Determinants of SME Funding: The Case of Kuwait

Abstract

The aim of this study is to explore the determinants of small and medium enterprises funding terms, and more specifically what factors at the individual and firm level influence demand for credit, funding obstacles, and access to credit. 
The study uses questionnaires to define the characteristics of the founders and the firms and how they influence their funding terms.
The sample includes 172 small and medium enterprises in Kuwait in 2019. It includes 55 female owners (32%), and 117 male owners (68%). 75% of SME owners are under the age of 35. In terms of the SME-level characteristics, 62% of the ventures employ a full-time accountant, 67% pay more than 10,000 KWD as start-up capital, 57% of SMEs have more than 10 full-time employees, 80% are revenue-generating SMEs, 64% have done a feasibility study prior to starting their company. 37% of the SMEs in this sample have been established for more than five years.
Female entrepreneurs do not face more obstacles in funding than male entrepreneurs do and are not less likely to get access to credit; this would indicate no gender discrimination. Female entrepreneurs do less demand for capital. Founder’s education has to do with to access to capital, such that entrepreneurs with higher education are more likely to access capital than those with lower education. Larger firms are more likely to access credit than smaller firms. 
This study is the first to examine the factors that influence SME funding terms in the Kuwaiti market, it also examines the two levels of analysis to identify what individual (entrepreneur) level factors influence funding terms and what firm (SME) level factors influence funding terms in Kuwait.
The results of the study suggest that there is no gender discrimination regarding access to capital for SME owners. Nonetheless, female entrepreneurs are less likely to demand for credit, which may require some interventions to encourage females to obtain credit and grow their business. Bigger firms have easier access to capital, while newer and smaller businesses continue to face significant obstacles and challenges in accessing funding. Overall, results of the study suggest that it is important to develop more specialized funding instruments to serve newer and younger businesses.