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Barriers for SMEs to Access Finance in China in Shaanxi City (Dissertation Sample)


Barriers for SMEs to Access Finance in China: A Case Study of SMEs in Shaanxi City, China


Barriers for SMEs to Access Finance in China: A Case Study of SMEs in Shaanxi City, China




I……………………………………………………..hereby declare that this piece of work is my original work and has never been presented in any institution of learning institution.


This study primarily sought to explore the qualitative relationship between Chinese SMEs and banks or other financial institutions in terms to access to finance, with a focus on barriers. A case study of SMEs in Shaanxi was used, and a survey involving 87 managers and owners of SMEs undertaken to address the research questions. Consistent with several past studies, this study establish that bank loans remain unpopular source of finance among the SMEs, with majority resorting to finances from their personal savings and loans and grants from families and friends. This state of affairs is attributed to a number of issues and barriers associated with banks loans, including high costs of access, institutional and procedural bureaucracies and unwillingness on part of banks to negotiate on rates. The situation is unlikely to change fundamentally in the near future, due to information asymmetry which prompts loan rationing among others. The study recommends various policy measures that may be adopted to address the issue.
Key words: SMEs, bank loan, Shaanxi, access to finance 


[Mention people you wish to dedicate the work to ]


            I would like to express my sincere gratitude and appreciation to a number of individuals without whom my dream to obtain a [level of the degree eg. Bachelors , masters ,doctoral] degree would have been extremely difficult.
              I would like to acknowledge my awesome dissertation committee members, [Names] for their professionalism, advice, and support, particularly throughout the dissertation process.
            Sincere thanks also to my wonderful and [Friends and relatives]
            I am eternally grateful to you all and will never be able to repay you for all you have done to help me make my commitment a reality.






 Table of Contents
Declaration. ii
Abstract iii
Dedication. iv
Acknowledgments. v
1.0 Introduction. 1
Problem Statement 1
Aim and Objectives of the Study. 2
Research Questions. 2
Justification and contributions of the Study. 3
Dissertation Structure. 3
Development of SME in China. 4
Sources of Finance for SME.. 5
Factors Influencing SMEs to Access Finances. 7
Structure of the Chinese Financial System.. 9
Current SME Financing Policies in China. 10
Financial Policies in Other Nations. 12
Relationship between Chinese SME and Financial Institutions. 14
Barriers to Access of Funds by SME.. 15
Lack of appropriate collateral to banks. 15
Poor Credit Ratings Assessment 16
Lack of Transparency in Accounting and Auditing. 16
Economies of Scale. 16
Political Risks. 17
Investment and Tax Policies. 17
Summary of the Chapter 17
Chapter 3:  Methodology. 19
Epistemological Approach. 19
Research Design. 19
Research Strategies. 19
Sample and Sample Size. 20
Inclusion Criteria. 20
Data Collection Methods. 21
Data Analysis. 22
Validity and Reliability. 22
Ethical Considerations. 23
Chapter 4: Findings and Analysis. 25
The overall condition of SMEs’s ease of access to finance. 25
Duration taken to access credit facilities. 28
Opening a bank account 28
Enterprise age and access to finance. 30
Sources of Finance. 34
Issues and Barriers. 36
General difficulty in accessing finances. 36
Impact 41
How Chinese SMEs’ access to finance. 43
Chapter Summary. 44
Chapter 5: Discussions. 45
Access to Finance. 46
Accounting for the Issues and Barriers. 48
Chapter 6: Conclusion and Recommendations. 51
Recommendations. 52
Limitations and Implications for Future Research. 54
References. 55
Appendix 1. 59
Questionnaire. 59
List of tables  
Table 1: Frequency distribution on perceived ease of access. 26
Table 2: Statistics Perceived ease of access to bank finance. 27
Table 3: Frequency table-Business life span before opening a bank account 28
Table 4: Frequency table- Enterprise age and access to finance. 30
Table 5: Statistics: Duration taken to open a bank account and to obtain loans. 32
Table 6:  Major sources of finance. 34
Table 7: Key barriers /issues to accessing finances. 37
Table 8: Impact of difficulty in accessing bank finances. 41
Table 9: Measures to improve access to bank and financial institutions’  loans. 43
Table of Figures
Figure 1: The participants in the study, by their tittles. 25
Figure 2: Perceived ease of access. 26
Figure 3: Business life span before opening an account 29
Figure 4 Enterprise age and access to finance. 31
Figure 5: Major sources of finance. 35
Figure 6: General difficulty in accessing finances. 36
Figure 7: Difficulty in accessing finances from bank or other financial institutions finances. 37
Figure 8: Key barriers to SMs financing. 39
Figure 9: Impact of difficulty in accessing bank finances. 42

1.0 Introduction

            Access to finance has been shown to be a major challenge to SMEs across the globe and China in particular (Chong & Ongena, 2013; Dollar et al., 2000; Kostka et al., 2013; Li, 2011). The SMEs’ difficulty in accessing finance among the Chinese SMEs is well captured in a study by Hussain, Millman and Matlay (2006), which brings out the contrast between UK’s SMEs’s financing, and the Chinese SME financing.  Though in both countries the SMEs have considerable difficulties getting start-up capital from financing institutions.  In the UK, this difficulty is short lived among well performing SMEs because after five years of uninterrupted growth they easily access finances from financing institution.  However, in China, the problem appears prolonged and indefinite as SMEs mainly depend on the immediate family for financing and to a limited extent financial institution, even for those that have been in continuous business for long.  Given crucial role played by SMEs in providing economic productivity of the country and well being of the people supported by income generated from SMEs, it is crucial to investigate into details factors accounting for such barriers, and explore the most viable way forward.

Problem Statement

            As aptly captured by the capital structure theories, firms’ developmental needs to financial structure.  One of the most influential models is Berger and Udell’s (2006) financial growth cycle which asserts that financial needs of an organization change overtime as its size and age of operations increase. At a young age and small size, firms may survive on entrepreneurs personal sources. However, as it grows and become older, it needs access to larger funds such as debt market and personal equities (Berger & Black, 2011). Despite being crucial for their expansion, access to finance remains a serious difficulty for SMEs in many countries (Dollar et al., 2000). In their study of SMEs access to finance in Tanzania, Woldie, Mwita and  Saidimu (2012) note that access to microfinance facilities has been severely inadequate&nbs...
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