Bank Financing for Small and Medium-sized Enterprises (SMEs) in Libya

Abstract

Small and Medium-Sized Enterprises (SMEs) are of increasing importance for all national economies worldwide. Evidence already shows that SMEs are critical in key economic areas, including the distribution of income, the absorption of labour and the alleviation of poverty. As a result, SMEs have been increasingly the focus of policies and strategies that aim at achieving sustainable development goals in both developing and developed countries, regardless of any pre-existing differences in their underlying economic systems. However, despite widespread developments in recent decades, the lack of access to finance remains a formidable obstacle for SME development. In seeking to diversify its economy and reduce its over-reliance on the large firm- dominated oil sector, Libya has chosen to focus on the role of SMEs to assist in achieving myriad economic and social development objectives. However, as the case in many other developing countries, Libyan SMEs face difficulties obtaining external finance, yet, there has been very little research undertaken to investigate the issues associated with their access to finance. This is particularly the case with bank financing, which as elsewhere, is the most important source of external finance for SMEs.