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An integrated approach to financing small contractors in developing countries: A conceptual model

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  • Alex Eyiah

Abstract

Lack of access to bank finance is one of the major constraints on the development of small contractors in developing countries. Efforts by governments and interested donor agencies to mitigate the problem have achieved little. Banks perceive that the risk and transaction costs involved in dealing with small businesses in general are high. They also lack information about small business owner-managers and their businesses to better evaluate their loan proposals. Furthermore, several factors make it difficult to acquire adequate collateral to compensate for the risk. Theoretical and empirical analysis has recognized the importance of developing a closer working relationship between the bank and the small business in addressing the problem and, hence, improving the latter's access to bank loans. Microcredit schemes, which dwell on the principles of small business-bank relationships, have been successful in this respect. This paper reviews the factors affecting bank financing of small businesses and examines their implications for small contractors in developing countries. Based on the concept of microcredit, a model for financing small contractors in developing countries has been developed.

Suggested Citation

  • Alex Eyiah, 2001. "An integrated approach to financing small contractors in developing countries: A conceptual model," Construction Management and Economics, Taylor & Francis Journals, vol. 19(5), pages 511-518.
    • Handle: RePEc:taf:conmgt:v:19:y:2001:i:5:p:511-518
    DOI: 10.1080/01446193.2001.9709627
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    Citations

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    Cited by:

    1. John K. Mbroh, 2012. "An Investigation of Small and Micro-Enterprise Owners‘ Perceptions Towards Financial Credit Offered by Commercial Banks in the Cape Coast Metropolitan Area of Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 171-180, March.
    2. Alex Eyiah & Paul Cook, 2003. "Financing small and medium-scale contractors in developing countries: a Ghana case study," Construction Management and Economics, Taylor & Francis Journals, vol. 21(4), pages 357-367.
    3. Agyenim Boateng & Muhammad D. Abdulrahman, 2013. "Micro Small-sized Enterprises and Bank Credit," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 12(2), pages 129-150, August.
    4. James C. Brau & Gary M. Woller, 2004. "Microfinance: A Comprehensive Review of the Existing Literature," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(1), pages 1-28, Spring.
    5. Gloria K. Q. Agyapong, 2015. "Sustainability of Microfinance in Ghana: A Theoretical Perspective," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(3), pages 127-137.
    6. John K. Mbroh, 2012. "Cash Management Practices of Small Business Owners in the Cape Coast Metropolitan Area of Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 40-58, March.
    7. Eresia-Eke Eresia-Eke, 2013. "Can Owner-Manager Characteristics Signal Small Business Loan Default Propensity?," Journal of Economics and Behavioral Studies, AMH International, vol. 5(11), pages 762-776.
    8. Eyiah, Alex, 2004. "Regulation and Small Contractor Development: A Case of Ghana," Centre on Regulation and Competition (CRC) Working papers 30668, University of Manchester, Institute for Development Policy and Management (IDPM).

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