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 8(2), pages 81-96.

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