Business characteristics and sme funding in developed and emerging economies

Abstract

Access to finance is one of the major challenges faced by small and medium-sized enterprises in developing economies. Literature suggests that SME characteristics can contribute to SME funding. Nevertheless, there is limited research on whether business age, business size, sector, and gender composition have significant relationships with SME funding in developed and emerging economies. Although the micro- and macro-environment factors differ among economies, it is expected that lessons from the developed and emerging economies will enlighten SMEs from developing countries to devise financing strategies that are intertwined with their firm characteristics. This study analyses the role of business age, business size, sector, and gender composition in influencing SME funding (family, loan, remittances, savings, state programmes, venture capital) in developed and emerging economies. The linear regression analyses employing data from the 'Future of Business Survey - a collaboration between Facebook, the OECD, and the World Bank', have established the relationships between business characteristics and sources of SME funding. We argue that the policy development initiatives in developed, emerging, and developing economies may focus on establishing favourable environments that enhance the interaction of business characteristics and SME funding.