Small firms informally financed: studies from Bangladesh, Parts 63-253

Book by Islam, Reazul, Von Pischke, J. D.

this Working Paper Represents Studies Of Small, Informal Enterprises Which Were Commissioned By The World Bank Field Office In Bangladesh With Financial Assistance From The Netherlands Development Finance Company (fmo) Through The Royal Netherlands Embassy In Dhaka. Small Informal Enterprise Is The Dominant Form Of Economic Organization In Bangladesh. The Research Objective Was To Identify The Major Asset Of Each Firm Surveyed And To Determine How It Was Financed. It Was Hoped That This Information Would Provide Guidance In Designing Lending Programs Targeting Small Firms In Specific Industries. Although The Objective Was Not Fully Realized, The Studies Confirmed The Main Assumption Behind The Research: Firms In An Industry Exhibit Similiar Financial Structures, Which Vary From Industry To Industry. This Information Provides An Entry Point For A Prospective Lender And Suggests That Formula Lending (e.g., 80% Debt, 20% Equity) Is Not Appropriate Across Broad Ranges Of Economic Activity. More Than 350 Firms In 16 Industries Were Surveyed. Self-financed Predominated. Finance Did Not Generally Seem To Be An Important Constraint. Many Firms Conserved Capital By Renting Workshops Or Through Home-based Production. Working Capital Management Seemed A Larger Challenge Than Financing Fixed Assets. In Fact, The Studies Revealed That Many Informal Industries Are Net Suppliers Of Credit To Their Clients, Ultimately Benefitting The Poor People Who Buy Goods And Services From Informal Firms.