| || || Kanaenabogi, Lusiana Yaya.|
| || || Small business financing : an analysis of the problems encountered by small businesses as borrowers and banks as lenders |
Author:Kanaenabogi, Lusiana Yaya.
Institution: University of the South Pacific.
Subject: Small business -- Fiji -- Finance, Commercial credit -- Fiji, Commercial loans -- Fiji
Call No.: Pac HG 4027 .7 .K252 2002
Copyright:10-20% of this thesis may be copied without the authors written permission
Abstract: Private sector development has been at the forefront of both developed and developing countries' government policies, whereby the private sector has been recognised widely as the "engine for growth" of an economy. Small and medium enterprises (SMEs) play a dominant role in enhancing private sector development as these enterprises far outweigh the larger companies in terms of numbers and their contribution in terms of employment and income growth further justifies their importance. Hence, governments have and continue to provide the necessary incentives to encourage SME development. Policies on SME development are normally geared towards addressing any anomalies or problem areas identified. It has been established that a well-functioning financial system is an essential element of enhancing access to capital by SMEs. This study focused on the finance problems faced by small businesses. In particular, the study focused on the efficiency of small businesses in accessing finance fiom banks on one hand, and the efficiency of banks in lending to the small business sector in Fiji. The research found that a major factor that was contributing to the inefficiency in credit provided to small businesses was the lack of competition in Fiji's financial system. There is evidence provided in the study that confirms the high liquidity in the banking system, which had existed since the post-Rabuka coup era of 1987. Long credit processing times, poor customer service, ineffective communication channels, high cost of finance are the main factors that the research had identified that contributed to the inefficiency in the financing of small businesses. In order to enhance banks' portfolios of loans to small businesses, and enable small businesses to access bank finance, it is suggested that a joint effort fiom both the parties concerned is required. An effective communication channel or relationship needs to be built between the client and the bank, hence banks need to train their staff in the area of customer service and customer relations. If credit screening, approval and monitoring is to be efficient, then a review of banks' existing credit appraisal techniques is warranted. Bank staff need to be updated on new techniques which has to be modified to suit the local environment and for conditions. Small business entrepreneurs on the other hand, need to be more transparent in their dealings with the banks. Also, government needs to be proactive and continue to fulfill its social role of setting up appropriate infrastructure around the country as a first step before semi-urban and rural communities could fully benefit from economic activity generated by small business development. Also, government should provide incentives to banks to lend to the small business sector. Currently, incentives such as interest subsidies and equity schemes targeted at small . businesses are provided via the Fiji Development Bank (FDB) only. It is suggested that government should provide incentives for commercial banks to lend to the small business sector as well. A tax incentive package has been suggested to be developed to address this.