Impact of sources of finance on the growth of SMEs: evidence from Pakistan

Abstract

In this paper, we examine the impact of different types of funding sources on the growth of small and medium enterprises (SMEs) in a developing economy using Pakistan as a case study. We use Enterprise Survey Data of 78 SMEs in Pakistan over 3 years, i.e., 2002, 2007, and 2010. The results show that the banks play positive role toward the growth of SMEs over the sample period. In contrast, the informal sources negatively influence the growth of SMEs between 2002 and 2007 and the effects dissipate between 2007 and 2010 indicating the positive impact of government policies. The paper recommends further initiatives to reduce the impediments encountered by SMEs while accessing finance from banks.