...Vol. 2 No. 7 Scope and Strategies in Financing of SMEs by Banks Onkar Chand Rana, Asst. Professor, Sri Sai University, Palampur, H.P. Professor K. Ravi Sankar, IGNOU, New Delhi Abstract Scope and Strategies in Financing of Small and Medium Enterprises by Banks- a case study of State Bank of India at Pathankot, was conducted with a view to examine the problems of SMEs of Pathankot area, examine the scope of further financing SMEs by Banks in Pathankot area and devise requisite strategies for financing of SMEs by Banks in Pathankot area and thereby increase their SME loans portfolio which would help the banks and ultimately the country to achieve the projections as per Indian vision 2020- a document by the Planning Commission according to which the Industry share in GDP which is 26% at present is projected at 34% and the service sector share which is at present 46%, is projected at 60% by the year 2020. On the analysis of the secondary data, which was obtained from Banks Performa Reports, Annual Returns and Annual Credit Plans, it was observed that huge scope exists for the banks in Pathankot centre for intensive financing of SMEs which is observed from the data that at present CD Ratio at the centre is 58.71% (below the prescribed national average of minimum 60%) and the share of SMEs to total advances being 31.58%, which need to be increased to at least 50%. The primary study was conducted on the basis of random samples of five hundred micro, small and medium enterprises...
Words: 8074 - Pages: 33
...companies (SMEs) play an important role in most countries over the world. It has been a vital policy issue for governments to deal with these companies to increase development of economy. The financial difficulties faced by SMEs have restricted SMEs’ survival and development. SMEs exist a series of financial problems. This article focus on how to obtain effective financial source and dealing with the difficulties in raising finance for Chinese SMEs. Key words: Small and medium-sized Companies (SMEs); Financing. Introduction SMEs are the necessary power for economy growth. As Beck and Demirguc-Kunt (2005, p2932) said that there was robust partial connection between the importance of SMEs in manufacturing and economic development. According to Ayyagari (2007), formal SMEs contribute to 50% of GDP on average in developing countries and World Bank views SMEs as a core element in developing economy and employment. In China, the number of registered SMEs exceeds 40 million, accounting for more than 99 per cent of enterprises. As a private sector, SME has become a driving force since the economy began to recover in 1978 (Fan, 2007). And it makes up more than 70 percept of the GDP. According to Brookfield, SMEs can be regarded as unquoted small businesses and a medium for self-employment of the owners that are organized by few individuals, typically a family group and act as a medium for self-employment of the owners. In China, the government gives a definition about SMEs in the SME Promotion...
Words: 2540 - Pages: 11
...Report On Contribution of Banks on SME Sector in Bangladesh 1 LETTER OF TRANSMITTAL 2 ACKNOWLEDGEMENT 3 Table of contents No: Page: Chapter One Introduction 1.1 Introduction 1 1.2 Background of the study 2 1.3 Problem statement 3 1.4 Objectives of the study 3 1.5 Scope of the study 4 Chapter Two Methodology 2.1 Data requirement 5 2.2 Study area 6 2.3 Sample size selection 6 2.4 Questionnaire development 7 2.5 Literature review 8 2.6 Small enterprise 10 2.7 Medium enterprise 10 2.8 SME financing by Banks in Bangladesh 11 Chapter Three Results 3.1 Contribution of SMEs in the economy 13 3.2 Current status of SME financing by Bangladesh Bank 14 4 3.3 Loan documents needed for SME financing by banks 14 3.4 About the sample banks 15 3.5 Portfolio size of different banks in SME sector 17 3.6 Target given by Bangladesh Bank 19 3.7 Survey analysis 24 3.8 Findings 27 Chapter Four 29 Limitation Chapter Five 30 Conclusions and recommendation Appended Parts Data collection instruments Details of entrepreneurs Bibliography List of Tables 3.1 Portfolio size of Different Banks in SME sector 17 3.2 Distribution of entrepreneurs whether or not they take bank loan 24 to operate their SME business. 3.3 Distribution of entrepreneurs...
Words: 10459 - Pages: 42
...Financing Firms in India Franklin Allen Finance Department The Wharton School University of Pennsylvania allenf@wharton.upenn.edu Rajesh Chakrabarti Finance Area Indian School of Business Hyderabad 500 032, India rajesh_chakrabarti@isb.edu Jun “QJ” Qian Finance Department Carroll School of Management Boston College qianju@bc.edu Sankar De Centre for Analytical Finance Indian School of Business Hyderabad 500 032, India Sankar_De@isb.edu Meijun Qian Finance Department NUS Business School National University of Singapore bizqmj@nus.edu.sg Last Revised: December 2011 Forthcoming, Journal of Financial Intermediation Abstract With extensive cross-country datasets and India firm samples, as well as our own surveys of small and medium firms, we examine the legal and business environments, financing channels, and growth patterns of different types of firms in India. Despite the English common-law origin and a British-style judicial system, Indian firms face weak investor protection in practice and poor institutions characterized by corruption and inefficiency. Alternative finance, including financing from all non-bank, non-market sources, and generally backed by non-legal mechanisms, constitutes the most important form of external finance. Bank loans provide the second most important external financing source. Firms with access to bank or market finance are not associated with higher growth rates. Our results indicate that bank and market...
Words: 23426 - Pages: 94
...Handbook on Islamic SME Financing Islamic Banking Department State Bank of Pakistan The Team Name Designation Contact Mr. Pervez Said Director Pervez.Said@sbp.org.pk Mr. Imran Ahmad Senior Joint Director Imran.Ahmad@sbp.org.pk Ms. Fatima Javaid Regulating Officer Fatima.Javaid@sbp.org.pk TABLE OF CONTENTS S.No 1 2 3 4 5 6 Background Introduction Prudential regulations for SME Financing Importance in light of Strategic Plan for Islamic Banking Industry Scope of Islamic Banking over Conventional Banking in current Financial crises Proposed Products for Islamic SME Financing Need for Risk Management 7 Murabaha Financing Transaction Structure Accounting Treatment Risk Management 12 12 15 15 18 20 18 21 24 25 26 27 29 30 31 31 33 34 35 35 38 39 40 PARTICULARS Page No. 1 2 4 9 11 8 Ijarah Based Financing Basic Rules Accounting Treatment Risk Management 9 Salam Based Financing Basic Rules Accounting Treatment Risk Management 10 Diminishing Musharaka Basic Transaction Structure Accounting Treatment Risk Management 11 Istisna Financing Flow of Transaction Accounting Treatment Risk Management 12 Project Financing Handbook On Islamic SME Financing BACKGROUND One of the important characteristics of a flourishing and growing economy is a blooming SMEs sector. Small and medium enterprises play an important role in the development of a country. SMEs contribute to economic growth in various ways like...
Words: 11186 - Pages: 45
...School of Business United International University FINANCING OPTIONS FOR SMALL AND MEDIUM ENTERPRISES (SMES): EXPLORING NON-BANK FINANCIAL INSTITUTIONS AS AN ALTERNATIVE MEANS OF FINANCING THE CASE OF BANGLADESH Submitted To Submitted By James Bakul Sarkar Md. Moniruzzaman Assistant Professor ID: 111091381 School of Business Bachelor of Business Administration Bachelor’s Degree Thesis in Business Administration ACRONYMS SMES SMALL AND MEDIUM-SIZED ENTERPRISES NBFI NON BANK FINANCIAL INSTITUTIONS. FFS FORMAL FINANCIAL SYSTEM IFS INFORMAL FINANCIAL SYSTEM FMF FEDERAL MINISTRY OF FINANCE CBN CENTRAL BANK OF NIGERIA NDIC NIGERIAN DEPOSIT INSURANCE CORPORATION SEC SECURITIES AND EXCHANGE COMMISSION NIC NATIONAL INSURANCE COMMISSION FMBN FEDERAL MORTGAGE BANK OF NIGERIA NDIC NIGERIA DEPOSIT INSURANCE CORPORATION SEC SECURITY AND EXCHANGE COMMISSION NAICOM NATIONAL INSURANCE COMMISSION ABSTRACT TITLE: FINANCING OPTIONS FOR SMALL AND MEDIUM-SIZED ENTERPRISES (SMES): EXPLORING NON-BANK FINANCIAL INSTITUTIONS AS AN ALTERNATIVE MEANS OF FINANCING. AUTHOR: Md. Moniruzzaman SUPERVISOR: James Bakul Sarkar DEPARTMENT: School of Business, United International University COURSE: Bachelor’s Thesis...
Words: 13904 - Pages: 56
...CHAPTER - 1 INTRODUCTION 1.1 INTRODUCTION TO SMEs Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his...
Words: 15049 - Pages: 61
...V, Issue– 02, July-December, 2010 Problems and Prospects of SMEs Loan Management: A Study on Mercantile Bank Limited, Khulna Branch S. M. AKTERUJJAMAN 1 Abstract SMEs all over the world have been playing a crucial role in promoting economic development as well as industrial production. SME financing has been identified as a major obstacle to SME growth. Unfortunately, the issue seems to be as unresolved as it always has been. Though the majority of the issues are with the SME themselves, the banks also have major issues in designing financial products for the SMEs. This study tries to find out the underlying problems from the bank’s perspective. The major findings are related to the high interest and loan duration rates, reasons for SMEs relatively informal way of doing business in contrast to bank’s formal procedures and prerequisites, bank’s relative inexperience in this field. They are also related to the bank’s lack of perspective, the viability and benefits of cluster unity, approach to informal loan takers and non-usage of modern technology and accounting procedures. The recommendations were provided based on the analysis and findings. Key words: Small and Medium Enterprises (SMEs), Financing, Loan, Technology, Cluster. 1. INTRODUCTION Small and medium enterprises (SMEs) all over the world have been playing a crucial role in promoting economic development as well as industrial production. In particular, SMEs provide the necessary foundations for sustained growth and rising...
Words: 3816 - Pages: 16
...SME CHAPTER ONE INTRODUCTION 1.1 Background of the study: Banking system occupies an important place in a nation’s economy. A banking institution is indispensable in a modern society. Bank is an old institution that is contributing toward the development of any economy and is treated as an important service industry in the modern world. Economic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is the highest in the initial stage. Modern Banks play an important part in promoting economic development of a country Bank provides necessary funds for executing various programs in the process of economic development. They collect savings from large masses of people scattered throughout the country, which in the absence of banks would have remained ideal and unproductive. These scattered amounts are collected. Pooled together and made available to commerce and industry for meeting the financial requirements. Bank plays a vital role in the economy by providing means of payment and in mobilizing resources. Bank is the most important financial institution in the economy. The economic development of a country depends on the development of banking sector. Today’s modern banks ate not only providing traditional banking but also expanding the many financial services. In today’ world the lice of the people...
Words: 7882 - Pages: 32
...Volume 2 Issue 4, April 2014 Effects of Micro-Financing on Growth of Small and Micro Enterprises in Mombasa County Veronica W. Ngugi1, Dr F. Kerongo2 1 Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya, Department of Economics and Commerce, School of Human Resource Development 2 Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya, Department of Economics and Commerce, School of Human Resource Development loans to finance their business operations. The fundamental objective of this study was to assess the effects of Micro financing on growth of small and micro enterprises in Mombasa County. Despite access to credit SMEs growth remains a major problem. Access to credit should enable a business to achieve their growth objective. Despite this it is interesting to note that most of the SMEs could not survive third year of incubation period. Descriptive Survey method was employed in this study. The study adopted stratified and systematic random sampling method. The sample size was 157 SMEs. Semi-structured questionnaire was designed to facilitate the acquisition of data. Data was collected from 102 respondents, a response rate of sixty five percent. Sales, income and competitiveness were used as the independent variable while growth of SMEs as dependant variable. Descriptive statistics was used to analyze data. Results indicated that microfinance has positive effects on growth of SMEs. Majority of the owners indicated that microfinance...
Words: 4317 - Pages: 18
...SUMMARY Overall, the SME FDI is currently an extremely valuable initiative. Through appropriate and careful analysis of the data, public policy can be directed yet more efficiently to further improve competitive advantage of Canada's SMEs. In particular, the baseline survey associated with the SME FDI is an extraordinarily valuable research undertaking. It provides the potential to assess directly the extent to which financing gaps might occur in the capital markets on which SMEs rely. This is an important issue in practical terms, in terms of the role of public policy, and in terms of economic and finance theory. The SME FDI baseline survey data provides, for the first time internationally, a means of empirically testing Nobel prize-winning ideas related to information asymmetry and capital rationing. The data provides a means of providing yet better guidance for public policy with respect to addressing potential capital market imperfections that might constrain growth and economic development of SMEs. As designed, the research initiative can and will provide valuable information about these issues. In summary, the baseline survey undertaken as part of the SME FDI is a potentially invaluable resource with respect to the design, targeting, implementation, and follow-up assessment of public policy approaches to nurturing SME growth and viability. The outcomes of this research process could help Industry Canada and its partners to provide Canadian SMEs with substantial competitive...
Words: 5814 - Pages: 24
...IFC Advisory Service in the Middle East and North Africa Manufacturing Segment Grain Mill Products and Animal Feeds In partnership with: Canada, Denmark, Netherlands, Islamic Development Bank, Switzerland, United Kingdom and the United States. IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private segment development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. This report was commissioned by IFC through its Bank Advisory Services program which, helps build capacities of commercial banks to provide banking services to small and medium enterprises (SMEs) in a responsible, profitable and sustainable manner. © International Finance Corporation 2011. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. IFC does not guarantee the accuracy, reliability or completeness of the content included in...
Words: 7337 - Pages: 30
...Guide on Access to Finance GUIDE ON ACCESS TO FINANCE Financial services and tools available in Egypt supported by the Center for International Private Enterprise (CIPE) Sponsors PANTONE 202 U C:0 PANTONE 188 C M :100 Y : 65 K : 47 C:0 M : 79 Y : 65 K : 47 PANTONE Cool Gray 10 U PANTONE Cool Gray 10 C C:0 C:0 M:0 Y:0 K : 72 M:0 Y:0 K : 72 Guide on Access to Finance ! The Egyptian Junior Business Association (EJB) is a nongovernmental organization, established in 1999 and formally registered in 2000 with a vision to become the “association of first choice among Egyptian Junior Business people who are committed to the development of a culture of Excellence, Ethics and Public Service” and a mission to “Provide a platform for dynamic business people to affect a positive business environment through Business Development & Social Responsibility promoting a culture of excellence & business ethics.” The Center for International Private Enterprise is a non-profit affiliate of the U.S. Chamber of Commerce and one of the four core institutes of the National Endowment for Democracy. CIPE has supported more than 1,000 local initiatives in over 100 developing countries, involving the private sector in policy advocacy and institutional reform, improving governance, and building understanding of market-based democratic systems. CIPE provides management assistance, practical experience, and financial...
Words: 22311 - Pages: 90
...Overview of SME On Mercantile Bank Submitted to: Sharmin Sabnam Rahman 1st Supervisor Kohinur Akter 2nd Supervisor Submitted by: SHETU GUPTA ID# 05104092 Course no-Bus400 1 May 13, 2010 Sharmin Shabnam Rahman ( Lecturer) BRAC Business School BRAC University, 66, Mohakhali, Dhaka- 1212 Dear Madam, I am very pleased to submit my internship report on “Mercantile bank Limited” which is an essential requirement for the completion of BBA program. This report is the result of the Internship Program that I have conducted in Mercantile Bank Limited at Bijoynagar Branch. All the information presented in this report is done with outmost sincerity and honesty. I have tried my best to make this report holistic and informative. Apart from the academic knowledge gained, this internship program and preparation of this report have given me the opportunity to know about the overview of SME Loan. I believe that, the experience I have acquired from this Internship Program will be a valuable asset in my life. Working with such an interesting program has given me the opportunity to achieve experience, which will be helpful in my future professional career. However, there may be some mistakes or lacking due to some limitations. Therefore, I would be highly be obliged if you would kindly consider my limitations. Sincerely Yours, _________________ Shetu Gupta ID- 05104092 BRAC Business School BRAC University. 2 Acknowledgement The report titled as “Overview of SME loan of Mercantile...
Words: 8769 - Pages: 36
...WPS3593 The Role of Factoring for Financing Small and Medium Enterprises Leora Klapper Development Research Group The World Bank 1818 H Street, NW Washington, DC 20433 (202) 473-8738 lklapper@worldbank.org Abstract: Around the world, factoring is a growing source of external financing for corporations and small and medium-size enterprises (SMEs). What is unique about factoring is that the credit provided by a lender is explicitly linked to the value of a supplier’s accounts receivable and not the supplier’s overall creditworthiness. Therefore, factoring allows high-risk suppliers to transfer their credit risk to their high-quality buyers. Factoring may be particularly useful in countries with weak judicial enforcement and imperfect records of upholding seniority claims, because receivables are sold, rather than collateralized, and factored receivables are not part of the estate of a bankrupt SME. Empirical tests find that factoring is larger in countries with greater economic development and growth and developed credit information bureaus. In addition, we find that creditor rights are not related to factoring. This paper also discusses “reverse factoring”, which is a technology that can mitigate the problem of borrowers’ informational opacity in business environments with weak information infrastructures if only receivables from high- quality buyers are factored. We illustrate the case of the Nafin reverse factoring program in Mexico and highlight how the use of electronic...
Words: 11362 - Pages: 46
