The IUP Journal of Entrepreneurship Development
The Influence of Informal Financial Enactment on SMEs

Article Details
Pub. Date : Sep, 2019
Product Name : The IUP Journal of Entrepreneurship Development
Product Type : Article
Product Code : IJED31909
Author Name :S Priyadharsan
Availability : YES
Subject/Domain : Management Journals
Download Format : PDF Format
No. of Pages : 12

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Abstract

The present study examines the prominence of informal financial enactment on Small and Medium Enterprises (SMEs). Conceptual variables like self-help group finance, trade credit, family and friend’s finance and shylock finance have been considered. Data was collected through questionnaires distributed to hundred sample SMEs selected based on the systematic random sampling method. Data has been analyzed by central tendency and Pearson’s correlation test. The findings reveal that informal finance moderately influences the performance of SMEs. Furthermore, the results reveal that there is a positive and significant relationship between informal finance and enactment of SMEs. Suggestions for flexible rules and regulations, extension of the repayment period without additional cost and lower interest rate are made.


Introduction

The Small and Medium Enterprise (SME) sector has been identified as an important strategic sector in the overall policy objectives of the Government of Sri Lanka (GOSL) and it is seen as a driver of inclusive economic growth, regional development, employment generation and poverty reduction. SME sector is envisaged to contribute to transform lagging regions into emerging regions of prosperity. The GOSL recognizes SMEs as the backbone of their economy as it accounts for more than 75% of the total number of enterprises, provides 45% of the employment and contributes 52% of the Gross Domestic Product (GDP). SMEs promote broadbased equitable development and provide more opportunity for women and youth participation in the economic development of the country. Different countries use different definitions for SMEs based on their level of development. The commonly used yardsticks are total number of employees, annual turnover and total investment. In the Sri Lankan context, the SME policy framework defines SMEs based on the number of employees and annual turnover.


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