Abstract
SMEs have been efficiently used as the vehicles for promoting innovation, productivity, and
the competitiveness of a country's national economy. Across the globe, SMEs have been
playing a distinctive role in achieving the socio-economic objectives such as employment
generation, poverty reduction, equalizing the distribution of national wealth, fostering
innovation, and nurturing institutional competitiveness. The main objective of this study is to
empirically examine the extent to which financial constraints hamper the growth of SMEs in
Sindh, Pakistan. To collect the primary data, survey questionnaires were distributed to 100
SMEs from different economic sectors and registered in the Chamber of Commerce Offices in
Sindh. Seven (7) critical financial constraints to SMEs were determined through the literature
and included in the questionnaire. The data were analyzed through descriptive analysis and
correlation techniques. The results show that SMEs in Pakistan are severely constrained by
financing, particularly external equity. Financial ecosystem for SMEs in Pakistan is not
friendly and one-size fits all rules and regulations may not suffice the financing needs of SMEs
in Pakistan. It has been observed that the institutional weaknesses and market failures
exacerbate the financial constraints of SMEs. The government, exclusively, should develop
specialized banks and funds to cater to the financing needs of SMEs in their various stages of
the business cycle. Furthermore, the Credit Guarantee Schemes (CGS) should also be
launched to share the risk of Financial Institutions for lending to the SMEs.
Sadia Shaikh, Imam Uddin Khoso. (2019) Impact of Financial Constraints on the Performance of SMEs - A Study of Sindh Province, Journal of Independent Studies and Research-Management, Social Sciences and Economics, Volume-17, Issue-1.
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