Non-Traditional Sources of Financing for Small and Medium Business Enterprises in a Developing Economy Context

55 Pages Posted: 7 Jul 2017

Date Written: August 8, 2016

Abstract

This study examines the role of Non-Bank Financial Services for Small and Medium-Sized Enterprises finance including venture capital, financial leasing, factoring and capital market. It explains the influence of policies, regulatory frameworks and institutional setups along with Egyptian Government's efforts in order to improve SMEs' access to finance as SMEs account for over 90 percent of active enterprises in Egypt and contribute to over 80 percent of GDP and 75 percent of total employment. Yet, they remain at a clear disadvantage vis-à-vis larger businesses.

Assessment of Egyptian NBFS using regulatory framework and standards for companies establishment and their activities founded that financial leasing, factoring and venture capital still have unremarkable role in Egyptian SMEs financing because of the lack of well-functioning and efficient means of registering and enforcing property rights, and limited and poorly available information on potential clients and borrowers.

Through evaluating the performance of listed companies on Nile Stock Exchange using financial ratios, the study suggests a positive relation between their risk ratios and profit ratios. Increase in companies' profit is considered a result of increase in risk, but many SMEs are still worried about the high risk of being listed on Nile Stock Exchange. The study reveals that there are three main pillars which are responsible for enhancing the environment surrounding NBFS. The first pillar is the increasing awareness about non-bank financial companies in Egypt. The second pillar is designing incentives for those companies and the third pillar is the need for capable, skilled and qualified fund management to secure the implementation of successful investment plans.

Keywords: SMEs, Developing Economy, Financing

JEL Classification: A11, E44, G23, O16

Suggested Citation

Farouk Abdel Al, Sherine, Non-Traditional Sources of Financing for Small and Medium Business Enterprises in a Developing Economy Context (August 8, 2016). Journal of Accounting, Ethics and Public Policy, Vol. 17, No. 2, 2016, Available at SSRN: https://ssrn.com/abstract=2997356

Sherine Farouk Abdel Al (Contact Author)

Abu Dhabi University ( email )

Abu Dhabi

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