Share:


Barriers in financing microenterprises from the perspective of Czech and Slovak microentrepreneurs

    Mehmet Civelek   Affiliation
    ; Aleksandr Ključnikov   Affiliation
    ; Peter Krištofík Affiliation
    ; Zoltán Rozsa Affiliation

Abstract

This paper compares how Czech and Slovak microentrepreneurs perceive the volume and ease of access to finance that they face. Having an adequate number of sources of finance and easier access to them can help improve both enterprise and country performance. Chi-square and Z score tests for population proportions were used to test hypotheses. 740 microenterprises from Czech Republic and 287 microenterprises from Slovakia were included for the analyses that were performed by this study. The results show that Czech microentrepreneurs feel they have more sources of finance and have easier access to them than their Slovak counterparts. These differences may in part be linked to other factors such as the experience and age of microentrepreneurs and micro-firms, amount of business loans and microfinancing organizations, credit interest rates and credit rejection rates, the relative degree of economic freedom, the volume of government guarantees, relative GDP levels, the quality of business environment and ease of doing business. Additionally, The Moran’s I spatial autocorrelation index was performed to evaluate influence of location on the perception of Czech and Slovak microenterprises that were located in different regions of both countries. The paper also discusses the results’ policy implications for governments and financial institutions.

Keyword : microenterprises, SMEs, bank financing, microfinancing, Slovakia, Czech Republic, financial constraints

How to Cite
Civelek, M., Ključnikov, A., Krištofík, P., & Rozsa, Z. (2019). Barriers in financing microenterprises from the perspective of Czech and Slovak microentrepreneurs. Journal of Business Economics and Management, 20(2), 244-267. https://doi.org/10.3846/jbem.2019.8114
Published in Issue
Mar 7, 2019
Abstract Views
1990
PDF Downloads
1391
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Achleitner, A. K., Braun, R., & Kohn, K. (2011). New venture financing in Germany: Effects of firm and owner characteristics. Zeitschrift Für Betriebswirtschaft, 81(1), 263-294. https://doi.org/10.1007/s11573-011-0441-3

Ariful, C. H., Das, A., & Rahman, A. (2017). The effectiveness of micro-credit programmes focusing on household income, expenditure and savings: Evidence from Bangladesh. Journal of Competitiveness, 8(2), 34-44. http://doi.org/10.7441/joc.2017.02.03

Atmadja, A. S., Jen-Je, S., & Sharma, S. (2016). Examining the impact of microfinance on microenterprise performance (Implications for women-owned microenterprises in Indonesia). International Journal of Social Economics, 43(10), 962-981. https://doi.org/10.1108/IJSE-08-2014-0158

Ayyagari, M., Demirguc-Kunt, A., & Maksimovic, V. (2010). Formal versus informal finance: Evidence from China. The Review of Financial Studies, 23(8), 3048-3097. https://doi.org/10.1093/rfs/hhq030

Baptista, J., Ramalho, J., & da Silva, J. (2006). Understanding the microenterprise sector to design a tailor-made microfinance policy for Cape Verde. PEJ, 5, 225-241. https://doi.org/10.1007/s10258-006-0004-7

Beck, T., Demirguc-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25, 932-952. https://doi.org/10.1016/j.jimonfin.2006.07.005

Beck, T., Lu, L., & Yang, R. (2015). Finance and growth for microenterprises: Evidence from rural China. World Development, 67, 38-56. http://doi.org/10.1016/j.worlddev.2014.10.008

Belanova, K. (2013). Access to finance of small and medium sized enterprises in Slovakia. Economic Review, 42(3), 277-290. Retrieved from http://old.euba.sk/department-for-research-and-doctoral-studies/economic-review/preview-file/er3_2013_belanova_fulltext-13603.pdf

Berger, A. N., & Udell, G. (2006). A more complete conceptual framework for SMEs finance. Journal of Banking and Finance, 30(11), 2945-2966. https://doi.org/10.1016/j.jbankfin.2006.05.008

Berger, A. N., & Udell, G. (1995). Relationship lending and lines of credit in small firm finance. The Journal of Business, 68(3), 351-381. Retrieved from http://www.jstor.org/stable/2353332

Berger, A. N., & Black, L. K. (2011). Bank size, lending technologies, and small business finance. Journal of Banking & Finance, 35(3), 724-735. https://doi.org/10.1016/j.jbankfin.2010.09.004

Berger, A. N., Goulding, W., & Rice, T. (2014). Do small businesses still prefer community banks? Journal of Banking & Finance, 44, 264-278. https://doi.org/10.1016/j.jbankfin.2014.03.016

Berger, M. (1989). Giving women credit: The strengths and limitations of credit as a tool for alleviating poverty. World Development, 17(7), 1017-1032. https://doi.org/10.1016/0305-750X(89)90165-4

Bhaird, C., & Lucey, B. (2010). Determinants of capital structure in Irish SMEs. Small Business Economics, 35, 357-375. https://doi.org/10.1007/s11187-008-9162-6

Bhattacharya, S., & Londhe, B. R. (2014). Micro entrepreneurship: Sources of finance & related constraints. In Procedia Economics and Finance, 11, Symbiosis Institute of Management Studies Annual Research Conference (SIMSARC13) (pp. 775-783). https://doi.org/10.1016/S2212-5671(14)00241-X

Blazy, R., & Weill, L. (2013). Why do banks ask for collateral in SME lending? Applied Financial Economics, 23(13), 1109-1122. https://doi.org/10.1080/09603107.2013.795272

Bondareva, I., & Zatrochová, M. (2014). Financial support for the development of SMEs in the Slovak Republic. Procedia – Social and Behavioral Sciences, 110, 541-548. https://doi.org/10.1016/j.sbspro.2013.12.898

Brown, A., Garguilo, S., & Mehta, K. (2011). The relentless pursuit of financial capital for Micro-enterprises: Importance of trust and social capital. International Journal for Service Learning in Engineering, 6(2), 78-97. Retrieved from https://www.researchgate.net/profile/Khanjan_Mehta/publication/257142786

Canton, E., Grilo, I., Monteagudo, J., & Zwan, P. W. (2013). Perceived credit constraints in The European Union. Small Business Economics, 41, 701-715. https://doi.org/10.1007/s11187-012-9451-y

Carbo, S., Rodriguez-Fernandez, F., & Udell, G. (2009). Bank market power and SME financing constraints. Review of Finance, 13(2), 309-340. https://doi.org/10.1093/rof/rfp003

Casey, E., & O’Toole, C. (2014). Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs. Journal of Corporate Finance, 27, 173-193. https://doi.org/10.1016/j.jcorpfin.2014.05.001

Cenni, S., Monferra, S., Salotti, V., Sangiorgi, M., & Torluccio, G. (2015). Credit rationing and relationship lending: Does firm size matter? Journal of Banking & Finance, 53, 249-265. https://doi.org/10.1016/j.jbankfin.2014.12.010

Central Office of Labour, Social Affairs and Family of Slovakia. (2018). Retrieved from https://www.upsvr.gov.sk/kontakt.html?page_id=233

Cowling, M., Liu, W., & Ledger, A. (2012). Small business financing in the UK before and during the current financial crisis. International Small Business Journal, 30(7), 778-800. https://doi.org/10.1177/0266242611435516

Daskalakis, N., Jarvis, R., & Schizas, E. (2013). Financing practices and preferences for micro and small firms. Journal of Small Business and Enterprise Development, 20(1), 80-101. https://doi.org/10.1108/14626001311298420

De la Torre, A., Pería, M. S. M., & Schmukler, S. L. (2010). Bank involvement with SMEs: Beyond relationship lending. Journal of Banking & Finance, 34, 2280-2293. https://doi.org/10.1016/j.jbankfin.2010.02.014

Deller, S., & McConnon, J. (2009). Microenterprises and economic growth: A panel study of the US States 1977–1997. Applied Economics Letters, 16(13), 1307-1312. https://doi.org/10.1080/13504850701367361

Dong, Y., & Men, C. (2014). SME financing in emerging markets: Firm characteristics, banking structure and institutions. Emerging Markets Finance & Trade, 50(1), 120-149. http://doi.org/10.2753/REE1540-496X500107

Duarte, F. D., Gama, A. P. M., & Esparanca, J. S. (2017). Collateral-based in SME lending, The role of business collateral and personal collateral in less developed countries. Research in International Business and Finance, 39, 406-422. https://doi.org/10.1016/j.ribaf.2016.07.005

Duman, A. (2009). Access to credit: Microenterprises in Turkey. Working Papers in Economics, 9(5), 1-13. Retrieved from http://hdl.handle.net/10419/175906

EC. (2016a). European Commission SBA Fact Sheet. Czech Republic. Retrieved from https://ec.europa.eu/docsroom/documents/22382/attachments/7/translations/en/renditions/pdf+&cd=2&hl=tr&ct= clnk&gl=cz

EC. (2016b). European Commission SBA Fact Sheet. Slovakia. Retrieved from https://ec.europa.eu/docsroom/documents/22382/attachments/31/translations/en/renditions/pdf+&cd=1&hl=tr&ct= clnk&gl=cz

European Commission. (2016). New SME definition and a model declaration to be used when applying to SME support schemes. Retrieved from https://ec.europa.eu/digital-single-market/en/news/new-sme-definition-user-guide-and-model-declaration

European Economic Agreement Grants and Norway Grants. (2018). Retrieved from https://eeagrants.org/Where-we-work

Eversole, R. (2004). Change makers? Women’s microenterprises in a Bolivian City. Gender Work and Organization, 11(2), 123-142. https://doi.org/10.1111/j.1468-0432.2004.00225.x

Fila, M., & Kučera, J. (2015). Innovation performance of the Slovak Republic and its regional disparities in innovation management and corporate sustainability. IMACS, 2015, 39-51. Retrieved from http://imacs.vse.cz/wp-content/uploads/2015/08/Proceedings-IMACS-2015-fullpapers-APA.pdf#page=42

Galindo, A. J., & Micco, A. (2007). Creditor protection and credit response to shocks. The World Bank Economic Review, 21(3), 413-438. https://doi.org/10.1093/wber/lhm016

Garcia-Teruel, P. J., Martinez-Solano, P., & Sanchez-Ballesta, J. P. (2014). Supplier financing and earnings quality. Journal of Business Finance & Accounting, 41(9-10), 1193-211. https://doi.org/10.1111/jbfa.12090

Gavurova, B., Belas, J., Kocisova, K., & Kliestik, T. (2017). Comparison of selected methods for performance evaluation of Czech and Slovak commercial banks. Journal of Business Economics and Management, 18(5), 852-876. https://doi.org/10.3846/16111699.2017.1371637

Gbandi, E. C., & Amissah, G. (2014). Financing options for small and medium enterprises (SMEs) in Nigeria. European Scientific Journal, 10(1), 327-340. Retrieved from https://www.eujournal.org/index.php/esj/article/view/2565/2426

Heritage. (2018a). Economic freedom index. Czech Republic. Retrieved from https://www.heritage.org/index/country/czechrepublic

Heritage. (2018b). Economic freedom index. Slovakia. Retrieved from https://www.heritage.org/index/country/slovakia

Jha, R., M. A., & Depoo, T. (2017). Role of microenterprises in recovering U.S. economy- post 2008 financial crisis. The Journal of Applied Business and Economics, 19(3), 9-28. Retrieved from https://search.proquest.com/docview/1927524915?accountid=15518

Ivanová, E. (2017). Barriers to the development of SMEs in the Slovak Republic. Oeconomia Copernicana, 8(2), 255-272. https://doi.org/10.24136/oc.v8i2.16

Khan, A., & Quaddus, M. (2015). Examining the influence of business environment on socio-economic performance of informal microenterprises. International Journal of Sociology and Social Policy, 35(3/4), 273-288. https://doi.org/10.1108/IJSSP-02-2014-0016

Kliestik, T., Misankova, M., Valaskova, K., & Svabova, L. (2018). Bankruptcy prevention: New effort to reflect on legal and social changes. Science and Engineering Ethics, 24(2), 791-803. https://doi.org/10.1007/s11948-017-9912-4

Koisova, E., Habanik, J., Virglerova, Z., & Rozsa, Z. (2017). SMEs financing as an important factor of business environment in Slovak Republic regions. Montenegrin Journal of Economics, 13(2), 129-140. https://doi.org/10.14254/1800-5845/2017.13-2.8

Kozubikova, L. (2016). Differences in innovativeness and risk-taking between microenterprises and SMEs: Czech Republic Case Study. Actual Problems of Economics, 3(177), 167-177. Retrieved from https://search.proquest.com/docview/1781553740?accountid=15518

Larson, D. W., & Shaw, T. K. (2001). Issues of microenterprise and agricultural growth: Do opportunities exist through forward and backward linkages? Journal of Developmental Entrepreneurship, 6(3), 203-220.

Menkhoff, L., Neuberger, D., & Rungruxsirivorn, O. (2012). Collateral and its substitutes in emerging markets lending. Journal of Banking and Finance, 36, 817-834. https://doi.org/10.1016/j.jbankfin.2011.09.010

Ministry of Local Development of Czech Republic. (2013). Strategie regionálního rozvoje ČR 2014-2020. Retrieved from https://www.mmr.cz/getmedia/08e2e8d8-4c18-4e15-a7e2-0fa481336016/SRR-2014-2020.pdf , picture 23

Mudd, S. (2013). Bank structure, relationship lending and small firm access to finance: A cross-country investigation. Journal of Financial Services Research, 44(2), 149-174. https://doi.org/10.1007/s10693-012-0140-4

Munoz, J. M., Welsh, D. H. B., Chan, S., & Raven, P. V. (2015). Microenterprises in Malaysia: A preliminary study of the factors for management success. International Entrepreneurship and Management Journal, 11(3), 673-694. https://doi.org/10.1007/s11365-014-0302-y

Narender, V., & Venu, L. (2010). Challenges of lending and credit assessment for SMEs in India. Management Prudence Journal, 1(2), 66-75. Retrieved from https://search.proquest.com/docview/1478031634?accountid=15518

Neuberger, D., & Rathke, S. (2009). Microenterprises and multiple bank relationships: The case of professionals. Small Business Economics, 32, 201-229. https://doi.org/10.1007/s11187-007-9076-8

OECD & The European Commission. (2014). The missing entrepreneurs: Policies for inclusive entrepreneurship in Europe. OECD Publishing. https://doi.org/10.1787/9789264213593.en

OECD. (2018). Financing SMEs and entrepreneurs: an OECD scoreboard. Paris: OECD Publishing. https://doi.org/10.1787/fin_sme_ent-2018-en

Okura, M. (2008). Firm characteristics and access to bank loans: An empirical analysis of manufacturing SMEs in China. International Journal of Business and Management Science, 1(2), 165-186. Retrieved from https://search.proquest.com/docview/89160990?accountid=15518

Osei-Assibey, E., Godfred, A., Bokpin, D., & Twerefou, K. (2012). Microenterprise financing preference: Testing POH within the context of Ghana’s rural financial market. Journal of Economic Studies, 39(1), 84-105. https://doi.org/10.1108/01443581211192125

Panda, D. K. (2018). Entrepreneurial orientation, intermediation services, microfinance, and microenterprises. Managerial and Decision Economics, 39, 253-265. https://doi.org/10.1002/mde.2900

Pandula, G. (2015). Bank finance for small and medium-sized enterprises in Sri Lanka: issues and policy reforms. Studies in Business and Economics, 10(2), 32-43. https://doi.org/10.1515/sbe-2015-0018

Petersen, M. A., & Rajan, R. G. (1994). The benefits of lending relationships: Evidence from small business data. The Journal of Finance, 49(1), 3-37. https://doi.org/10.1111/j.1540-6261.1994.tb04418.x

Prentice, R. (2017). Microenterprise development, industrial labor and the seductions of precarity. Critique of Anthropology, 37(2), 201-222. https://doi.org/10.1177/0308275X17694944

Presbitero, A. F., & Rabellotti, R. (2016). The determinants of firm access to credit in Latin America: Micro characteristics and market structure. Economic Notes 3 – Review of Banking, Finance and Monetary Economics, 45(3), 445-472. https://doi.org/10.1111/ecno.12069

Rahman, A., Belas, J., Kliestik, T., & Tyll, L. (2017). Collateral requirements for SME loans: Empirical evidence from the Visegrad Countries. Journal of Business Economics and Management, 18(4), 650-675. https://doi.org/10.3846/16111699.2017.1357050

Ryan, R. M., O’Toole, C. M., & McCann, F. (2014). Does bank market power affect SME financing constraints? Journal of Banking & Finance, 49, 495-505. https://doi.org/10.1016/j.jbankfin.2013.12.024

Saarela, M., Jokela, H., Eija-Riitta, N., Muhos, M., & Leviäkangas, P. (2016). The firm level impacts of local public funding to microenterprises. International Journal Innovation and Learning, 19(3), 299-313. https://doi.org/10.1504/IJIL.2016.075656

SAFE. (2014). Survey on the access to finance of enterprises. Analytical Report. Retrieved from https://ec.europa.eu/docsroom/documents/7504/attachments/1/translations/en/renditions/native

Serrasqueiro, Z., & Caetano, A. (2015). Trade-off theory versus pecking order theory: Capital structure decisions in a peripheral region of Portugal. Journal of Business Economics and Management, 16(2), 445-466. https://doi.org/10.3846/16111699.2012.744344

Shen, Y., Shen, M., Xu, Z., & Bai, Y. (2009). Bank size and small- and medium-sized enterprise (SME) lending: Evidence from China. World Development, 37(4), 800-811. https://doi.org/10.1016/j.worlddev.2008.07.014

Sobeková Majková, M., Solík, J., & Sipko, J. (2014). The analysis of chosen business obstacles and problems with the financing of young entrepreneurs in Slovakia. Economics and Sociology, 7(3), 90-103. https://doi.org/10.14254/2071-789X.2014/7-3/7

Social Science Statistics. (n.d.). Chi-Square and Z score calculator for 2 population proportions. Retrieved from http://www.socscistatistics.com/tests

Technology Agency of Czech Republic. (2015). Technology agency of Czech Republic and its programmes. Retrieved from https://www.tacr.cz/dokums_raw/media/brochure_TACR_ENG_2.pdf

Technology Agency of Czech Republic. (n.d.). Retrieved from https://www.tacr.cz/index.php/en/about-tacr.html

Thapa, A. (2015). Determinants of microenterprise performance in Nepal. Small Business Economy, 45, 581-594. https://doi.org/10.1007/s11187-015-9654-0

Villanger, E. (2015). Entrepreneurial abilities and barriers to microenterprise growth: A case study in Nepal. The Journal of Entrepreneurship, 24(2), 115-147. https://doi.org/10.1177/0974927615586888

Wangmo, C. (2015). Small Medium Enterprise (SME) bank financing constraints in developing countries: A case study of Bhutan. International Journal of Arts & Sciences, 8(5), 569-590. Retrieved from https://search.proquest.com/docview/1764690575?accountid=15518

Welsh, D. H. B., Munoz, J. M., Deng, S., & Raven, P. V. (2013), Microenterprise performance and microenterprise zones (MEZOs) in China. Management Decision, 51(1), 25-40. https://doi.org/10.1108/00251741311291292

World Bank. (2016). GDP Statistics. Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD

World Bank. (2018). Retrieved from https://data.worldbank.org/indicator/IC.BUS.EASE.XQ

Yildirim, H. S., Akci, Y., & Eksi, I. H. (2013). The effect of firm characteristics in accessing credit for SMEs. Journal of Financial Services Marketing, 18(1), 40-52. https://doi.org/10.1057/fsm.2012.28