Credit rationing’s determinants of Small and Medium Enterprises (SMEs) in Chittagong, Bangladesh

Abstract

Small and medium enterprises (SMEs) contribute immensely to Gross Domestic Product (GDP) and they have a significant influence in growth of economy. However, SMEs are constrained in their access to formal credit as financial institutions fail to grant credit due to information asymmetry. This study investigates the credit rationing of SMEs in the city of Chittagong. A sample of 200 firms was selected and analyzed using descriptive statistics and multinomial logit regression. The result suggests that 89 % of the firms obtained loan from microfinance institutions (MFIs). The firms that obtained their loan from banks are 60 % and 48 % of them received the less amount of credit than they desired. In our study, credit rationing was categorized in four types, 24 % of them were unconstrained non-borrowers, 28 % unconstrained borrowers, 19 % quantity rationed and 29 % risk rationed borrowers. Econometrics result shows that education, firm age, marital status, initial outlay, number of employees, and education do not have any impact on credit rationing. On the contrary, age and gender of the owners of the firms, heads of household, status of the living and work place and household size have impact on credit rationing.

Factores determinantes que explican el acceso a la financiación bancaria: un estudio empírico en empresas peruanas

“…Diversas investigaciones relacionan el tamaño y la edad de la empresa para explicar el racionamiento de crédito que padecen las pymes (Hoque, Sultana, & Thalil, 2016;McCarthy et al, 2013;Freel, Carter, Tagg, & Mason, 2012;Ange-lini, Salvo, & Ferri, 1998). Así, es ampliamente aceptado que las pequeñas empresas afrontan mayores dificultades que las grandes empresas en el mercado de crédito.…”

“…Diversos estudios han tratado de encontrar relaciones entre el racionamiento de crédito a las empresas y la edad, el género y el nivel de instrucción del gerente (Hoque et al, 2016;Freel et al, 2012). En concreto, Hoque et al(2016) hallan que la edad y el sexo del dueño principal de la empresa tienen un impacto significativo sobre el racionamiento de crédito.…”

“…En concreto, Hoque et al(2016) hallan que la edad y el sexo del dueño principal de la empresa tienen un impacto significativo sobre el racionamiento de crédito. Robson, Akuetteh, Stone, Westhead, & Wright (2013) concluyen que la experiencia del empresario reduce la probabilidad de que sus créditos sean racionados.…”

“…El mayor nivel educativo, hace que los empresarios tengan mayores conocimientos de carácter técnico, lo que les da mayor capacidad para poder afrontar de una forma más satisfactoria las limitaciones financieras de las empresas, lo cual a su vez tiene un impacto positivo en la reducción de restricciones de financiación. La formación del empresario puede ayudarlo a formular buenos proyectos y a mejorar sus habilidades con el mercado financiero, por lo que las restricciones de crédito podrían ser de un bajo nivel (Hoque et al, 2016).…”

Collateral and SME financing in Bangladesh: an analysis across bank size and bank ownership types

“…Beck et al (2006) use the World Business Environment Survey (WBES) and fi nd that collateral requirements are the third most important diffi culty in fi nancing for SMEs while high interest rates and lack of long-term loans are the fi rst and second ones. In the context of Bangladesh, Hoque et al (2016) found that 44.5% of their respondents did not apply for bank loans due to being unable to pledge collateral and therefore, they had a fear to get rejection on a loan application. stated that the main reason why banks ask for collateral while lending to SMEs is mainly due to the ex-ante information gap between lenders and borrowers and if the information gap can be shortened it will also reduce the collateral requirement for SMEs .…”