Microcredit, in its simplest form, involves granting individuals who have lack of money access to capital in the form of uncollateralized small (micro) loans designed to be repaid with interest. Microcredit and micro franchise share the prefix “micro,” which for both constructs, is synonymous with a focus on select services for very low income clients (Fairbourne, 2007b). At least since Muhammad Yunus and his Grameen Bank won the Nobel Peace Prize in 2006, micro-credit has become well-known in the Western world. But what are the differences between the different concepts and where doesmicro-franchising fit in? This paper will investigate how far the micro credit or microfinancing helps the infant entrepreneur in micro franchising scheme. This paper speaks of the issue of how far the micro credit scheme provided by Financial Institutions helps the infant micro franchisee in Malaysia by looking into the financial elements offered by financial institutions in Malaysia. Micro franchise is the one of the methods to create the employment opportunities in a particular country especially in developing countries.
The term “financing gap” refers to a situation where a sizeable proportion of economically significant MSMEs cannot obtain financing from banks, capital markets or other suppliers of finance. Furthermore, it is often alleged that many entrepreneurs or MSMEs that do not currently have access to funds would have the capability to use those funds productively if the funds were available but due to structural characteristics, the formal financial system does not provide finance to such entities. The broad picture that emerges from the various surveys of MSME financing “strongly suggest that business owners view access to financing as a significant problem for business activity” (Turner et al, 2008). There might be a “financing gap” despite the various public and private sector initiatives to facilitate access to financing.
There are two methods of financing applied in Islamic banks, which is a non-profit-loss sharing (non-PLS) in the form of financing the sale and purchase system including hire purchase and method of profit and loss sharing (PLS) in the form of financing under the profit-sharing system. According Triyuwono (200 4) in the profit-sharing system, the interest rate is replaced with the rate of profit, therefore the investment system is driven by the profit rate, while the rate of profit is higher then the total investment was also higher. So that the level of profit that can positively eliminate speculative demand for money, the inflation rate can be reduced, since there are only actual demand for real investment. Profit-sharing essentially keeping the principle of justice is still running in the economy. Because it is economic stability derived from the principles of justice as practiced in the economy. When a bank determines the level determined fixed income funds lent to entrepreneurs regardless of whether the employer can or can not make a profit. When businessmen suffer losses, employers suffer alone, while the other party that the bank still obtain a fixed income from employers. Very different from the system based on profit- sharing, both parties would benefit or suffer losses together. Echoes the revenue sharing system togetherness (cooperation), justice, brotherhood, which may drive a feeling of personal interest and otherwise encourage and strengthen the interests of the community. However, according to Karim (2004: 195) profit-sharing contract does not provide certainty of income in terms of both quantity and time. So in this contract and the return timing its cash flow depends on the business performance mudharib (mudaraba fund manager).
When firms sell their products to customers, they usually do so on credit, especially when they are selling to another firm. This means that the customers do not have to pay immediately for the goods they purchase. The purchasing company is given an invoice that has the total amount due and the bill’s due date. However, offering credit to clients tie up funds that a firm may otherwise have needed, to invest or grow its operations. To finance slow-paying accounts receivable or to meet short-term liquidity, businesses may opt to finance their invoices. Invoice financing, also known as invoice trading or financing of account receivables, is a short-term alternative funding solution which allows firms to draw down cash against outstanding invoices due from customers (Sopranzetti, 1998). Put in another way, it is a way firms borrow money against the amounts due from customers. The difference between invoice financing and invoice factoring is that while invoice financing is borrowing money against account receivables, invoice factoring is selling the account receivables to another firm completely, it is a pre-selling of unpaid invoices to another company (Bakker, Klapper & Udell, 2004). Firms pay a percentage of the invoice amount to the lender as borrowing fee, and can access 70% to 90% of the invoice amount upfront. Invoice financing/factoring can solve problems associated with overdue payments by customers and difficulties obtaining other types of business credit. In addition, this source of alternative funding can help businesses improve their cash flow.
Trying to understand how firms choose their capital structure has been of great interestto scholars around the world for a very long time. Effort has been made in trying toexplain the proportion of debt relative to equity, instead of the exact combination ofdifferent kinds of securities, such as long-term verses short-term debt(Frank andGoyal 2007). From the past50 years, different theories on capital structure have emerged.Theories explaining capital structure and the variation of debt ratios across firms range from the irrelevance of capital structure, proposed by Modigliani and Miller (1958), to a host of relevance theories.According to the irrelevance theory, the amount of debt relative to equity only serves to determine the successive split of cash flows between debt holders and equity holders, and this relativity does not affect the aggregate value of the company. The theoryonly holds in the synthetic world of M&M, where capital markets are perfect, i.e. no taxes, no business transaction costs (Myers 2001).
One of the key constraints impacting the Micro, Small and Medium Enterprises (MSMEs) is inadequate finance, particularly working capital. In the case of MSMEs, the need for quick conversion of trade receivables, an important component of current assets of business entities, into cash assumes great importance since the lack of opportunities affects their liquidity and thereby their business, quite significantly. It is, however, observed that at present not many avenues exist for these enterprises to convert their receivables before maturity except through availing bill finance facility from a bank. One of the principal instruments of working capital is trade finance including bill discounting and factoring. It is estimated that only 10% of the total receivable market is presently covered under formal bill discounting mechanism in the financial system, while the rest is covered under conventional cash credit/overdraft arrangements with banks.
Conventional approaches to agricultural financing from development banks have been difficult and commercial banks have shied away due to perceived risks and costs while, microfinance institutions with their relatively high cost, short term microcredit do not offer any solution (Quiros, 2011). In the recent past a number of approaches have been used in financing agriculture oriented MSEs. The most popular ones include comprehensive risk assessment and lending approach, which focuses on character, capacity, collateral or capital and cash flow (Miller & da Silva, 2007). The Cash flow based lending (Henley, 2011) poses challenges due to the diversity of enterprise activity on a small farm making the approach complicated. Other financiers have used Value chains, value addition and value chain finance. Value chain finance in agriculture is an approach to financing that uses an understanding of the production, value added and marketing processes to best determine financial needs and provide financing to those involved (Miller & Jones, 2010). Other financing models that have been applied with limited success include; Linkage banking including a whole range of credit, banking and non banking services, including multiple loan products, savings, insurance, payments, money transfers and where possible point of sale access for accessing or depositing funds has also been used widely (Quiros, 2011). 2.1 An Overview of the Youth Enterprise Development Fund (YEDF) Lending Approach
This paper presents a survey conducted on Sustainability of Small and MicroEnterprises. Small and MicroEnterprises (SMEs) has a vital place in the economic development of any nation. In the State of ector contributed over 50 percent in the economic development and created significant number of new jobs despite number of difficulties that the SMEs are facing. Past statistics indicated that two out of five unable to survive during the first six This study investigates the way SMEs handle the challenges and sustain to exist in the computing business. This study employed simple random sampling to collect data from 57 registered and licensed small and microenterprises. Data collected using Questionnaire and interviews was analyzed and presented. Access to finance, land, Electricity, trained workforce, transportation, political instability, licenses & permits and tax rates are major challenges of small and micro training for members of small and micro enterprise (SMEs) is found so essential to capacitate the members for strengthening and identifying business areas where SMEs can further play a part in promoting research projects that can help them to copy or adopt technologies already exists in order to enhance their production and become competitive in the labor market as well as mange to the enterprises sustain. In spite of challenges and different measures r and sizes; however they are still facing hard conditions. Disparities among the SMEs are significantly escalating by creating excessive pressure on enhancing the productivity of the SMEs and hamper the important role it can play in the economic As similar studies indicate, such challenges can be addressed if the government is to providing various support services such as setting strategies to overcome the challenges; fair price to quality customer service and continuously on job training can enhance the
The analytical table I consists of the data pertaining to MSMEs of India in the form of total number of MSMEs, fixed investment made and employment generation by them with their contribution in exports during a period of forty years (1975-76 to 2014-15) which have further been divided under sub-headings A, B, C and D on the basis of time period of 10 years each to measure the comparative and overall performance of the units over the period under study.
The micro finance is agenda for empowering poor women. Microenterprises are an integral part of planned strategy for securing balanced development of the economy of the poor women. Rural women’s participation in agro-based activities is much more than what statistics reveal. This is mainly due to the fact that most of the work done by the women at farm and home is disguised as daily chores. Mechanization and easy availability of labour provide more time to energetic women to engage themselves in self-employment or entrepreneur ventures. Rural women are having human and non- human resources to take up an enterprise need one an innovative mind and motivation. Entrepreneurship is the only solution to the growing employment among rural youth. It helps to generate employment for a number of people within their own social system. This is more beneficial for women in rural areas as it enables them to add to the family income while taking care of their own home and livestock centered task. Rural women possess abundant resources to take up enterprises. Entrepreneurship development among rural women helps to enhance their
This study examines the mobile phone usage and its impact on micro enterprise performance in Tanzania. The study was conducted at Moshi Municipality, Kilimanjaro Region, Tanzania. A descriptive research design was employed whereby a total of 70 micro entrepreneurs who are belonging to any of the following categories: secondhand clothing, shoes and handbags, food vendors and saloon owners were randomly selected. Questionnaire and interview techniques were used as research tools in gathering quantitative and qualitative data. Quantitative data derived from closed ended questionnaires were analyzed into percentages while qualitative analysis was done through content analysis to identify, examine, interpret the pattern and themes from the interview and open ended questionnaires. Findings show that mobile phone services contribute positively to microenterprises business performance. 87% of the respondents used mobile phones services mainly for business purposes. Furthermore, findings revealed that the more the use of mobile phone services by micro entrepreneurs the more the business successes. However the study shows low perceived problems of using mobile phones were encountered by micro entrepreneurs. The study recommends that there is a need to have an awareness campaign on the uses of mobile phones in business activities at grassroots level.
According to Odhiambo (2013), in Kenya, strong SMEs tend to be located in urban and semi-urban centers and are usually registered. They also face a number of constraints, which include the difficulty in employing competent people with techniques in financial management because of the salaries such people would demand, financial problems arising from late payments by debtors, and inability to raise own finance and access financial services from formal sources. This category of SMEs usually looks to the banking sector and other financial intermediaries for instruments to finance working capital and to provide credit for short-term liquidity. They however, often fail to access the financial resources in the required amounts because banks evaluate them based on a checklist, including - audited financial statements for the last three years including management accounts; project proposal highlighting the strengths, weaknesses, opportunities and threats; financial projections; monitoring costs; credit or default risk because of the problem of information asymmetry; and enforcement costs.
lending groups including consumers and the self-employed, who traditionally lack access to banking and related services.” The today use of the expression microfinancing has it roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus, where starting and shaping the modern industry of microfinancing. Shore bank was the first microfinance and community development bank founded 1974 in Chicago . Financial services for poor people are a powerful instrument for reducing poverty, enabling them to build assets, increase incomes, and reduce their vulnerability to economic stress . But it has been observed that more than 80 % of households havebank accounts in high-income countries, compared to well below 20 % in low-income countries. In countries like Bangladesh or Sudan, that numberhovers just above zero The rapid growth of the industry over the past 15 years has reached approximately 130 million clients according to recent estimates. Yet microfinance still reaches less than 20 percent of its potential market among the world’s three billion or more poor. The World Bank Group is working with private microfinance institutions and stakeholders to incorporate responsible finance practices into all aspects of business operations. When done responsibly, private microfinance can have significant development impact and improve people’s lives.
SMEs with innovation of technology have higher performance compared to SMEs that do not have it (Subrahmanya et al., 2010). More recently, a study by Apulu and Latham (2011) claimed that adoption of information and communication technology in business will increase the competitiveness of the SMEs. Lack of technological capabilities is the primary reason for the slow growth of the small businesses in developing countries (Arinaitwe, 2006). Despite the great technology advancements throughout the world, small businesses are still caught up with the problem of lack of implementation of technology in their business operation. Singh, Garg and Deshmukh (2009) found that many SMEs in India are in low scale production, this decreases their capability to have technology improvements, which is one of the major obstacles to SMEs growth. Small firms face a lot of barriers in the adoption of technology such as expensive hardware and software, lack of internet and ICT professionals and so on, which interferes with their progresses (Ssewanyana and Busler, 2007).
Thus MSMEs play a vital role as they promote growth and development of the economy, reduce rural unemployment, regional disparities. MSMEs contribute significantly to the economic activity in almost every country of the world. Indian MSMEs are therefore of no exception. The performance of MSMEs has a determining significance for Indian economic growth due to their substantial share in enterprises, employment, and production and value addition besides being one of the important foreign exchange earner. However, inspite of their vital significance, these industries face various Challanges as mentioned which impede their growth. Therefore, in order to keep their growth engine on the right path, it is better to put emphasis on formulation of MSME friendly policies, conducive operating environment, improvement of proper infrastructure, securing peace and security, arranging proper finance, ensuring better and efficient management and arranging appropriate and modern technology. Considering MSMEs contribution towards every aspect of economic advancement, therefore a considerable attention should be provided to this sector.
Carpenter and Petersen (2002) argue that firms whose financial needs exceed their internal resources may be constrained to pursue potential opportunities for growth. The insufficient internally generated liquidity is therefore one of the factors which are frequently cited as the causes of micro and small business failure in developing economies. It is from this perspective, the micro credits are considered to be an appropriate solution because the amount of money needed to start a micro or small business is generally quite minimal (Sonfield & Barbato, 1999). Access to credit enables the MSEs owner to cover some or all of the cost of capital equipment, expansion, or renovation of buildings. Similarly, UWFT (2005) found that majority of MSEs that accessed adequate funds from microfinance institutions increased their volume of sales and the profit. The study also found MSEs acquired assets using MFIs loans. According to a study by UNDP (2002) found that MSEs in Kenya were able to acquire fixed assets and technologies using MFIs. The study established a positive significant relationship between amount of loan and MSEs achievement of goals. Makokha (2006) revealed that inadequacy of capital hindered the expansion of businesses. The study further found that larger loans enabled MSEs to graduate to medium enterprises. This argument is supported by Otto, Muli and Ong’ayo (2010) in their study that indicated that those MSEs that received large loans frequently had larger labour force than those MSEs that received smaller loans. Appropriate loan sizes for clients matching their needs, realistic interest rates, savings as a prerequisite, regular, short and immediate repayment periods and achieving scale can contribute to the sustainability of micro and small enterprises.
Entrepreneurship Theory of Shane (2003) states that an entrepreneur’s ability to identify and tap the opportunity provided by the external business environment to start or improve his/her business differs between individuals and depends on individual’s ability to access information and willingness to act upon the information in terms of risk. Ability to access information and willingness to act upon the information in terms of risk could be inferred to represent attitude to risk. Studies have found that attitude and behavioral intention are positively related (Crisp & Turner, 2007) and that attitude towards behavior leads to intention which eventually leads to actual behavior (Ajzen, 1991). We therefore conclude that attitude to risk moderates the relationship between credit, savings, social capital, and opportunity; and women entrepreneurs’ performance in Kenya and thus has positive effect on women entrepreneurs’ performance. Taking a clue from previous studies that have earlier measured the variables, and in determining the composite effect of financial factors on women entrepreneurs’ performance, we could finally conclude that Credit, savings, social capital, opportunity and attitude to risk are positively related to women entrepreneurs’ performance.
However, effectiveness of entrepreneurship training is greatly influenced by training needs assessment. A study by Jusoh, Ziyae, Asimiran and Kadir (2011) showed that through training needs assessment, critical issues regarding entrepreneurship training can be highlighted and emphasis given to areas that need to be trained on for business success. Further, a study by Rajani (2008) emphasized that intensified effort has to be taken to assess the social attitude, mentality, needs and abilities of various entrepreneurs so as to impart effective entrepreneurship training. Moreover, a study by Nadeem and Hafeez (2016)established that training needs assessment plays an important role in organization most importantly when giving training to employees. In line with these, a study by Huka, Mbugua and Njehia (2015) established that lack of training needs assessment has a negative effect on acquiring business competencies among youth and women groups in Marsabit County, Kenya. It must however be observed that training needs vary from organization to organization, and are determined by the objectives of the organization at particular times. Therefore, carrying out training needs assessment would bring out specific needs for specific organizations. The study focused on identifying the effect of training needs assessment on the performance of small and microenterprises (SME) in the ICT sector in Kenya.