Addressing SMEs\u2019 needs for finance, it is assessed that formal financial lending organizations represent a weak link in the financial supply chain for SMEs in the region. The problem also hinders the physical supply chain in that SMEs are key drivers of business growth in the region. This paper proposes a framework for financial lending to allow formal lending organizations to compete with the alternative sources of finance that SMEs seek.<\/p>\n
This research work is built upon case studies from Malaysia and India, and surveys conducted on the supply and demand of SME finance in Malaysia. A lack of collateral and limited access to venture and growth capital are some of the obstacles that SME owners face when seeking finance for their businesses. Cash flow shortages caused by long or delayed payment cycles exacerbate the problem. On the supply side, a number of issues, including high transaction costs, inadequate information about borrowers, and weak governance, deter large banks from developing SME lending portfolios.<\/p>\n
In the absence of bank lending options, many SMEs turn to other sources of finance such as unregistered money lenders that charge high interest rates. It is realized that the local money lenders are accessible and understand the SME business model better. They are also able to keep a tight rein on costs and have developed ways to make sure that investment funds are used by borrowers for profit-making purposes.<\/p>\n","protected":false},"excerpt":{"rendered":"
Asia\u2019s economic miracle is often associated with large, multinational companies. While these organizations have been important drivers of the region\u2019s growth, small and medium enterprises (SMEs), accounting for more than 98% of the enterprises, have played a key role. These SMEs contribute around 40% to their country\u2019s GDP in the ASEAN region. In developed nations such as the USA, UK, France, and Singapore, SMEs contribute more than half of the country’s GDP.<\/p>\n","protected":false},"featured_media":47319,"template":"","meta":{"pmpro_default_level":"","tdm_status":"","tdm_grid_status":""},"product_brand":[],"product_cat":[1842,2347],"product_tag":[3475],"class_list":["post-75740","product","type-product","status-publish","has-post-thumbnail","product_cat-sme-finance","product_cat-study-library","product_tag-2016-2020","pmpro-has-access","first","instock","shipping-taxable","product-type-external"],"yoast_head":"\n