Impact of Micro and SME Financing on Financial Performance
DOI:
https://doi.org/10.56830/IJAMS10202406Keywords:
MSME, Financial Performance, Finance, Economic Growth, Economic Development, Egypt, Developing CountriesAbstract
This research aims to examine the relation between the access to finance by Micro/Small businesses in term of volume and number on creating new employment opportunities and hence positively impacting the country financial performance. Based on empirical literature, the model expressed the relationship of Micro and SME Financing on Financial Performance, is obviously discussed and delicately examined. Consequently, the conceptual, linkage, and research assumed four hypotheses tested the relationship between the Financed amount to micro and small enterprises and the reduction in unemployment; the financed amount to micro and small enterprises and the different economic sectors; the number of financed micro and small enterprises and the reduction in unemployment and finally the number of financed micro and small enterprises and the different economic sectors. The study gathers secondary data by obtaining all pertinent and necessary data from Egypt's "Accountability state authority" Micro Small and Medium Enterprises Development Agency. The dataset contains several significant variables, such as the number of projects, the amount of finance disbursed in the correspondent year, the number of the firm (Micro and Small), the sector classifications (animal production, industrial, commercial, liberal profession, and service), the year of observation (2008–2023), and employment statistics. This study provides empirical evidence for the positive impact of Micro / Medium financing on employment in SMEs, albeit with varying effects across different enterprise types and sectors. The findings suggest that both the amount of financing and the number of projects funded play roles in job creation, though the magnitude of these effects appears to be small. This underscores the need for targeted and efficient micro / medium financing strategies that consider the specific characteristics of different business types and industries.
References
Dwivedi, Y. K., Hughes, L., Ismagilova, E., Aarts, G., Coombs, C., Crick, T., Duan, Y., Dwivedi, R., Edwards, J., Eirug, A., Galanos, V., Ilavarasan, P. V., Janssen, M., Jones, P., Kar, A. K., Kizgin, H., Kronemann, B., Lal, B., Lucini, B., . . . Williams, M. D. (2021). Artificial Intelligence (AI): Multidisciplinary perspectives on emerging challenges, opportunities, and agenda for research, practice and policy. International Journal of Information Management, 57, 101994. DOI: https://doi.org/10.1016/j.ijinfomgt.2019.08.002
Gherghina, Ș . C., Botezatu, M. A., Hosszu, A., & Simionescu, L. N. (2020). Small and Medium-Sized Enterprises (SMEs): The Engine of Economic Growth through Investments and Innovation. Sustainability, 12(1), 347. DOI: https://doi.org/10.3390/su12010347
Al-Haddad, L., Sial, M. S., Ali, I., Alam, R., Khuong, N. V., & Khanh, T. H. T. (2019). The Role of Small and Medium Enterprises (SMEs) in Employment Generation and
Economic Growth: A Study of Marble Industry in Emerging Economy. International Journal of Financial Research, 10(6), 174. https://doi.org/10.5430/ijfr.v10n6p174 DOI: https://doi.org/10.5430/ijfr.v10n6p174
Malaczewski, M. (2018). NATURAL RESOURCES AS AN ENERGY SOURCE IN A SIMPLE ECONOMIC GROWTH MODEL. Bulletin of Economic Research, 70(4), pp.362–380. doi:https://doi.org/10.1111/boer.12153. DOI: https://doi.org/10.1111/boer.12153
Klasen, S. (2008). Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators. World Development, 36(3), pp.420–445. doi:https://doi.org/10.1016/j.worlddev.2007.03.008. DOI: https://doi.org/10.1016/j.worlddev.2007.03.008
Whitacre, B., Gallardo, R. and Strover, S. (2014). Broadband׳s contribution to economic growth in rural areas: Moving towards a causal relationship. Telecommunications Policy, 38(11), pp.1011–1023. doi:https://doi.org/10.1016/j.telpol.2014.05.005. DOI: https://doi.org/10.1016/j.telpol.2014.05.005
Toolis, E.E. and Hammack, P.L. (2015). The lived experience of homeless youth: A narrative approach. Qualitative Psychology, 2(1), pp.50–68. doi:https://doi.org/10.1037/qup0000019. DOI: https://doi.org/10.1037/qup0000019
Feldman, M., Hadjimichael, T., Lanahan, L. and Kemeny, T. (2015). The logic of economic development: a definition and model for investment. Environment and Planning C:
Government and Policy, [online] 34(1), pp.5–21. doi:https://doi.org/10.1177/0263774x15614653. DOI: https://doi.org/10.1177/0263774X15614653
Nunn, N. (2019). Rethinking economic development. Canadian Journal of Economics/Revue canadienne d’économique, 52(4), pp.1349–1373. doi:https://doi.org/10.1111/caje.12406. DOI: https://doi.org/10.1111/caje.12406
Jacob, S. (2014). The Kerala Regime and Regional Disparities in Health Infrastructure Versus
Outcomes. India Review, 13(1), pp.58–77. doi:https://doi.org/10.1080/14736489.2014.873680. DOI: https://doi.org/10.1080/14736489.2014.873680
The Role of the Cooperatives, Small and Medium Enterprises (SME’s) and Labor Office in empowering Small and Medium Enterprises (SME’s) in the Handicraft Sector in Banjarbaru City, South Kalimantan Province. (2022). International Journal of Social Science and Human Research, 5(9). doi:https://doi.org/10.47191/ijsshr/v5-i9-30. DOI: https://doi.org/10.47191/ijsshr/v5-i9-30
Becker, G.S. (2021). Crime and Punishment: An Economic Approach. Journal of Political Economy, 76(2), pp.169–217. DOI: https://doi.org/10.1086/259394
Fiseha, G.G. and Oyelana, A.A. (2015). An Assessment of the Roles of Small and Medium Enterprises (SMEs) in the Local Economic Development (LED) in South
Africa. Journal of Economics, 6(3), pp.280–290. doi:https://doi.org/10.1080/09765239.2015.11917617. DOI: https://doi.org/10.1080/09765239.2015.11917617
Khader, H. (2002). Small Business Development, Bridge Development journal, Arab
Planning Institute, vol. 01, p. 03, Kuwait.
Sahlawi, Khalid bin Abda Aziz.(2001) The Rate and Factors of the Spread of Small and Medium Enterprises in Saudi Arabia ", Journal of Public Administration, 41(2) 303335.
Haddad, M. (2006). Role of Banks and Financial Institutions in Financing Small and Medium Enterprises, Illuminations from the Experience of Jordan and Egypt, Research Paper for the International Meeting for Small and Medium Enterprises Qualification in Arab Countries, Hassiba Ben Ali University, Chlef, Algeria.
Zheng, C., O’Neill, G. & Morrison, M. (2009). Enhancing Chinese SME performance through innovative HR practices. Emerald Group Publishing Limited, 38(2), 175-194. DOI: https://doi.org/10.1108/00483480910931334
Abujazer, F. (2006). Small and Medium Enterprises in importance in Reducing Unemployment in Palestine, Conference on the Development and Development of the Gaza Strip after the Israeli Withdrawal, p. 2, Gaza, Palestine.
National Bank of Egypt (2004) Small and Micro Enterprises under Law No. 141 of 2004, Economic Bulletin No. 4, Volume 57, p. 25, Cairo.
Elasrag, H. (2010) Activating the role of Islamic finance in the development of small and medium Enterprises, Munich Personal RePEc Archive , Online at https://mpra.ub.uni-muenchen.de/34398/ DOI: https://doi.org/10.2139/ssrn.1951454
Bary, Amr. (2019). SMEa Sector; a Key Driver to The Egyptian Economic Development. SSRN Electronic Journal. 10.2139/ssrn.3334845. DOI: https://doi.org/10.2139/ssrn.3334845
Boushnak, E. , Rageb, M. , Ragab, A. and Sakr, A. (2018) Factors Influencing Credit Decision for Lending SMEs: A Case Study on National Bank of Egypt. Open Access Library
Journal, 5, 1-17. doi: 10.4236/oalib.1104996 DOI: https://doi.org/10.4236/oalib.1104996
Chatsama, David (2022), Strategies Used by Small and Medium Enterprises in Rome and Cairo to Access Finance for Growth
A Halim et al 2017 J. Phys.: Conf. Ser. 890 012138 DOI: https://doi.org/10.1088/1742-6596/890/1/012138
George Nyantakyi, Francis Atta Sarpong, Philip Adu Sarfo, Nneka Uchenwoke Ogochukwu, Winnifred Coleman. (2023) A boost for performance or a sense of corporate social responsibility? A bibliometric analysis on sustainability reporting and firm performance research (2000-2022). Cogent Business & Management 10:2. DOI: https://doi.org/10.1080/23311975.2023.2220513
Lu, Z and Wu, J and Liu, J (2020) Bank concentration and SME financing availability: The
impact of promotion of financial inclusion in China. International Journal of Bank Marketing. ISSN 0265-2323 DOI: https://doi.org/10.1108/IJBM-01-2020-0007 DOI: https://doi.org/10.1108/IJBM-01-2020-0007
Martinez-Cillero, Maria; Lawless, Martina; O'Toole, Conor (2021) : SME investment determinants and financing constraints: A stochastic frontier approach, ESRI Working Paper, No. 699, The Economic and Social Research Institute (ESRI), Dublin
Gan, Liu & Xia, Xin, 2022. "SME financing with a combination contract of investment and guarantee," Finance Research Letters, Elsevier, vol. 50(C). DOI: https://doi.org/10.1016/j.frl.2022.103320
Marwa, Elsherif. (2019). THE RELATIONSHIP BETWEEN FINANCIAL INCLUSION AND
MONETARY POLICY TRANSMISSION: THE CASE OF EGYPT.
10.20472/IAC.2019.045.014. DOI: https://doi.org/10.20472/IAC.2019.045.014
Metawea, Maha. (2020). The Role of financial institutions in supporting entrepreneurial success: Case of Egypt. 36-51. 10.5281/zenodo.3733841. DOI: https://doi.org/10.54216/AJBOR.010104
Ndeye Ndiaye, Lutfi Abdul Razak, Ruslan Nagayev, Adam Ng, Demystifying small and medium enterprises’ (SMEs) performance in emerging and developing economies
Ogujiuba, Kanayo K., Ebenezer Olamide, Azikiwe Isaac Agholor, Estelle Boshoff, and Phetole Semosa. 2022. "Impact of Government Support, Business Style, and Entrepreneurial Sustainability on Business Location of SMEs in South Africa’s Mpumalanga Province" Administrative Sciences 12, no. 3: 117. https://doi.org/10.3390/admsci12030117 DOI: https://doi.org/10.3390/admsci12030117
Tian, Zhongkai & Sheikh Hassan, Ahmad Fahmi & Ab Razak, Nazrul. (2018). Big Data and SME financing in China. Journal of Physics: Conference Series. 1018. 012002.
10.1088/1742-6596/1018/1/012002. DOI: https://doi.org/10.1088/1742-6596/1018/1/012002
Sooriyakumaran, Logeswary and Thrikawala, Sujani and chandrapala, pathirawasam, A Study Between the Association of Financial Management Practices and Performance of Small and Medium Enterprises (SMEs) Background: A Working
Paper (January 22, 2022). International Journal of Research and Innovation in Social
Science (IJRISS), 6(1), 16, 2022, Available at
SSRN: https://ssrn.com/abstract=4039774
Baltagi, B. H. (2008). Econometric analysis of panel data. John Wiley & Sons.
Baltagi, B. H. (2013). Econometric analysis of panel data (5th ed.). John Wiley & Sons. DOI: https://doi.org/10.1002/9781118445112.stat03160
Byrne, B. (2016). Structural equation modeling with AMOS. New York, NY: Routledge. DOI: https://doi.org/10.4324/9781315757421
Greene, W. H. (2012). Econometric analysis (7th ed.). Pearson.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate Data Analysis. (7th Ed.) Pearson.
Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61(S1), 631-652. DOI: https://doi.org/10.1111/1468-0084.0610s1631
Akoglu, H. (2018). User's guide to correlation coefficients. Turkish journal of emergency medicine, 18(3), 91-93. DOI: https://doi.org/10.1016/j.tjem.2018.08.001
Ratner, B. (2009). The correlation coefficient: Its values range between+ 1/− 1, or do they?. Journal of targeting, measurement and analysis for marketing, 17(2), 139-142. DOI: https://doi.org/10.1057/jt.2009.5
Cameron, A. C. (2005). Microeconometrics: methods and applications. Cambridge University. DOI: https://doi.org/10.1017/CBO9780511811241
Baltagi, B. H. (2015). The Oxford handbook of panel data. Oxford University Press. DOI: https://doi.org/10.1093/oxfordhb/9780199940042.001.0001
Baltagi, B. H. (2021). Test of hypotheses with panel data. Econometric Analysis of Panel Data, 75-108 DOI: https://doi.org/10.1007/978-3-030-53953-5_4
