• ISSN: 2155-7950
  • Journal of Business and Economics

Formal versus Informal Financing of SMEs in the Libyan Context: The

Case of Gharian City

Ghazi A. Samawi1, Metri F. Mdanat1, Fathi A. Yosef1, Bandar K. Abutayeh2
(1. School of Managerial and Logistics Sciences, German Jordanian University, Jordan;
2. Al-Balqa’ Applied University, Jordan)
Abstract: Many economists recognize that the development of small and medium enterprises (SMEs) is one of the most important contributors to economic and social development, particularly in developing countries. Therefore, the governments of many countries are interested in these companies and support them in different ways, according to their capabilities and the resources available. Promoting the establishment and growth of SMEs is among the most successful means that governments of developing countries such as Libya can use to tackle the problems of unemployment and poverty in society, and to accommodate the large numbers of laborers and job-seekers. The constraints facing such projects, especially economic ones, can be addressed by assessing these constraints and then finding the best solutions for them, in addition to improving these projects. The most important problems are lack of funding and poor liquidity. Although there are many specialized banks and commercial financial institutions, such problems persist. This research explores the methods for funding SMEs, based on a field study in Libya of a sample of SMEs and the Trade and Development Bank, conducted between 2007 and 2012.
Key words: small and medium enterprises; formal finance; informal finance; Islamic finance
JEL codes: G30

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