ASSESSING THE INFLUENTIAL FACTORS TOWARDS THE FORMAL FINANCING DECISION OF REGIONAL ENTREPRENEURS IN UVA REGION

Abstract

Sri Lanka is a lower-middle income country with one of the highest per capita income in the South Asian region. Entrepreneurship results for venture creation with direct/ indirect employments that leads on economic development, accelerating the achievement of wider socioeconomic objectives, including poverty alleviation, employment generation, income equality and foreign exchanges. Commercial Banks plays a pivotal role in economy while providing access to capital in various means to different sectors. The traditional financing methods has been replaced by informal sources due to inherited issues; high borrowing cost, long processing periods and high value securities. Further recent obstacles in the finance market create a question mark for the trustworthiness while think rationally on financing sources. Informal sources are more popular due to the simplicity of village lenders; personal securities ,less documentation and bureaucratic procedures even with high borrowing costs. Limited access to banking facilities, lack of regional spread of loan schemes or availability, afraid of using new technology tools or machines, lack of knowledge on banking procedures, and inability to provide collateral may cause for the less attraction of the formal finance sector when compared with informal sector. Research Objectives formulated to assess the impact of the formal financing dimensions and most and least important dimensions influencing regional entrepreneurs’ formal financing decision. Sample consisted from 40 Entrepreneurs chosen by snow-ball sampling method in Uva province and in-depth interview method has been adopted for data collection. Quantitative methods as Correlation and Regression analysis adopted for analysis. Study reveals most entrepreneurs are unsatisfied with the available packages of formal finance institutes and Microenterprise dynamics are the best influencing dimension on the formal financial decisions. Permanence in the sector, Plans to expand Buying and selling procedure and Compliance with tax authorities are mostly affect to the entrepreneurs’ formal financial decisions. As recommendations; relationship with entrepreneurs, locational advantage of Finance Institutions, focused Promotion ,public awareness , Time of access , and reducing the formalities has been provided. Simplify/flexible the pre-requirements to obtain the lending facility and process to entrepreneur, and government facilitation on financial infrastructure and financial literacy has been highlighted as managerial implications.