An Examination and Critical Analysis of SMEs Failures/Barriers in Bahrain

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TABLE OF CONTENTS

CHAPTER 2: LITERATURE REVIEW1

Comparing SME with individuals5

Business failure10

Environment influence11

Small business and economy13

SME failure and market behaviour17

Bankruptcy impact20

Models20

Effective prediction model27

The concept of small and medium enterprises in Bahrain30

Importance of small and medium enterprises in Bahrain32

Support of small and medium-sized building productive capacity33

Advantages of small and medium enterprises33

Difficulties and constraints faced by small and medium enterprises in Bahrain35

Technical difficulties36

Financial difficulties36

Obstacles to financing small and medium-sized commercial banks37

The role of the finance department of small and medium-sized commercial banks39

Limited competition in the provision of such services between banks39

Recommendations40

Statistics44

REFERENCES47

CHAPTER 2: LITERATURE REVIEW

Advisors, counsellors and instructors to the leaders of Bahrain small businesses with only a few employees should not encourage them to engage in formal (i.e., written) planning in instances where the costs may exceed the benefits (Castro 2008, 24-79). In one of the earliest writings in this subject area, Paul J. FitzPatrick, Professor of Economics at Catbolic University, wrote: "Because of the meagreness of business failure literature, there is justification for the present study in the underlying objective of establishing the specific, not vague, causes of business failures, since the knowledge of the causes suggests on the one hand, the possibility of preventing future failures, and, on the other hand, the possibility of applying certain remedies. During the years leading up to and including the Great Depression which began in 1929, the maximum number of business failures in any year (Kuran 2004, 14-26).

During the recent recession of 1992, the business failure rate was 96,836, more than three times the highest year before and during the Great Depression. While a portion of the increase in failure rates is explained by expanded coverage by Dun &. Bradstreet and a portion can be explained by the increase in total firms in business over this period (Jalilian 2006, 15-30). Nevertheless, annual failure rates of over 100 firms per 10,000 in business are as common today as they were in the years leading up to and including the Great Depression. From 1984 through 1996 (the longest recent period of consistent statistical data collection), the business failure rate in the world has averaged about 68,000 per year with a range of 50,000 to 97,000. The trend during the recession of 1991 and 1992 was one of considerable increase (Jabbra 2009, 14-78).

With an improving economy, the failure rate subsided in 1993 and 1994 but has remained in excess of 70,000. Non-nationalizing the data for the gradual increase in the total number of businesses in existence produces a slight downward trend line but with the effect of the recent recession prominent nonetheless. For comparison, new incorporations are also plotted, and they range from 600,000 to 800,000 per year with a gradually increasing trend over time. The data tabulated here is for III businesses -large and small (Zipperer 2006, 23-45). However, if the count includes all businesses which file a business tax return and if the definition of a SME business noted earlier less than 500 employees) is used, 21 ...