Supply Side Obstacles to Financing the Private Sector: Empirical Evidence from a Small Island Developing State

Abstract

In light of the positive growing finance-private sector-economic growth findings, this article examines, from a supply side perspective, obstacles to private sector financing in Fiji, a growth deprived, small island developing state in the Pacific region. A survey of 80 per cent of formal financial institutions reveals that, contrary to popular belief, financing the private sector may not be a major problem. However, the prevalent relationship - lending practices, good profits and well-managed risks, together with moderate growth in private sector credit - also suggests that suppliers may be concentrating on a systematically selected small group of connected borrowers, resulting in the wider private sector, including many SMEs, being left out. Growth and development implications extend to developing economies across the Pacific.