DOI: 10.5176/2010-4804_2.3.215
Authors: Kesseven Padachi
Abstract:
For almost three decades, small firm finance has captured the attention of academicians and policy makers across the world. Despite the government efforts to bridge the ‘financial gap’ yet the small to medium-sized enterprises(SMEs) rated access to finance, especially working capital finance (WCF) as a main hindrance to move along the business life cycle. This study is an attempt to identify the main factors affecting the Mauritian SMEs access to WCF. The methodology used for this study involves the collection of primary data through a comprehensive survey questionnaire administered to the owner manager of firms operating in six main industry groups of the Mauritian manufacturing sector. The research findings provided some new evidences as regards to the difficulties which firms faced while procuring
working capital. They are often constrained by their lack of financial knowledge and their inability to formulate good business plan. Access to finance is also constrained by the market conditions, where the seasonality of the market has a greater incidence on the working capital requirements. Further, firms experiencing significant information costs have difficulty getting access to traditional sources of finance. There was also evidence to
support that financially constrained firms suffer from late payment problem, have longer production cycle and operate in seasonal markets. The findings of the study will be useful to financial institutions funding SME and policy makers. The study finds working capital is the major concern for the SME and its timely availability is critical for the success of ventures. In many cases, SMEs have no option but to extend or provide longer credit period and it needs not be seen negatively for funding. This paper provides evidence on the difficulties which Mauritian manufacturing SMEs faced while procuring WCF and adds to the growing literature on SMEs financing.
Keywords: SMEs; Working Capital Finance; Financial Knowledge; Sources of Finance; Logistics Regression
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