Do Financial Intermediaries Promote Availability of Financial Instruments for Micro-Enterprises?

Abstract

The aim of the study is to investigate the role of financial intermediaries in promoting the availability of financial instruments for micro-enterprises in Latvia. The EU financial assistance policy for supporting business activity is accomplished on a national scale through tailor-made financial instruments implemented by financial institutions. Thus, the latter have been entrusted to act as intermediaries that offer government support to companies that have hitherto had difficulty in obtaining the necessary funding. Such aid schemes significantly facilitate access to finance for companies, especially micro-entities that have faced financial constraints in recent years.

Design/ methodology/ approach. The study examines the model of corporate financing established for accessing financial instruments in Latvia and scrutinizes the functions of government institutions involved in the model. Some of the practical aspects of financial mediation have been uncovered through individual interviews with financial experts. A survey of Latvian enterprises, covering 1879 micro-enterprises, provides an overview of the remaining limitations on obtaining external financing, including state aid. It highlights the attitudes and perceptions of micro-enterprises on the likelihood of obtaining financial instruments.

Originality/ value. The role of financial intermediaries in ensuring the availability of financial instruments in Latvia has not been studied before and has mainly been made visible through everyday practice. Although the JSC Development Finance Institution Altum, as the principal intermediary, has been actively involved in implementing new forms of support, the study has revealed areas for potential improvement in providing better access to financial instruments for micro-enterprises.