Financial management is the key factor for the success of the seas in the context of the Maldives / Aishath Rana

Abstract

Small and Medium Enterprises generates growth and development for any economy in the world. (Ayyagari & Demirguc, 2003) Known otherwise as the backbone of an economy it creates most of the employment opportunities in the developing world and is directly related with reducing poverty.

Maldives, a country growing at a rapid fast pace, has a commercial private sector growing at a very fast pace. These small and medium enterprises have created the hype for new types of businesses in the commercial scene of the country, creating an abundance of job opportunities for the locals. This in turn has resulted in a rapid growth the in the Maldivian economy.

However, it can be seen that only a handful of these SMEs grow to become bigger enterprises. Even slow the growth that these SMEs most likely are to be seen as sluggish. A handful of reasons is vindictive of this reason -- most notably - market imperfection and lack of financial knowledge in financial management. Thus the importance being given to financial management in SMEs has considerably risen in the Maldives within the past few years.
This thesis examines the relationship between financial management and the profitability and growth of SMEs in the Maldivian context.

The main objective of this project is to understand how crucial a factor financial management plays in effecting the challenges faced by SMEs in the Maldives. This research will identify the current financial management practices in place, get an understanding of whether SMEs have the capacity to use, learn or adopt financial management. Additionally, this research investigates the financial management practices of SMEs in the Maldives and develops a model for SMEs to follow for profitability and business success. Moreover this research contributes knowledge regarding the efficient financial management required to improve SMEs success.

The structure of this thesis will be presented in five chapters. First chapter identifies the research problem and provide justification for the research study. It also examines the background of the SMEs in the Maldivian economy and reviews the significance and scope of the study.

Chapter two focuses on the literature collected to help identifying financial management issues faced by the SMF sectors all over the world. Especially in developing economies like Nigeria, Turkey, Sri Lanka, Singapore, Malaysia, Vietnam etc. The main locus of this chapter is to examine previous literatures related to financial management in relation to the profitability of SMEs and to build a conceptual framework model of the impact of proper financial strategy for the success of SMEs in Maldives.