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The microenterprise earnings of microfinance clients in southeastern Sri Lanka are linked to their initial incomes. Poorer clients face geographic, financial and sociocultural barriers to entry to the most promising microenterprise occupations, leading them to select low-value activities with poor growth prospects. In semi-urban areas, poverty impacts could be strengthened by supplementing loans with nonfinancial interventions encouraging poor clients to select higher-value occupations. In arid rural areas, where microenterprises face severe market and infrastructure constraints, microenterprise development is unlikely to facilitate poverty exit. Key words--Asia, Sri Lanka, microfinance, poverty, microenterprise development, rural livelihoods

The hypothesis that small-business lending increases when commercial banks in the United States have securities affiliates is explored. This is not substantiated as it is shown that banks with securities affiliates and less than $1 billion in assets have lower portfolio proportions of small business lending than banks without a securities affiliate.

There has been a growing body of evidence indicating race-based discrimination in small business lending. However, very little research has examined potential geographic redlining effects. This article measures small business lending flows to neighborhoods in the Philadelphia metropolitan area. It advances previous work by measuring differential credit flows while accounting for variations in the credit scores of small firms. Black tracts receive fewer loans after accounting for firm density, firm size, industrial mix, neighborhood income, and the credit quality of local firms. The findings suggest that federal bank regulators should expand small business lending data to include racial characteristics and application information, in part to help identify potentially discriminating lenders for further investigation. Also, Community Reinvestment Act regulations should pay more attention to the distribution of small business loans, by both race and income of neighborhood.

Microfinance Systems. By Graham Wright. London: Zed Books, 2000. Pp.xix + 283. [pounds sterling]US$69.50 and [pounds sterling]15.95/US$25. ISBN 1 8649 787 9 and 788 7 Women Development Workers: Implementing Rural [...]

Microenterprise has gained attention as a strategy to promote economic well-being among the poor, but there is relatively little research to suggest whether microenterprise programs work. This study uses existing data to compare three groups: low-income microentrepreneurs who participated in one of seven U.S. microenterprise assistance programs, low-income self-employed workers not attached to microenterprise assistance programs, and low-income wage workers not self-employed. Analyses of household income and poverty status over time fail to suggest that microenterprise programs make significant gains for participants.

A sample of 629 small and medium sized business in the United Kingdom were found to choose earnings, debt, and new stocks, in this order, to obtain additional financing. Closely held businesses adhered more closely to the model, and factors affecting the financing decision include insider knowledge, owner preference, and supply of external capital.

According to a survey in the United Kingdom, small firms averaging ten employees set their credit terms to improve cash flow, and according to demand and product characteristics. These procedures affect the firm's ability to bargain for credit with their suppliers, and they are also pressured by industry practices.

This paper presents an analysis of a public assistance program for small-scale entrepreneurship in peripheral areas. Public assistance compensates for market inefficiencies where the decision rules of financial institutions discriminate against otherwise viable small firms in capital markets. Lending institutions perceive high risk in providing debt capital when little information is present. Using empirical data from Israel, the determinants of this risk are estimated and the role of location in creating this information asymmetry is stressed. These results empirically establish that (1) location matters in determining the risk profile of the firm, (2) locationally targeted programs can reduce the information asymmetries that make peripheral firms unattractive to lenders, and (3) these programs can also generate positive welfare effects. Finally, there is speculation on the potential role of ICT (information and communications technology) in increasing the visibility of small firms in remote locations and creating a more symmetrical flow of information.

Under the federal Community Reinvestment Act large commercial banks and thrift institutions were required to publicly disclose small business lending by geographic area beginning with lending activity for 1996. The most current data available are for 1999. Using Milwaukee, Wisconsin as a case study, this study illustrates how these new data can be utilized to assess the allocation of small business loans throughout a local market. This study found that small business loans (defined as loans for less than $1 million) are highly concentrated in upper income areas, and are more concentrated in those communities than is the case nationwide though these gaps moderated slightly during these years. Such lending is also concentrated in white neighborhoods with black and Hispanic communities receiving far fewer loans per population than is the case in white areas. More significantly, lending disparities between White and Black neighborhoods grew considerably. Approximately half of all small business loans went to firms that were small businesses (defined as those firms with assets of less than $1 million). The share of these loans going to such firms is smaller in Milwaukee and this gap increased over time, particularly in low--and moderate--income areas. Finally, this study found substantial differences among area lenders in the distribution of their loans by neighborhood income level and by size of business. On some measures these gaps have moderated slightly while on others they have increased. Policy recommendations are offered to improve the value of small business lending data that will be collected in the future and increase access to capital in low-income and minority neighborhoods.

According to this research, the location of Small Business Innovation Research grant awards is a function of the number of SBIR firms located in the same area, despite any varying firm, regional, or industry characteristics.

Jonathan Lean and Jonathan Tucker (2000), Information Asymmetry and Small Firm Finance, paper presented to the 23th ISBA National Small Firms Policy and Research Conference, Aberdeen, November. DISCUSSION OF WHETHER [...]

THE FINANCING OF SMALL BUSINESSES is the subject of enduring academic and political debate. A continuing tradition has been for research to focus on the efficiency of the supply of [...]

This article examines the access to small business financing among native-born Puerto Ricans, American-born Puerto Ricans and immigrants to Puerto Rico, concluding that immigrants are more likely to receive financing than are Puerto Ricans. Reasons include the possibility that immigrants are wealthier and have easier access to representation in the financial sector, and the higher probability of financial success among immigrants promotes there ability to obtain credit.

Byline: Simon C. Parker (1) Abstract: This paper shows how a dynamic analysis of entrepreneurial choice, in which inter-temporal savings plans can be adjusted to build up capital, allows agents to overcome borrowing constraints. This casts fresh doubt on the notion that borrowing constraints deter entrepreneurial entry in the long run. Impatient agents are shown to voluntarily remain constrained indefinitely, whereas patient agents become entrepreneurs. The model also explains temporary and permanent closures of viable businesses. The model's predictions are consistent with evidence of greater savings behaviour by entrepreneurs. Author Affiliation: (1) Department of Economics and Finance, University of Durham, 23--26 Old Elvet, Durham, DH1 3HY, U.K. Article History: Registration Date: 08/10/2004

Byline: Alec R. Levenson (1), Kristen L. Willard (2) Abstract: This paper measures the extent to which small businesses in the United States in the late 1980s were able to access the external credit finance they desired. We argue that a comprehensive definition of credit rationing must account for both (a) creditworthy firms that apply for and are denied financing, and (b) creditworthy firms that decide not to apply for desired external financing, given expectations about how long it may take to obtain financing and the evolution of investment opportunities. Data from a national survey of small businesses shows that only 2.14 percent of firms did not obtain the funding for which they applied in 1987--88. Another 2.17 percent may have faced some short-run constraints on investment: they were initially denied by lenders but received the credit for which they applied by the end of the sample period. Finally, an additional 4.22 percent of firms are estimated to have been discouraged from applying because of expected denial. Constrained firms are smaller, younger, and more likely to be owned by their founders than those firms that successfully applied for external finance. The total number of credit constrained firms seems quite small, particularly because we cannot distinguish empirically between creditworthy and noncreditworthy firms. Thus the extent of true credit rationing appears quite limited. Author Affiliation: (1) Center for Effective Organization, University of Southern California, and Milken Institute, 1250 Fourth Street, Second Floor, Santa Monica, CA, 90401, U.S.A. (2) Graduate School of Business, Columbia University, 3022 Broadway Room 608 Uris Hall, New York, NY, 10027, U.S.A. Article History: Registration Date: 08/10/2004

Byline: Joe Cheung (1) Abstract: While discount rates of listed companies can be readily estimated using 'betas' and the Capital Asset Pricing Model, the same is not true for small business. Entrepreneurs often have to rely on subjective assessments of the financial viability of their business ventures. This paper suggests an alternative to estimate the costs of capital for small businesses. Costs of capital are derived from the probability of success for similar business. These required rates of return can be used as minimum hurdle rates to assess the viability and profitability of the business under consideration. Since risk neutrality is assumed of investors in this approach, the costs of capital established should only be regarded as minimum returns required by risk-averse investors. Therefore, this suggested approach attempts to provide a refined 'rule-of-thumb' which may be of value to small business entrepreneurs and financiers, especially when detailed accounting and financial data of similar business are not readily available. Author Affiliation: (1) Department of Finance, University of Waikato, Private Bag, Hamilton, New Zealand Article History: Registration Date: 30/09/2004

Byline: Nicos Michaelas (1), Francis Chittenden (1), Panikkos Poutziouris (1) Abstract: This article utilises up-to-date financial panel data, and investigates the capital structure of small and medium sized enterprises (SMEs) in the U.K. Different capital structure theories are reviewed in order to formulate testable propositions concerning the levels of debt in small businesses, and a number of regression models are developed to test the hypotheses. The results suggest that most of the determinants of capital structure presented by the theory of finance appear indeed to be relevant for the U.K. small business sector. Size, age, profitability, growth and future growth opportunities, operating risk, asset structure, stock turnover and net debtors all seem to have an effect on the level of both the short and long term debt in small firms. Furthermore, the paper provides evidence which suggest that the capital structure of small firms is time and industry dependent. The results indicate that time and industry specific effects influence the maturity structure of debt raised by SMEs. In general terms, average short term debt ratios in SMEs appear to be increasing during periods of economic recession and decrease as the economic conditions in the marketplace improve. On the other hand, average long term debt ratios exhibit a positive relationship with changes in economic growth. Author Affiliation: (1) Business Development Centre, Manchester Business School, Booth Street West, Manchester, M15 6PB, U.K Article History: Registration Date: 30/09/2004

Bank mergers and consolidations are found to constrain small business lending, but this effect is more than offset by the reaction of other banks and by the reactions of the merging banks in some cases. The study is the first to decompose the effects of mergers into the static effects and the dynamic impact of these mergers on small business lending rates of merging banks.