Beyond Access to Finance - A Micro- and macro level study of determinants of SME growth

Abstract

The present study analyses the weaknesses and strengths of the “tools” used by governments to promote the Small- and Medium sized enterprise (SME) sectors as much as it aims to assess the policy responses to the evolving policy context by conducting a two-level study of both qualitative and quantitative characteristics using EU member states as well as Swedish SMEs as units of analysis. As the trade-and industry sector, in addition to scholars and policymakers, have recognized the importance of SMEs to employment and the domestic economy, attention has been focused on the capital market imperfections that have arisen as an effect of the financial crisis. The essence of the argument that has driven SME policies is that increasing access to finance will promote the sectors contribution to the economy and employment, yet this cross-country study shows that there is no direct correlation between the improvement of access to finance and employment creation and SME contribution to the economy. In order to determine the desirability and accessibility of such programs, the micro level study examines how the level of interest rate in the public financial support loan program in Sweden responds to the growth needs of Swedish SMEs. Essentially, the argument that comes to the fore is that the public financial support program in Sweden targets SMEs successfully and that the level of the interest rate itself does not determine SMEs growth investments.