Access to Finance for SMEs

Lead Research Organisation: Bournemouth University
Department Name: Faculty of Management

Abstract

Lending to Small and Medium Sized Enterprises (SMEs), including micro businesses, remains at the top of the agenda for governments around the world. With various political and economic incentives introduced to support SMEs, it is important not to overlook the practicalities of institutional arrangements for access to finance, especially in the environment of prudent lending. This proposed seminar series brings together practitioners and academics in order to discuss the most pertinent issues of SME finance and of credit risk, with a view to setting a research agenda relevant to lenders and regulators. The government reports that the current support scheme appears to be working well, but banks have been criticised for their reluctant handling of the scheme. Critics emphasise that the uptake is far below the last year's Small Firms Loan Guarantee Scheme, but the British Banker's Association confirmed that total lending to SMEs rose. The government scrutinises the scheme and it was noted that banks were increasing charges and fees and require more personal security. New initiatives include the launch of the British Business Bank, local banks and credit unions. The German partners will contribute a comparative element for the institutional environment drawing upon. The German Kreditanstalt fuer Wiederaufbau (KfW) is considered to be a successful role model.

Participants will engage in debate and invite keynote speakers from academia, government agencies and industry. Social science research will be promoted by drawing on leading researchers and through interaction of speakers and attendees, which will include breakout sessions related to sub-schemes such as micro finance, the role of regional funds, gender and development agencies. There has been a string of reports on SME lending, funding and equity gaps. Now is the time to take stock, draw it all together and make a preliminary assessment of the various initiatives in light of those reports.

There is an abundance of academic literature related to the context of the project, see for example the seminal article by Thorsten Beck and Asli Demirguc-Kunt (2006), of which a brief review is attached in the Case for Support document.

Planned Impact

Through this new seminar group we aim to achieve societal impact, in particular on economic growth and entrepreneurship by supporting better access to finance through our plans for dissemination and communication. We will develop a website, hosted on the page of the established DM Centre for Entrepreneurship at Bournemouth University, through which the seminar series will be promoted, papers will be summarised and made available for downloading, and links to related events and institutions will be set up. We also plan to open a 'discussion room' and to make podcasts of highlights from the seminars. We will promote the site, the seminars and associated outputs, and related events to academic and policy users through our existing mailing lists which cover the UK and international community. All the participants have an extensive network of research contacts across academic institutions, government and NGOs in the UK and internationally. Examples include the mailing lists of the European Association for Comparative Economic Studies (EACES), the Money Macro Finance Group (MMF) of the Royal Economic Society, the Institute for Small Business and Entrepreneurship (ISBE) and the DM Centre for Entrepreneurship. These lists are regularly updated and will be extended further by the connections forged through this seminar series. We will target early career researchers and research students, and will reserve places at each seminar for this constituency supported by a dedicated budget line for those requiring financial support to be able to attend. An application to undertake a Special Issue of the International Small Business Journal, the leading UK and European Entrepreneurship journal, will be undertaken and we will use the seminar paper contributions as the basis for an edited volume (which may include some additional commissioned contributions). We will publish a shorter policy oriented paper in an appropriate outlet preceded by a suitable press release and will also seek to generate an associated article in the press (e.g. The Financial Times, The Economist, The Guardian, The Independent, The Times). We will use academic and policy conferences as platforms for additional promotion and dissemination of the series findings, for example by drawing on the outputs in plenary presentations and roundtable discussions (e.g. the conferences of EACES, MMF and ISBE). These outputs will enhance the knowledge economy, as new knowledge will be generated through academic impact.

Economic and societal impact will be achieved by influencing public policies at local and national level. Current examples are community banks (Bank of Bournemouth), the recently launched British Business Bank and the Enterprise Finance Guarantee (EFG) scheme, all designed to generate better access to finance for small businesses. This will also involve legislation, in particular in the area of financial regulation. One lesson from the recent financial crisis is that if banks are seen as too big to fail, they might actually be too big to exist and need restructuring. Banks' behaviour will also be influenced, as standard high street banking is questioned by different approaches (for example Swedbank and Metro Bank). This indicates that the project will have international impact, as most of financial regulation (certainly within the European Union) is of international character. An illuminating example is EU state aid legislation, which did not allow the British Business Bank to be modelled on the German KFW. Primary beneficiaries are SMEs, which will translate in increased entrepreneurship and economic growth. Ultimately the economic competitiveness of the UK will be strengthened, which in turn will lead to rising employment levels. This impact will be measured quantitatively, for example, by change of private sector employment and turnover generated by SMEs. The contribution to new job creation will be of particular interest, as this will feed into GDP growth.
 
Description A range of alternative finance is available and accessible for SMEs. There are business angels, the crowd, SME bonds (in Germany), credit unions and public banks as institutional arrangements possible. The German system of decentralised and relative small scale cooperative banks and municipal savings associations could serve as an orientation for the UK, as this set-up utilises local knowledge.
Exploitation Route Findings have resulted from 8 seminars as listed under engagement activities. End users will be policy makers and SMEs with the aim of influencing a better institutional design for access to finance for SMEs and SMEs seeking better access to finance. The project found that there is a lack of knowledge and transparency of alternative finance opportunities. The project promoted dialogue across disciplines between researchers and research-users, which developed a better understanding of 'better access to finance' for SMEs in the UK. Here the German experience will prove to be valuable.
Sectors Financial Services, and Management Consultancy

 
Description Awareness of alternative forms of SME finance compared to bank loans has been raised. I have been invited to a conference National Entrepreneurship Summit in Uganda by a former PhD student, who worked on the project. The title of the event will be SMEs: Unlocking potential. Publications, which were outcomes of the project have now been published, and will lead to further grant applications and have led to international invitations for presentations. Partly due to the project I have now won a project on the Marine Industry Supply Chain in Dorset sponsored by Poole Borough Council, which is aiming for economic policy recommendations at regional level. The industries involved are dominated by SMEs. This will be fostering the economic competitiveness of the United Kingdom and increase the effectiveness of public services and policy at regional level.
First Year Of Impact 2017
Sector Aerospace, Defence and Marine,Financial Services, and Management Consultancy,Government, Democracy and Justice
Impact Types Economic,Policy & public services

 
Description Poole Marine Supply Chain Analysis
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Participation in a advisory committee
 
Description Poole Marine Cluster Supply Chain Analysis
Amount £10,000 (GBP)
Organisation Borough of Poole 
Sector Private
Country United Kingdom
Start 02/2018 
End 05/2018
 
Description seminar: Access to Finance for Ethnic Minority Enterprises 
Organisation University of Birmingham
Department Health Services Management Centre
Country United Kingdom 
Sector Academic/University 
PI Contribution acting as chair and discussant, presentation of papers
Collaborator Contribution presentations on aspects of access to finance for ethnic minorities
Impact details see outputs, journal article
Start Year 2014
 
Description seminar: Access to Finance for SMEs in Transition Economies 
Organisation University College London
Department Division of Biosciences
Country United Kingdom 
Sector Academic/University 
PI Contribution presentations on the subject
Collaborator Contribution presentations one the subject
Impact see outputs: working paper
Start Year 2015
 
Description seminar: Approaches to SME finance in Germany and the UK 
Organisation Albert Ludwig University of Freiburg
Country Germany 
Sector Academic/University 
PI Contribution presentations on SME finance aspects in the UK
Collaborator Contribution presentations on SME finance aspects in Germany
Impact see outputs for details: one book chapter and a special journal issue
Start Year 2015
 
Description Access to Finance for Ethnic Minorities 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Study participants or study members
Results and Impact participants discussed aspects of SME finance for ethnic minorities
Year(s) Of Engagement Activity 2016
 
Description Access to Finance for SMEs 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact participants reported on previous workshops and discussed general aspect of access to finance for SMEs and institutions for it
Year(s) Of Engagement Activity 2016
 
Description Access to Finance in Transition Economies 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Study participants or study members
Results and Impact scholars discussed finance in transition countries
Year(s) Of Engagement Activity 2015
 
Description Approaches to Finance to SME Finance in Germany and the uK 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact 30 academic and professional practitioners discussed and compared aspects of SME finance in Germany and the UK
Year(s) Of Engagement Activity 2016
 
Description Entrepreneurship and Access to Finance for SMEs 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Professional Practitioners
Results and Impact About 70 practitioners, academics and PGRs and local policy makers had controversial discussions, which lead to interest in further future events.
Year(s) Of Engagement Activity 2015
URL https://business.bournemouth.ac.uk/about/access-to-finance-for-sme.html
 
Description Financing women's entrepreneurship: Options, strategies and outcomes. 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other audiences
Results and Impact Research workshop/seminar on gender, women and finance attended by 35 people including academics, practitioners, business advisors, bankers and investment providers. Much discussion was undertaken, a number of women business owners reported back to Susan Marlow (the organiser and CoI) that they would be changing their business finance strategies after attending the event.
Year(s) Of Engagement Activity 2015
URL http://www.nottingham.ac.uk/business/businesscentres/hgi/events/esrc-finance-seminar-series.aspx
 
Description Finding entrepreneurial and governmental investors: Approaches to SME finance in Germany and the UK 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other audiences
Results and Impact Research workshop / conference on particularities of SME finance in Germany / the UK compared. Part of conference series that took place in Freiberg, Germany. Attended by a max of 50 people including academics as well as practitioners. Many fruitful discussions, focusing institutional problems of SME finance from the supranational (EU policy) to the national level (financial intermediaries, financial system).
Year(s) Of Engagement Activity 2016
URL http://tu-freiberg.de/sites/default/files/media/investition-und-finanzierung-3418/Aktuelles/schedule...
 
Description Has the SME Finance landscape fundamentally change post-GFC? And what does the future hold? 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Study participants or study members
Results and Impact participants discussed aspects of SME finance post-GFC and the future
Year(s) Of Engagement Activity 2016
 
Description Session on finance within SSEES UCL Economics and Business Conference 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Schools
Results and Impact As part of the UCL SSEES centenary celebrations in 2015, the Economics & Business group organised a 3-day conference covering among other topics the theme of 'Financing Constraints, Firm investment Decisions and Financial Development'. This session was co-hosted jointly with with Bournemouth University (Prof Jens Holscher) to contribute to a series of the seminars on SMEs' access to finance: http://microsites.bournemouth.ac.uk/business-school/2014/08/13/access-to-finance-for-smes/. The session was international in scope, reaching not only for UK academic audience and policy-makers, but also academic scholars and policy-makers in EU, US and the rest of the World. During the finance session the issues of financing constraints, in particular experienced by small and medium-sized businesses (SMEs) was raised, and discussed in part of how better developed financial systems and financial stability are expected to ease up financing constraints for SMEs, and how this situation is expected to be addressed at a time of systemic financial crises.
Year(s) Of Engagement Activity 2015
URL http://www.ucl.ac.uk/ssees/centenary/centenary-events/ssees/research/research-centres/economics-and-...
 
Description Stay away from banks: Crowd-funding and other alternative forms of entrepreneurial finance (seminar in ESRC SME finance series) " Aston University, 7th-8th of May 2015 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Programme
Stay away from banks: Crowd-funding and other alternative forms of entrepreneurial finance
7th May 2015
Time Title Presenter or chair
12.30 13.00 Registration and light buffet lunch

13.00-15.00
Chair: Professor Andy Mullineux (Bournemouth)

13.00 13.40 Entrepreneurial finance Professor George Feiger, Dean of Aston Business School
13.40 14.20 SME Bonds Professor Andreas Horsch, Freiberg Technical University

14.20 15.00 Discouraged borrowers and
non -borrowers Professor Stuart Fraser, Warwick Business School
15.00 15.30 Tea & coffee

15.30 -16.30
Chair: Professor Jens Hoelscher (Bournemouth)
15.30 16.30 Reward -based crowdfunding Professor Giles Chemla and
Dr. Katrin Tinn (Imperial College, London)

16.30 -17.30
Chair: Professor Tomasz Mickiewicz (Aston);
16.30 17.30 Crowdfunding and early stage finance: practitioners' panel (1) Antony Fanshawe (FPN Ltd, Southampton); Donncha Hughes (Crowd Funding for Irish Businesses)
17.30 18.00 Peer to peer lending in China Wei Yue (University of Brighton)

8th May 2015
9.00 9.30 Tea & coffee
9.30 10.30 Business Angels and Crowdfunding Professor Mark Hart, Aston Business School, Aston University
10.30 10.45 Tea & coffee
10.45 11.15 Financial support for the start-up process. Preliminary discussion of PSED data Professor Paul Reynolds, Aston Business School, Aston University
11.15 11.45 Investment strategies: UK investors' point of view Dr Yundan Gong, Aston Business School, Aston University
11.45 12.30 Teaching 21st Century finance: crowdfunding and cryptocurrencies Dr Dale Heywood, University of Liverpool Management School
12.30 13.00 Credit constraints and exporting of Greek SMEs
Dr Agelos Delis (Aston)

13.00 13.45 Light buffet Lunch
13.45 14.45 Alternative finance: trajectory & relevance Professor Matthias Klaes, University of Dundee
14.45 15.45 Crowdfunding and early stage entrepreneurial finance Professor Saul Estrin (LSE) and Professor Susanna Khavul (Texas University, Arlington)
15.45 16.00 Tea & coffee
16.00 - 17.00 Chair: Professor Ute Stephan (Aston)
16.00 17.00 Early stage finance for different type of ventures - a practitioner's view (2) Stephen Miller (UnLtd);
Mark Runiewicz (Trade and Export Finance Ltd)
Year(s) Of Engagement Activity 2015
URL http://www.aston.ac.uk/aston-business-school/research/events/esrc-seminar-series-stay-away-from-bank...
 
Description Stay away from the banks: Alternative forms of entrepreneurial finance or lack of finance? 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Study participants or study members
Results and Impact 40 academic and professional practitioners attended and discussed alternative forms of access to finance for SMEs
Year(s) Of Engagement Activity 2015