ABSTRACT
Obtaining appropriate finance is a fundamental issue for all businesses whatever their location and whether they are opportunity- or necessity-based. Indeed, an almost ubiquitous finding of business surveys which explore the barriers to startup and growth is the importance of either shortages or the cost of finance (Fraser, 2005, Pillai and Amma, 2005). In more developed economies with well-developed financial and legal institutions, attention has often focused on funding ‘gaps’ although attention has also focused on discouraged borrowers (Kon and Storey, 2003) and the lack of investment readiness of some firms. In less developed and transition economies, funding issues may also reflect weaknesses on both the supply and demand sides (Levitsky and Prasad, 1989, Duan et al., 2009). Supply-side weaknesses may reflect a simple lack of supply of finance due to a paucity of lending institutions, or a preference for lending to larger borrowers. Demand-side weaknesses may reflect a lack of collateral or the higher risks entrepreneurs pose to lenders. In either case, policy initiatives have developed to counter these issues focused often on reducing the risk of lending and increasing the supply of loan capital to entrepreneurs and SMEs through credit guarantee schemes.
