Abstract:

Financing plays an important role in supporting micro enterprises development. Although there are many financing options made available for this sector, the majority of micro-enterprises still encounter problems in accessing the funding assistance due to some external issues. This paper aims to examine the financing preference among micro- enterprises and reasons contribute to their selection. Data were derived from the questionnaire survey among the Malaysian micro-enterprises owner/managers. Based on 100 usable responses, the results demonstrate that the majority of the respondents rely heavily on their own funds. The major reasons are due to loan application bureaucracy and documentation requirements requested preference to internal funding due to their reluctance for additional debt commitment which seems a long-term burden if the business is not succeed. On the other hand, owner/managers who opt for external debt financing, was mainly triggered by the insufficient of their own internal capital. Furthermore, a quick and simple application process for loan where no collateral requirement facilitate their loan application. This in the case of most Government microloan schemes where less strict procedure is taken for approval. This paper provides new evidence in financing preferences by using a sample of the Malaysian micro-enterprises. The paper sheds light on the reasons behind micro enterprises financing preference which provides a useful insight on financial issues among enterprises from this sector.