How are SMEs Financed? Evidence from the Ghanaian Nontraditional Export Sector

Joshua Abor and Nicholas Biekpe

Environment and Planning C, 2006, vol. 24, issue 1, 71-81

Abstract: The study explored the determinants of small and medium-sized nontraditional exporters' choice of type of finance (formal or informal). The empirical results revealed a negative relationship between age and formal finance, suggesting that newer firms depend more on formal finance and less on informal finance. In addition, the study found positive and significant relationships between formal finance and size and growth of the firm. This suggests that larger and high-growth firms require more funds to finance their expansion and growth opportunities and therefore employ formal finance. Finally, the results of the study also indicated that the proportion of formal finance increases with increasing international activities, suggesting that, as firms engage more in international business, they employ more formal finance and less informal finance. Recommendations are made in this regard.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envirc:v:24:y:2006:i:1:p:71-81

DOI: 10.1068/c0454

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