There is no doubt that access to finance is of crucial importance for the ongoing and sustainable growth and profitability of small and medium enterprises sector (SMEs) through its role in facilitating the creation of new businesses and nurturing the innovation process as well as promoting the growth and development of existing businesses, which in turn, boost national economic growth. The main motive of this paper is that SMEs significantly differ from large firms in terms of their financial decisions and behaviour. Hence, the purpose of this paper is to review the literature on the various financing sources of SMEs taking into account the effects of both SME characteristics and those of the owner-managers on SME financial behaviour.

This paper investigates the criteria used by loan officers at Bank Al Tanmeya when assessing SMEs loan applications and the most frequent reasons that lead to turn these applications down. To achieve this, a qualitative research method was adopted. The data were gathered using semi-structured interviews with loan officers at the bank. The results show that the ability to provide collateral and good business plans alongside the profitability of the business are very important. Other criteria such as the applicants' credit history, their business experience and the type of business activity are also important. Further, the results indicate that SMEs loan applications are generally rejected on the ground that they are not robust enough from the bankers' viewpoint. While lack of collateral is the most frequent reason, other reasons include weaknesses in business plan, concerns about the loan repayment, and doubts about the viability of business ventures. These results have the ability to increase awareness and broaden understanding of the factors that may affect SMEs access to bank loans from a supply side perspective.

In most countries, especially the developing ones, SMEs have a dynamic role as engines through which the growth objectives can be accomplished. This is very true in the case of Libya where the economy has been over-reliant on oil and gas as well as inefficient public sector. Unfortunately, SMEs in Libya are not playing their expected role as access to finance remains to be a formidable challenge. While banks remain the major external financier, if not the only one, many studies found that Libyans in general avoid dealing with conventional banks mainly due to religious beliefs. However, the recent introduction of Islamic banking and finance in the country could be a game changer. As such, this paper attempts to assess the opportunities for SMEs development in Libya following the recent introduction of Islamic finance. The study is exploratory; therefore the relevant literature is sourced and reviewed. The review shows that there is a strong demand for Islamic finance products from Libyan businesses including SMEs. Coupled with a strong enabling environment in which political stability and regulatory clarity are maintained Islamic finance is viable and has the ability to significantly contribute to the development of SMEs sector.

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