FACTORS AFFECTING ACCESS TO FINANCE OF SMALL AND MEDIUM ENTERPRISES (SMEs) OF BANGLADESH

Abstract

This study addresses the issues that impede SMEs of Bangladesh in obtaining finance from the financial institutions. To accomplish our goals we collected data from a sample of 86 SMEs to investigate the problems and suggest policy recommendations. We collected data by directly interviewing the respondents with the help of a questionnaire for self-guidance. We also used secondary data for this purpose. Findings revealed that the size and age of the firms, education and skills of the owners, and unfavorable credit terms such as high interest rates, lack of collateral security, corruption by bank officials etc. are some of the biggest hurdles that SMEs in Bangladesh face in getting loans from financial institutions. The limitation is that the study has included one city in its sample population. A nationwide study where there are SMEs in large numbers could lead to better results for this kind of study. The implication is that small businesses, as opposed to the larger ones, face funding obstacles and are discriminated by the financial institutions in granting loans. Built on current literatures and research on SMEs, specially in regard to their ability to access finance, this study captures the information relating to problems identified by SMEs in having access to finance and suggesting the ways and means needed for strengthening the SMEs access to finance for their expansion and growth.

Keywords

• small and medium-sized enterprises
• finance
• collateral
• entrepreneurial skills
• corruption
• bureaucracy.