What is the contribution of microfinance institutions on the growth of small and medium enterprises (SMEs)?
Student-written example
Shared for study and reference. Not a sample of our professional writing.
About this example
This assignment was contributed by a student. The views expressed are the author’s and do not necessarily reflect those of UKEssays. Use it to inform your reading and develop your own work.
Question
What is the contribution of microfinance institutions on the growth of small and medium enterprises (SMEs)?
Answer
The lack of sufficient funds to set up and maintain small businesses has been identified as a significant problem in the global business field. It has been illustrated that the concept of microfinance can be adequately incorporated into SMEs in order to boost their financial performance (Wijesiri, 2016). Yet, it is important to specify that microfinance is not solely related to providing loans to individuals. It has been considered from a more holistic perspective in the sense that it is interrelated to sustainability in improving the performance and economic outlook of SMEs. Microfinance can play an important role in prompting relevant financial reforms in developing countries such as India and China (Rahman et al., 2015). At the same time, the specific structure of microfinance provides substantial opportunities to SMEs to grow and prosper in the future. However, research on the relationship between microfinance and the profitability of SMEs is inadequate.
It has been argued that the active participation of SMEs in various microfinance schemes can enable them with a relevant opportunity to increase their revenues and net profits in the long term. In assessing the financial conditions in SMEs, it appears that personal funds and retained earnings have been identified as quite important indicators of the demand for microfinancing (Wijesiri, 2016). Those SMEs with lower productivity and insignificant retained earnings can encounter persistent problems, thereby their demand for microfinance options can substantially increase. At the same time, it can be predicted that microfinance can play an essential role for those SMEs that have considered the option of borrowing under unhealthy economic conditions. Certain firm characteristics should be determined in assessing the likelihood for SMEs to receive microfinancing funds (Rahman et al., 2015). Therefore, microfinance institutions can help SMEs facilitate their growth in terms of improved performance and profitability in the future.
References
Rahman, N. A. Hassan, S. Said, J. (2015). Promoting sustainability of microfinance via innovation risks, best practices and management accounting practices. Procedia Economics and Finance. 31(1) 470-484.
Wijesiri, M. (2016). Weathering the storm: Ownership structure and performance of microfinance institutions in the wake of the global financial crisis. Economic Modelling. 57(1) 238-247.
UK Essays writing support
Need support with your own question?
Get help from our experienced academic writers. All hold at least a 2:1 degree from a reputable university, and most hold a master’s degree or PhD, and/or have teaching experience.
Send us your question and, if you wish, any marking criteria. We’ll write a model answer to your brief.
Cite This Work
To export a reference to this article please select a referencing stye below:
Related Services
View all
DMCA / Removal Request
If you are the original writer of this assignment and no longer wish to have your work published on UKEssays.com then please click the following link to email our support team:
Request essay removal