Effects of Lease Finance on Performance of SMEs in Bangladesh

Md. Abdus Salam

Abstract: Over the years, Lease finance has been consented as one of the cornerstones of modern financial sources and a field of crucial decision for corporate organizations globally. As such, the purpose of this paper is to ascertain the effects of lease finance on the financial performance of SME's located on Munshigang and Kushtia in Bangladesh and whether lease finance has a relationship with the Return on Equity (ROE) /Return on Assets (ROA) of organizations. This study uses content analysis with the usage of questionnaire instrument is adopted using a multi-stage random sampling population of 53 SMEs. Respondents are entrepreneurs of SME's and a study of SMEs? 2012 annual reports. This study investigated 23 Medium enterprises SMEs and 30 Small enterprises SMEs. This paper studies the relationship between lease finance and firm performance in cross- sectional data for each group of SMEs. The results show a positive correlation between lease finance and Return on Equity (ROE)/Return on Assets (ROA) through simple regression statistics. These findings suggest that SMEs in Bangladesh should be consistently involved in their lease finance practices because lease finance has a significant impact on improving the financial performance of Bangladesh's SMEs, especially Medium enterprises SMEs.

Keywords: Lease finance, Performance, ROE, ROA, SMEs, Bangladesh