The financing of small firms: different continents, the same problems?

The importance of small firms for economic development has been recognised across the globe. Most governments are aware that smaller enterprises face problems not experienced by their larger counterparts, and have taken steps to provide financial assistance. This article compares the experiences of small firms in the United Kingdom and Malaysia, and assesses whether public and private sector financial initiatives in the two countries have reduced the existence of the “finance gap” thought to prevail in both countries. The research programme conducted for this article suggests that, despite differences in the financial infrastructures, the cultural backgrounds and stages of economic development, small firms in the UK and Malaysia seem to adopt the same financing practices and face the same difficulties in raising funds. The reasons for this phenomenon are explored and the implications for policy-makers are discussed

The evaluation criteria used by venture capitalists: evidence from a UK venture fund

Grahame Boocock and Margaret Woods are Lecturers in Banking and Finance, and Financial Management, respectively at Loughborough University Business School, England. The paper examines how venture fund managers select their investee companies, by exploring the evaluation criteria and the decision making process adopted at one UK Regional Venture Fund (henceforth referred to as the Fund). The analysis confirms that relatively consistent evaluation criteria are applied across the industry and corroborates previous models which suggest that venture capitalists’ decision making consists of several stages. With the benefit of access to the Fund’s internal records, however, this paper adds to the current literature by differentiating the evaluation criteria used at each successive stage of the decision-making process. The paper presents a model of the Fund’s activities which demonstrates that the relative importance attached to the evaluation criteria changes as applications are systematically processed. Proposals have to satisfy different criteria at each stage of the decision-making process before they receive funding. In the vast majority of cases, applications are rejected by the fund managers. In addition, the length of time taken by the fund managers in appraising propositions can lead to the withdrawal of applications at an advanced stage

Measuring the effectiveness of credit guarantee schemes: evidence from Malaysia

Governments across the globe are increasingly utilizing credit guarantee schemes to support SMEs. This article fills a gap in the academic literature for developing countries by reviewing the effectiveness of the New Principal Guarantee Scheme (NPGS) offered by the Credit Guarantee Corporation (CGC) in Malaysia. Using a variety of research methods, the authors investigate whether the CGC has achieved its objectives of generating finance and economic additionality without placing its financial resources under undue strain or jeopardizing its relationships with participating financial institutions. It is almost impossible to establish ‘definitive’ measures of additionality yet our findings provide sufficient evidence to demonstrate that the CGC is not meeting all of its objectives. The authors put forward an integrated package of measures designed to enhance the effectiveness of the NPGS

An examination of non-bank external funding for small and medium-sized enterprises in the UK

This article reviews recent developments in the provision of long-term external funds to small and medium-sized firms in the UK; particularly, it attempts to establish how far the actions taken by a group of institutions, the specialist financial intermediaries (SFIs), have remedied perceived defects in the intermediation process. The activities of the SFIs are compared with those of the clearing banks, and the impact of government initiatives in this sphere is examined. While progress has undoubtedly been achieved in supplying external funds in amounts exceeding £250,000, attention still needs to be directed towards raising less than that figure and, especially, below £100,000

Venture capital in malaysia: the role of government

Venture capital in malaysia: the role of governmen

Small firms and internationalisation: learning to manage and managing to learn

Small firms contribute significantly to the UK economy, but most research into learning and work features the experience of large organisations. This paper focuses on learning and work in small organisations. An interpretive framework relating to organisational learning is derived from the literature. Data on learning in small organisations that internationalise are analysed to assess the extent to which models of organisational learning are applicable to the context and challenges they face. This paper suggests that the large firm model of learning is inappropriate. The distinctive culture and communication systems of small firms require different approaches to the acquisition, transmission and interpretation of knowledge. Tacit knowledge, developed through informal learning, is a priority and learning through local business networks is more important than participation in formal programmes. Advocacy of HRD practices based on conventional theories of organisational learning, therefore, may hinder rather than encourage performance in small organisations

The determinants of the utilisation of government-backed loan schemes: a case study of Malaysia

Government-backed loan schemes have been introduced in many countries to enable small and medium-sized enterprise (SMEs) to have access to funding at a reasonable cost. This paper focuses on the operation of the Credit Guarantee Corporation (CGC) in Malaysia. A model to determine the utilisation of the CGC’s facilities is developed. The equilibrium level of utilisation is derived by solving a reduced form equation which balances supply and demand factors. In an ex-post simulation test, our estimated model tracked the behaviour of the actual data reasonably accurately. The implications of the model’s findings for CGC, SMEs, banks and public policy makers are explored