How Does Lending from Commercial Banks Impact Performance of Small Enterprises: A Case Study of District Hafizabad, Pakistan

Abstract

This study examines the impact of lending from commercial banks on performance of small enterprises. Financial data of forty business entities of district Hafizabad have been collected from commercial banks, for the period of 2005 to 2013. “Net profit” in the first model and “sales” in the second model are used as dependent variables. Working capital, accumulated profit, net-worth and lending/financing amount are used as independent variables. The study suggests: Firstly, banks’ lending positively affects the performance of small enterprises. Secondly, financing amount illustrates positive effect on net profits of the firms. Thirdly, the preferred amount of lending to small enterprises is less than two million PKR.