Determinants of Access to Finance for Small and Medium-Sized Enterprises in Libya: An Analytical Study of Influencing Factors and Credit Constraints

Abstract

This study aims to identify the main factors that hinder small and medium-sized enterprises (SMEs) in Libya from accessing finance amid the economic, political, and security challenges affecting the business environment. The study is based on data collected from 264 companies and employs statistical methods to analyze the factors associated with access to finance. The findings indicate that financial constraints are primarily associated with two dimensions: entrepreneurs’ characteristics, including managerial capabilities and institutional relationships, and firms’ financial characteristics, such as collateral and financial performance. The results also highlight the importance of entrepreneurs’ characteristics in explaining financing difficulties faced by enterprises experiencing greater credit constraints. The study recommends developing human resources and managerial capabilities, strengthening financial management knowledge, improving relationships with financing institutions, and preparing clear and effective business plans. It also emphasizes the need for future research involving financing institutions and relying on objective data to develop a more comprehensive understanding of the determinants of SME financing in Libya.