Graduate papers
Description of the graduate paper
Form of studies Master
Title of the study programm Business Finance
Title in original language Ārējā finansējuma pieejamība Gruzijas MVU
Title in English The Accessibility of External Financing for SMEs in Georgia
Department 22000 Faculty of Engineering Economics and Management
Scientific advisor Nataļja Lāce
Reviewer Natālija Fiļipoviča
Abstract Small and medium size enterprises play an important role in economic growth, employment creation in developed as well as in developing countries. They can establish rapidly and produce quick return. SME have a great impact on sustainable development of country, due to the fact that they represent huge amount of active enterprises. Moreover, SMEs are investing in restructuring, innovation and qualification and are giving them opportunities to develop and contribute in economy. In order to, SME develop innovative projects, they need to have access to finance. Georgia is post-soviet country in Eastern Europe and despite the fact that Georgia has two decade year experience of reforms, it still stays a country of transitional economy. Formation of SME is really complex process due to the many facts, such as market imperfection, low level of investment and credit accessibility, political instability, etc. Moreover financial constraint is the main barriers for SME’s development, which endangers economic growth of country. Even though that SME represent the highest proportion of companies, their contribution in economy still stay in low level, 19.5 percent in gross value added and 39.5 per cent in employment it emphases lower level of development of this sector, which can be caused by market imperfection, institutional or regulatory constraint, agency cost and different taxes. Problem: Lack of diversity of financial source for Small and medium size Enterprises in Georgia. The goal of the master thesis is to analyze impact factors on SME choosing method external financing and how financial institution are providing them external funds in Georgia, and develop the recommendation to improve SME’s ability to get external funds. The object of the research is SME in Georgia. The subject of the research availability and accessibility of external finance for SME. Research questions are: • What alternative sources of funding do SMEs us and how viable are these? • Does SMEs have challenges in accessing external finance in Georgia? • What are the factors that affect SMEs’ ability to borrow from bank in Georgia? Main contributions and scientific novelty: 1. The disclosure of interconnection between accessibility of loans, asset structure and profit through linear regression model analyzes. 2. Investigation of accessibility of external funds for SME using work out survey result. Hypotheses to be defended: H1: Initial insider finance used by Small and medium size enterprises is negatively related with age H2: The use of debt finance by SME is positively related with provision of collateral H3: The larger size SMEs can get financial resources by high probability H4: Use of debt finance is positively related with firm’s age. The first section of the Analytical part includes importance of SME in economy and definition in EU and Georgia. Second and third section is about Georgian macroeconomic review, SME contribution in gross value added and employment. Last paragraphs of chapter analyze Georgian financial sector and enterprises survey conducted by World Bank. The second section of the Theoretical part is about problem related to SME financing, such as moral hazard and information asymmetry. Second section is analyzing factors which influences SME’s ability to get external funds. Last chapters of theoretical part is about which source of SME external finance are appropriate in different stage of development and evaluation of accessibility of external funds for SME. The third section of the Practical part is information of descriptive statistic, assessment of SMEs’ accessibility to external finance according to the age, size and activities. Estimation of SMEs’ demand for external finance. Identify and analyses factors which influence SME to borrow, by linier regression model and categorical regression model.
Keywords SMEs, external finance, ability to borrow,collateral, firm size,firm age, Georgia.
Keywords in English SMEs, external finance, ability to borrow,collateral, firm size,firm age, Georgia.
Language eng
Year 2016
Date and time of uploading 31.05.2016 14:59:26