International Journal of Business and Economics Research
Volume 9, Issue 1, February 2020, Pages: 50-59
Received: Jan. 28, 2020;
Accepted: Feb. 11, 2020;
Published: Feb. 14, 2020
Views 373 Downloads 254
Riad Makdissi, Finance Department, Faculty of Economics and Business Administration, Lebanese University, Tripoli, Lebanon
Jimmy Tannous, Finance Department, Faculty of Economics and Business Administration, Lebanese University, Tripoli, Lebanon
Building the capacity of small and medium-sized enterprises is at the heart of the concerns of modern economies. These types of enterprises are the engine of growth through the creation rate, explained by the low level of investment they require, the level of job creation and the low level of technology that gives them adaptability to Changes. In most developing countries, the problem of funding is common for SMEs. The funding challenge is the main barrier to the growth of SMEs, either due to lack of internal or external funds or due to the difficulty of the processes to be followed for loans’ approval. What is most worrying in Lebanon is that SMEs are fundamentally opportunities to get out of underdevelopment. Today, banks are finding it extremely difficult to finance SMEs in terms of the problems of informalities, weak guarantees and low capitalization. SMEs represent a significant share of banks' customers; that is why banks need to give more attention to the SME sector, seeking to meet at its best their needs and expectations. A survey was carried out on a sample of 110 Lebanese SMEs working in different regions in Lebanon and in various sectors. In addition to the questionnaire, we met qualified bankers from the five top leading banks in Lebanon to highlight lending requirements and procedures, risk assessment and management, approval and rejection decisions related to loans. As a result, limitation of access to funds were mentioned with different ways of solutions, requesting a real support and cooperation between actors: public authorities, central bank, financial institutions and SMEs.
Funding Challenges Facing SMEs’ Growth in Lebanon, International Journal of Business and Economics Research.
Vol. 9, No. 1,
2020, pp. 50-59.
Wolf, M. (2018) The global economic recovery is real but fragile https://www.ft.com/content/532f1142-4163-11e8-93cf-67ac3a6482fd
Karadag, H. (2016) The Role of SMEs and Entrepreneurship on Economic Growth in Emerging Economies within the Post-Crisis Era: an Analysis from Turkey. Journal of Small Business and Entrepreneurship Development. 4. 22-31. 10.15640/jsbed.v4n1a3.
Gancarczyk M. & Zabala-Iturriagagoitia J.(2015). The Process of the Growth of Small and Medium-Sized Enterprises (SMEs). Journal of Entrepreneurship, Management and Innovation. 11. 3-24. 10.7341/20151141.
Atul, R. (2019) Five sources of funds to fast track SME growth https://www.wfglobal.org/five-sources-of-funds-to-fast-track-sme-growth/
The Economist (2019), Dec 12th 2019 Edition, As Lebanon’s economy drowns in debt, Syria’s begins to sink as well. https://www.economist.com/middle-east-and-africa/2019/12/12/as-lebanons-economy-drowns-in-debt-syrias-begins-to-sink-as-well
Sull, D. (1999) Why Good Companies Go Bad, Harvard Business Review, July August issue, https://hbr.org/1999/07/why-good-companies-go-bad
Naimy V. (2011). Financing Problems Faced By The Lebanese SMEs: An Empirical Study. International Business & Economics Research Journal (IBER). 3. 10.19030/iber.v3i1.3652.
Badugu D. & Tripathi V. (2016) Micro-Finance Research Structure Studies: The Microfinance Structures, Microfinance Systems, and Microfinance Institutions, Such as the Social, Economic Empowerment of the Poor International Journal of Business and Applied Social Science Vol. 2, No. 2, February, 2016 - s.ssrn.com/sol3/papers.cfm?abstract_id=2942527
Alessandrini P., Presbitero A. & Zazzaro A. (2009): Banks, distances and firms’ financing constraints. Review of Finance 2009, 13 (2): 261–307.
Campanella, F., Del Giudice, M. & Peruta, (2013) M. R. D. The role of information in the credit relationship. J Innov Entrep 2, 17 (2013). https://doi.org/10.1186/2192-5372-2-17
Demiroglu, Ch., James, C., & Kizilaslan, A. (2012). Bank lending standards and access to lines of credit. Journal of Money, Credit and Banking, 44 (6), 1063-1089.
Schmukler S. & De La Torre A. & Martinez Peria M. (2008). Bank Involvement with SMEs: Beyond Relationship Lending. Journal of Banking & Finance. 34. 2280-2293. 10.1016/j.jbankfin.2010.02.014.
Prager R. & Wolken J. (2008). The Evolving Relationship between Community Banks and Small Businesses: Evidence from the Surveys of Small Business Finances. Finance and Economics Discussion Series. 2008. 10.17016/FEDS.2008.60.
Abdesamed K. & Abd Wahab K. (2014). Financing of small and medium enterprises (SMEs): Determinants of bank loan application. African Journal of Business Management. 8. 717-727. 10.5897/AJBM2013.7222.
Rexhepi Mahmutaj L. (2014). The impact of innovation in SME’s performance. Horizons / Horizonti. 12. 195-206.
Beck T. & Demirguc-Kunt A. & Martinez Peria M. (2008). Bank Financing for SMEs Around the World: Drivers, Obstacles, Business Models, and Lending Practices. The World Bank, Policy Research Working Paper Series.
Hauptmann C. (2017). Corporate Sustainability Performance and Bank Loan Pricing: It Pays to Be Good, but Only When Banks Are Too. Saïd Business School WP 2017-20. http://dx.doi.org/10.2139/ssrn.3067422
Laib, Y. (2013). Determinants of bank financing for small and medium enterprise. Gestion 2000, volume 30 (3), 29-47. doi: 10.3917/g2000.303.0029.
Belás, J.; Mišanková, M.; Schönfeld, J.; Gavurova, B. (2017). Credit risk management: financial safety and sustainability aspects. Journal of Security and Sustainability Issues, 7 (1), 79-93. https://doi.org/10.9770/jssi.2017.7.1(7)
Aven T. (2015). Risk assessment and risk management: Review of recent advances on their foundation. European Journal of Operational Research. 10.1016/j.ejor.2015.12.023.
Al Arabiya, (2019) Lebanon’s Central Bank governor says country is in a ‘dollarized economy’ http://english.alarabiya.net/en/business/economy/2019/11/11/Lebanon-s-Central-Bank-Governor-says-country-is-in-a-dollarized-economy-.html
Tabellini G. (2005). The Role of the State in Economic Development. Kyklos. 58. 283-303. 10.1111/j.0023-5962.2005.00289.x.
Sayeed A. & Abbasi Z. (2015). "The role of central banks in supporting economic growth and creation of productive employment: the case of Pakistan," ILO Working Papers 994874753402676, International Labour Organization
Bittencourt M. & Gupta R. & Stander L. (2014). Tax evasion, financial development and inflation: Theory and empirical evidence. Journal of Banking & Finance. 41. 194–208. 0.1016/j.jbankfin.2014.01.009.
Abdulsaleh, A. M., & Worthington, A. C. (2013). Small and medium-sized enterprises financing: A review of literature. International Journal of Business and Management, (14), 36.
Hamdar B. & Najjar R. & Karameh K. (2017). The Lebanese Perception of the Impact of Small & Medium Enterprises (SMEs) on the National Economy. Journal of Economics and Public Finance. 3. 330. 10.22158/jepf.v3n3p330.
Malaeb O. (2018). Small and Medium Enterprises in Lebanon: Obstacles and Future Perspectives.
Obaji N. & Olaolu D. & Jumbo D. (2019). Entrepreneurial Skills as Catalyst for Sustainable SME Performance. 10.22624/AIMS/iSTEAMS-2019/V16N1P6.
Asrawi, F. (2010). Assesing the business environment for small and medium size enterprise in Lebanon. International Journal of Business and Public Administration. 7. 103-116.
The Dialy Star Lebanon (2019): Kafalat loans drop 85 percent in first six months of 2019 https://www.dailystar.com.lb/Business/Local/2019/Aug-15/489673-kafalat-loans-drop-85-percent-in-first-six-months-of-2019.ashx
Chaaban J. (2019) Why aren't lebanese banks giving back your money http://beirut-today.com/2019/11/08/arent-lebanese-banks-giving-back-money/
Kafalat (2020) Kafalat description http://kafalat.com.lb/about-us
Blom Invest Bank (2019) Value of Kafalat Guarantees https://blog.blominvestbank.com/29313/value-of-kafalat-guarantees-down-by-february-2019-to-2-34m/
Lajis S. (2017) Risk-Sharing Securities: Accelerating Finance for SMEs. Islamic Economic Studies, Vol. 25, No. 2, 2017. Available at SSRN: https://ssrn.com/abstract=3150197
Elbahnasawy N. & Ellis M. & Adom A. (2016). Political Instability and the Informal Economy. World Development. 85. 10.1016/j.worlddev.2016.04.009.
Hadchiti S. (2019) BDL Instructs Banks to raise capital by up to 20% by the end of June 2020 https://blog.blominvestbank.com/31561/bdl-instructs-banks-to-raise-capital-by-up-to-20-by-the-middle-of-2020/
Drucker, P. (2020). Our entrepreneurial economy. Harvard Business Review. 62. 59-64.
Pansiri J. & Temtime Z. (2008). Assessing managerial skills in SMEs for capacity building. Journal of Management Development. 27. 251-260. 10.1108/02621710810849362.
CEIC (2020) Lebanon Bank Lending Rate https://www.ceicdata.com/en/indicator/lebanon/bank-lending-rate
Wlodarczyk B., Szturo M., Ionescu G., Firoiu D., Pirvu R., & al.. (2018) The impact of credit availability on small and medium companies. Entrepreneurship and Sustainability Issues, Entrepreneurship and Sustainability Center, 2018, 5 (3), pp. 565-580. ff10.9770/jesi.2018.5.3(12)ff.ffhal-01773998f
Abbasi W. & Wang Z. & Abbasi D. (2017) Potential Sources of Financing for Small and Medium Enterprises (SMEs) and Role of Government in Supporting SMEs URL: https://doi.org/10.15640/jsbed.v5n2a4
Capasso S. & Jappelli T. (2011). Financial Development and the Underground Economy. Journal of Development Economics. 101. 10.1016/j.jdeveco.2012.10.005.
Beck T. & Demirguc-Kunt A. & Laeven L. & Maksimovic V. (2006). The Determinants of Financing Obstacles. Journal of International Money and Finance. 25. 932-952. 10.1016/j.jimonfin.2006.07.005.
Arzeni, S., Cusmano, L., &Robano, V. (2015). Access to Finance for SMEs and Entrepreneurs: Trends and Policies in OECD Countries. In Public Private Partnerships for Infrastructure and Business Development (pp. 189-220). Palgrave Macmillan US
Beck T. & Demirguc-Kunt A. (2006). Small and Medium-size Enterprises: Access to Finance as a Growth Constraint. Journal of Banking & Finance. 30. 2931-2943. 10.1016/j.jbankfin.2006.05.009.
Shihadeh F., Naradda Gamage S. & Hannoon A. (2019) The causal relationship between SME sustainability and banks’ risk, Economic Research-Ekonomska Istraživanja, 32: 1, 2743-2760, DOI: 10.1080/1331677X.2019.1655465
Amlôt M. (2019) Lebanon’s black market exchange rates soars up to 50 pct over USD peg http://english.alarabiya.net/en/business/economy/2019/11/26/Lebanon-s-black-market-exchange-rates-soars-up-to-50-pct-over-USD-peg.html