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What are the biggest obstacles to growth of SMEs in developing countries? – An empirical evidence from an enterprise survey

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  • Yao Wang

Abstract

SMEs are drivers of economic growth and job creation in developing countries. It is paramount to determine the factors that hinder their growth. This paper uses the Enterprise Survey from the World Bank which covers data from 119 developing countries to investigate the biggest obstacles SMEs are confronting and the determinants that influence the obstacles as perceived by enterprise managers. The results show that SMEs perceive access to finance as the most significant obstacle which hinders their growth. The key determinants among firms' characteristics are size, age and growth rate of firms as well as the ownership of the firm. The latter – the role of the state in financing SME – is particularly intriguing. External reasons for the financing dilemma are also examined. It is shown that the main barriers to external financing are high costs of borrowing and a lack of consultant support.

Suggested Citation

  • Yao Wang, 2016. "What are the biggest obstacles to growth of SMEs in developing countries? – An empirical evidence from an enterprise survey," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(3), pages 167-176, September.
    • Handle: RePEc:bor:bistre:v:16:y:2016:i:3:p:167-176
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    Keywords

    SMEs; Obstacles to growth; Financing constraints; Developing countries; Firm characteristics; Internal and external barriers;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • N80 - Economic History - - Micro-Business History - - - General, International, or Comparative
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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