1. Demand-side obstacles to MSME financing in Solomon Islands
2019 South Pacific Central Banking Research Conference and Regional Policy Dialogue   Warwick Resort, Port Vila, Vanuatu | November 2019
Jack Boe, Mary Magi-Loea, Parmendra Sharma, and Lan Nguyen

2. Significance of this research
MSMEs are “engines” of Economic Growth
Sector is shown in the literature to be credit constrained
This study: first to systematically investigate the extent and determinants of credit constraints of MSMEs in SI
Research Question: What are the determinants of credit constraints for MSMEs in Solomon Islands?
Study is pilot for the PICs; region-wide, comprehensive surveys envisaged

3. Context of the study Narrow economic base
Growth averaged 6% from ; declined to an average of 3%
Credit constraints limits private-sector induced growth
Weak SME policies, ineffective MSMEs guarantee schemes

4. Literature review

5. Literature review

6. Data and methods Population sample drawn from business registrars list
Data collected over 5 months using survey questionnaires
face-to-face interviews using survey questionnaire
Data recording and verification performed by the researchers

7. Descriptive stats Average revenue = 12.831 in logs
55.7% of firms report access to finance as a major constraint
Mean of firm size is in logs (8 persons)
Average firm age = 8 years old
72.1% of family-owned businesses
41% of firms had a bank loan in the past
Average revenue = in logs
70.5% of firms are owned by male entrepreneurs

8. Preliminary results

9. Firm size decreases the likelihood of being constrained: smaller firms have a higher probability of being constrained by 48.3% relative to large firms
Male-owned firms are found to be more credit constrained than female-owned firms by 46.7%
relationship between education & credit constraints contrary to expectation
 It might be explained that in the business relations between firms and formal lenders in the case of Solomon Islands, education level does not really matter but the networking and experience of the owners may affect the access to credit.

10. Potential policy implications
training seed funding
support to institutions that promote access to finance for specific groups: women, youth and men etc..
MSME peer networking

11. Conclusion and plan
SMEs are the engines of growth, yet access to finance limits their ability to survive and grow.
The preliminary findings on the determinants of credit constraints are threefold.
Smaller firms are more credit-constrained than larger firms.
Male-owned firms are more credit-constrained than female-owned firms.
Education does not affect access to credit
Working paper by June 2020

12. THANK YOU