Abstract:
This study aimed at assessing the factors affecting SME financing, addressing the role
of private commercial banks in Sri Lanka. Though identification on factors affecting
SMEs are based on SME owner’s perspective in many scholars, the supply side
perspective has not been covered. The literature was assessed to grasp knowledge being
published by previous researchers pertaining to SME financing and banks’ role, and
comprehensive theoretical framework analysis was also carried out to evaluate SME
financing and the behavior of banks.
A mixed method was used in the study where both quantitative and qualitative data
were collected using semi structured interview mode. 150 bank credit officers who are
involved in SME financing and credit units were selected to carry out the study where
the scope is limited to the Colombo District.
Both statistical analysis and thematic analysis were carried out based on the data being
collected and it has been identified that there are significant relationships between the
Lending policies of banks, Risks associated with banks, credit officers’ attitudes and
perceptions towards the SMEs, Rules and regulations by governments for banks and
Banks’ strategic motive and tendency for loan granting for SMEs by private
commercial banks. Further, it has been identified that the relationship management
between SME owners and banking staff is also a critical factor in loan granting
propensity. The study contributes to suggest policy implications on revising the lending
policies of Commercial Banks to look at customers in an objective manner without
making decisions based on the preconceptions to fulfill the financing needs of SMEs.
