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Financing needs of micro-enterprises along their evolution

Financing needs of micro-enterprises along their evolution The purpose of this paper aims to investigate micro enterprises financing in Indonesia and examines how this financing differs, depending on the enterprise’s development stage. This research also identifies some structural problems related to micro-financing and provides workable solutions.Design/methodology/approachThis research uses the entrepreneurial network model of Schutjens and Stam (2003) to examine how Indonesian micro and small enterprises (MSEs) evolve even before they become regular small businesses. Content analysis is used on 10 micro-enterprises from Jakarta, the capital city of Indonesia and its surroundings. Financing issues at each stage of enterprise development are identified and deeply examined.FindingsThis research not only confirms the significant financing problems micro-enterprises face but also clarifies that these problems are unique to each stage of the MSEs’ development. One insight is that most micro-enterprises do not use funding from formal institutions. That is, business owners rely more on funding from non-formal institutions. This is because these enterprises’ managers generally cannot prepare loans application and/or they are lack of knowledge/training on financing matters. They hesitate to borrow from formal financial institutions, as the rates are high but the processing time is longer than those of the loan sharks.Originality/valueThis research contributes to the field of entrepreneurial finance by identifying the structural problems inherent in micro-finance and providing workable solutions for overcoming these problems. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Ethics and Systems Emerald Publishing

Financing needs of micro-enterprises along their evolution

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References (65)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2514-9369
DOI
10.1108/ijoes-05-2018-0071
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper aims to investigate micro enterprises financing in Indonesia and examines how this financing differs, depending on the enterprise’s development stage. This research also identifies some structural problems related to micro-financing and provides workable solutions.Design/methodology/approachThis research uses the entrepreneurial network model of Schutjens and Stam (2003) to examine how Indonesian micro and small enterprises (MSEs) evolve even before they become regular small businesses. Content analysis is used on 10 micro-enterprises from Jakarta, the capital city of Indonesia and its surroundings. Financing issues at each stage of enterprise development are identified and deeply examined.FindingsThis research not only confirms the significant financing problems micro-enterprises face but also clarifies that these problems are unique to each stage of the MSEs’ development. One insight is that most micro-enterprises do not use funding from formal institutions. That is, business owners rely more on funding from non-formal institutions. This is because these enterprises’ managers generally cannot prepare loans application and/or they are lack of knowledge/training on financing matters. They hesitate to borrow from formal financial institutions, as the rates are high but the processing time is longer than those of the loan sharks.Originality/valueThis research contributes to the field of entrepreneurial finance by identifying the structural problems inherent in micro-finance and providing workable solutions for overcoming these problems.

Journal

International Journal of Ethics and Systems – Emerald Publishing

Published: Apr 22, 2020

Keywords: Evolution; financing; micro-enterprises; start-up; ongoing; content analysis

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