Browsing by Author "Karunarathna, T.A.O.S."

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    Factors Affecting to Neglect Formal Financing Sources by the SMES (With Special Reference to Badulla District)
    (Uva Wellassa University of Sri Lanka, 2014) Karunarathna, T.A.O.S.
    The achievement of better economic growth of developing countries can be sustained by the expansion of private sector, as they are the engine of growth. As a consequence, it is important to accelerate the growth of SMEs (Small and Medium Enterprises) in order to gain sustainable development in this era. SMEs play a pivotal role in the socio economic development and poverty reduction process of any economy in terms of employment generation, growth of GDP, innovation, equitable income distribution, resource utilization and regional development. When developing this vital sector it is needed sufficient finance. The available financial sources for SMEs can be categorized into two categories as formal and informal. Although, there are available two approaches to obtain finance, most of the SMEs are failed due to lack of finance. Most of the SME owners are not willing to take financial aids from formal financial institutes and it has been a major barrier to the development of the sector. Hence, this study is focus to find the factors which affect to neglect the formal financial sources by the SME owners. The objectives of the study aim to find the relationship between the formal financing dimensions of the SME owners' and formal financing decision, then, determine formal financing dimensions impact on SME owners' formal financing decision and finally, determine the most and least important formal financing dimension factor that influence to the SME owners' formal financing decision. The study conducted through SMEs which have been registered under Badulla District Chamber of Commerce and Industry. A structured questionnaire was designed and administered to collect the data and the sample consisted fiom 60 SME owners. It is used SME owners' demographic factors to increase the research scope. Research methodology consisted of a model constructed by the author to measure influencing factors for formal financing that includes characteristics of the SME owner, characteristics of the enterprise, and firm dynamics. The results from the study reveal that SME owners' formal financing decisions are highly affected by the characteristics of the microenterprise, and firm dynamics. When it is further describing, factors like, years in business, location of residence or operation, sector of operation, permanence in the sector, plans to expand, and compliance with tax authorities are mainly influenced to SME owners' formal financial decisions.
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    Factors affecting to neglect formal financing sources by the SMEs; with special reference to Badulla district
    (Uva Wellassa University of Sri Lanka, 2015) Karunarathna, T.A.O.S.; Fernando, P.I.N.
    In terms of need for finance, the International Finance Corporation IFC defines an SME as ‘Small Enterprises’ with loan size of $10,000 to $100,000 and ‘Medium Enterprise’ with loan sizes of $100,000 to $1 million (UNEP, 2007). According to the Central Bank of Sri Lanka (1998), the cottage and Small Scale Industries (CSSI) sector plays an important role in economic development through creation of employment opportunities, the mobilization of domestic savings, poverty alleviation, income distribution, regional development, training of workers and entrepreneurs, creating an economic environment in which large firms flourish and contribute to export earnings. According to Kihimbo et al.,(2012), SMEs financing constraints are attributed by high transaction costs, high collateral requirements and lack of guarantee credit instruments, deficiencies in legal systems, regulatory and policy problems and asymmetric information. In order to operate efficiently, SMEs require easy access to short and long term capital. In general terms, it appears that lending to SMEs is seen as a high risk business since most of these enterprises lack collateral. Since, that is a major obstacle faced by SMEs, may be badly affected on the country’s economy as well. In accordance with Wahab and Hassan (2012), despite the importance of (SMEs) in the national economy in general, they face many obstacles that hinder their development; one of which is evident in the aspect of financial access. The primary objective is to identify the relationship of the formal financing dimensions that influence to the SME owners’ formal financing decision. Secondary objectives are to determine the impact of the formal financing dimensions on formal financing decision of SME owners and to determine the most and least important formal financing dimension factor that influence to the SME owners’ formal financing decision. Methodology All the SME owners in Badulla district were considered as the population of the study who are registered in Badulla District under the Chamber of Commerce and Industry of Uva Province. Therefore, the sample of 60 SME owners is selected from metropolitan and rural areas, who are doing their businesses in Badulla district. The sample has been selected using stratified sampling method. Data was collected by using a structured questionnaire. In addition, Cronbach Alpha reliability test was employed to assess the validity of the questionnaire and 0.822 of Conbrach’s alpha value indicated that the internal reliability and validity of questionnaire was acceptable since that these levels are exceeding the general acceptable level. Hence, it was suitable for the further processing. Data were analyzed using descriptive statistics, correlation analysis and multiple linear regressions.