Proceedings of 10th Global Business and Social Science Research Conference
23 -24 June 2014, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-55-9
Barriers to Accessing Microfinance for SMEs: An Interview
Study
Simon Gao* and Jane Zhang*
Microfinance has been recognized in many developing countries as an effective tool to address
social and finance issues in poor rural areas. While microfinance has been developed in China
since the middle 1990s, there are still many difficulties for small and medium sized enterprises
(SMEs) to access products and services provided by microfinance institutions. The aim of this
research is to examine the barriers confronting Chinese SMEs' access to microfinance and
identify the challenges that Chinese SMEs face in acquiring microfinance products and
services. This study adopts qualitative research through semi-structured interviews with SME
owners and managers. This study provides several findings. First, microfinance concepts and
products are generally known in Chinese SMEs and many SMEs have used and are
considering use microfinance products and services. Second, although mainstream financial
institutions also provide microfinance products and services, it is quite difficult for SMEs to get
access to the products and services from the mainstream institutions due to problems of
information, cost and competition. Third, many mainstream financial institutions lack expertise
and know-how to provide microfinance services and products for SMEs. Fourth, the role of
governments has been recognized in addressing the problem. This study provides several
recommendations, including: 1) the governments and SMEs authorities should take an active
role to look into China’s mainstream financial system to address financing difficulties faced by
SMEs, as microfinance can only play a limited role; 2) SMEs access to microfinance in China’s
less developed regions cannot be treated in isolation as this is related to the overall financial
system in China’s development; 3) it is very important for mainstream financial institutions to
improve information on microfinance product and services, understand the needs of SMEs,
and develop microfinance products and services that are appropriate for SMEs.
Field of Research: Finance (Microfinance)
* School of Accounting, Financial Services and Law, Edinburgh Napier University, Craiglockhart Campus,
Edinburgh EH14 1DJ, Scotland, UK; E-mails: s.gao@napier.ac.uk; ja.zhang@napier.ac.uk.