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Investigating the causes of financial default among SMEs in Kuwait with evidence from the national fund for enterprise development
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Journal Article
Investigating the causes of financial default among SMEs in Kuwait with evidence from the national fund for enterprise development
2025
Overview
This research explores the causes behind increasing defaults among Small and Medium Enterprises (SMEs) in Kuwait by focusing on the impact of the crisis and the role of the Kuwait National Fund for SME Development. The central crisis examined in this study is the COVID-19 pandemic, which acted as a catalyst that intensified pre-existing financial and operational challenges within the SME sector. Other systemic vulnerabilities such as limited financial literacy, weak risk management, and policy gaps are also considered within this broader crisis context. By employing a mixed method approach, the study draws on 15 interviews with owners of defaulted SMEs and a questionnaire involving 64 defaulted SMEs. This dual method framework qualitative (thematic analysis) and quantitative (survey based statistics) provides both depth and generalizability in understanding default risks. Thematic analysis revealed that crises such as COVID-19 related operational delays, changes in customer behaviour, and increased financial obligations were the main contributing factors. The quantitative findings align with these themes, with 89% acknowledging that the pandemic affected their ability to repay loans. This research contributes to existing literature by empirically linking crisis induced pressures to SME loan defaults in a Gulf context, with Kuwait as the focus. Policy implications include strengthening the Kuwait National Fund’s role in flexible financial support, risk management programs, and enhancing SME access to alternative funding channels. The study proposes that the Kuwait National Fund for SME Development could implement sustainability policies and practices such as flexible financial support, capacity building, risk management, and facilitating connections with alternative funding sources to address these issues. These proposed strategies provide SMEs with more resources and skills to handle challenges, which may reduce default rates and contribute to a more resilient SME sector in Kuwait.
Publisher
Springer International Publishing,Springer Nature B.V,Springer
Subject
