The impact of financial borrowing choices on the Growth of SME’s in Pakistan

Abstract

This paper explores the effect of various forms of sources of financing on the development of small and medium-sized enterprises (SMEs) in an emerging economy, by using Pakistan’s case study. The Informal financial borrowing choices is the major cause of decline in the growth of SME’s in Pakistan as access to formal finance is difficult. The aim of thesis is to find the ways to improve formal financial borrowing system, that fulfills the financial needs of SME’s in Pakistan with fairness and dignity. The literature review consists of many subparts. It has been describing the theory of Market Power and theory of the financial growth life cycle. A research methodology has been conducted. The research philosophy for this research had been positive. A descriptive qualitative research analysis took place. A systematic review showed finding related to the topic. Business Survey Results of world bank are used from over 3 years of 35 SMEs in Pakistan, i.e. 2007, 2010, and 2013. The findings suggest that banks have a constructive role to play in promoting SME development over the study era. In the other hand, informal sources have had a negative influence on the development of small and medium-sized businesses between 2007, 2010 and 2013. A discussion has been conducted which showed an interpretation of the findings. A set of recommendations had been provided, a conclusion had been done to show the overall research on the influence of financial borrowing choices on the growth of SME’s in Pakistan