Original scientific paper
https://doi.org/10.1080/1331677X.2019.1655465
The causal relationship between SME sustainability and banks’ risk
Fadi Shihadeh
; Department of Computerized Financial and Banking Science, Business and Economics Faculty, Palestine Technical University, Tulkarm, Palestine
Sisira Kumara Naradda Gamage
; Department of Social Sciences, Faculty of Social Sciences and Humanities, Rajarata University of Sri Lanka, Mihintale, Sri Lanka
Azzam (M. T) Hannoon
; Department of Accounting, Finance, & Economics, College of Business Administration, American University in the Emirates, Dubai, United Arab Emirates
Abstract
This study aims to examine the influence of banks’ credit to SMEs on non-performing loans. Many studies find that access to financial sources has become an obstacle to the growth and sustainability of SMEs. This study uses theoretical and empirical approaches to support the study’s hypothesis. Data are presented for 15 banks in Palestine, covering the period 2006 to 2016.The study uses empirical techniques regarding to examine the relationship between the variables. Evidence shows that encouraging banks to lend more money to SMEs through the use of a guarantee fund could decrease their risk. Thus, enhancing credit to SMEs could improve the growth and sustainability of these firms. The study recommending policymakers and bank’s managers could develop their strategies according to SME’s needing. Therefore, enhancing the growth in these firms and reducing the bank’s risk. Furthermore, adopting the guarantee funds in developing countries could decrease the bank’s risk, thus lending more to SME. The value of this paper comes from the importance of SME in the economic growth and development sustainability. Therefore, there is a need to convince banks to enhance SME credit through a guarantee fund and that extending this type of credit would positively influence banks’activities.
Keywords
Sustainable development; SMEs; credits; bank’s risk; non-performance loan; Palestine
Hrčak ID:
229582
URI
Publication date:
22.1.2019.
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