Working Paper Series: Special Edition of 2016 to 2018 Interns

a priori expectations. For the CARICOM region, small firms are 38 per cent and medium firms are 23.0 per cent are less likely to obtain credit relative to larger firms, implying that larger firms do have an advantage when it comes to accessing credit. This is because banks perceive larger firms as more stable in the long run and less of a risk, especially where these economies in the CARICOM region are subject to higher volatilities in income. For those firms formally registered as partnership the odds of accessing credit are significantly higher and they are 15.5 per cent more likely to have access to financing, relative to shareholding companies. This is an indication that firms that follow proper channels in legally incorporating their enterprises, would have a better chance at accessing credit. There is a part here for SMEs in the region to play; as such, efforts should be made by those firms operating in the informal sector to secure formal registration, as it could improve their chances of future access to finance. The variables collateral, overdraft facility and audited financial statements significantly increases firms’ chances of accessing financing. Firms with collateral are 9 times more likely to access credit facilities as compared to those firms without. Firms with audited financial statements and overdraft facilities are 32.5 per cent and 36.3 per cent more likely to have access to credit respectively. Collateral reduces the risks of moral hazard, whereas audited financial statements tells about the financial performance, ability to service credit and overall health of the organization. Having an overdraft also reduces some of the risks of asymmetric information, as lenders are able to gauge firms’ creditworthiness by observing the servicing patterns of the overdraft facility. Moreover, lenders will always have updated information on the firms standing when they conduct their annual credit reviews on these overdraft facilities. If firms are servicing their overdraft facilities adequately, then they would be able to build a better relationship with the lenders thus, increasing their odds of obtaining future credit. The coefficient on the category university & postgraduate which measures managers’ education is negative relative to the category primary and secondary education, it’s a bit ambiguous as to why having academically qualified managers would reduce one’s chances of accessing financing. A possible explanation for this is that perhaps the majority of graduates are also owners of small, medium and young enterprises. The categories college and vocational and sole proprietorship were

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