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The availability of financial resources is central to an entrepreneur's decision to start a business and for the venture's ongoing performance. Barriers to appropriate levels of financial resources can have a negative and enduring impact on entrepreneurs' decisions. The “bank-based view” argues that banks play a positive role in allocating capital effectively, improving corporate governance, and enhancing investment efficiency.

Despite the importance of financial resources, not all entrepreneurs have access to appropriate levels of finances. The problem is vital for entrepreneurs in developing countries. Given the poor financial infrastructure of most developing countries, entrepreneurs have limited access to the type of credit offered by formal institutions in developed countries. Traditional banks in developing countries are rarely willing to lend to entrepreneurs without collateral, given that “poor ...

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