Working Paper Series: Special Edition of 2016 to 2018 Interns

state-owned banks account for an average of 14.0 per cent of total overall financing with both small and medium utilizing less financing from other sources as compared to larger firms.

Tables 4 and 5 (appendix 1B) show the percentage of firms that have overdraft and loan facilities respectively. Of small firms, 53 per cent and medium firms 66 per cent did possess an overdraft facility, as compared to 81 per cent of the large firms, which possessed an overdraft facility. Of the firms that had a loan facility, 35.9 per cent of small firms and 41 per cent of medium firms had a loan compared to 47 per cent of large firms. Overall 62 per cent of the total firms were found to use overdraft facilities and 39.4 per cent of firms were found to be in possession of a loan. Compared to Mexico only 24 per cent of firms possessed an overdraft while 30 per cent had a line of credit or loan (Presbitero & Rabellotti, 2014) whereas, in Vietnam only 13per cent of SMEs were found to have an overdraft (Nu Minh Le, 2012). Overdraft facilities also known as revolving credit can allow firms flexibility especially in the cases where they might need working capital to clear salaries etc. In the CARICOM region, it is observed that there is greater penetration in the overdraft market than in the market for loans this is consistent with findings by FSD Kenya (2015) which suggest there is a heavy reliance by mid- sized banks in Kenya on overdraft facilities as their core financial product. 5.2 Financing in the ECCU The absence of credit bureaus in the ECCU member countries increases the level of information asymmetries between borrowers and lenders. Hence, whenever owners of small and medium enterprises approach the Commercial banks for loans they are often turned away for lack of collateral. This section looks at the different financing patterns of firms working and fixed capital, the different debt financing instruments and the perceived access to finance obstacle in the ECCU. Table 6 (appendix 1C) shows the mean proportion of working capital financing by firm size. From this table it is observed that internal funds account for 60 per cent of firms working capital financing, while supplier credit accounts for the second largest source of finance for working capital at 19.87 per cent. Booth et al. (2001) finds that in the presence of imperfect information much like the case in the ECCU, firms tend to avoid borrowing due to the high cost of external

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