1. Demand-side obstacles to MSME
financing in Solomon Islands
2019 South Pacific Central Banking Research Conference
and Regional Policy Dialogue
Warwick Resort, Port Vila, Vanuatu | 13-14 November 2019
Jack Boe, Mary Magi-Loea, Parmendra Sharma, and Lan Nguyen
2. • MSMEs are “engines” of Economic Growth
• Sector is shown in the literature to be credit constrained
• This study: first to systematically investigate the extent and determinants
of credit constraints of MSMEs in SI
• Research Question: What are the determinants of credit constraints for
MSMEs in Solomon Islands?
• Study is pilot for the PICs; region-wide, comprehensive surveys
envisaged
Significance of this research
3. • Narrow economic base
• Growth averaged 6% from 2003-2011; declined to an average of 3%
• Credit constraints limits private-sector induced growth
• Weak SME policies, ineffective MSMEs guarantee schemes
Context of the study
6. - Population sample drawn from business registrars list
- Data collected over 5 months using survey questionnaires
- face-to-face interviews using survey questionnaire
- Data recording and verification performed by the researchers
Data and methods
7. Descriptive stats
• 55.7% of firms report
access to finance as
a major constraint
• Mean of firm size is
1.781 in logs (8
persons)
• Average firm age = 8
years old
• 72.1% of family-
owned businesses
• 41% of firms had a
bank loan in the past
• Average revenue = 12.831 in logs
• 70.5% of firms are owned by male entrepreneurs
9. • Firm size decreases the likelihood of being constrained: smaller firms have a
higher probability of being constrained by 48.3% relative to large firms
• Male-owned firms are found to be more credit constrained than female-owned
firms by 46.7%
• relationship between education & credit constraints contrary to expectation
It might be explained that in the business relations between firms and formal
lenders in the case of Solomon Islands, education level does not really matter
but the networking and experience of the owners may affect the access to credit.
10. • training seed funding
• support to institutions that promote access to finance for specific
groups: women, youth and men etc..
• MSME peer networking
Potential policy implications
11. • SMEs are the engines of growth, yet access to finance limits their ability to survive
and grow.
• The preliminary findings on the determinants of credit constraints are threefold.
• Smaller firms are more credit-constrained than larger firms.
• Male-owned firms are more credit-constrained than female-owned firms.
• Education does not affect access to credit
• Working paper by June 2020
Conclusion and plan
