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Informal financing of chinese SME in Brazil



Small and medium-sized businesses face obstacles in attracting low cost finance due to their less transparent nature in comparison with companies listed on the stock exchange. One of the alternatives for small and medium-sized businesses being able to obtain access to capital is through personal relationships and informal channels of financing. In Confucionist societies, guanxi (a social construct centered on the family) plays a preponderant role, facilitating interaction between companies and people. The literature, however, has not included significant studies on the influence of guanxi on informal financing in western societies. The objective of this article is to verify the impact of guanxi on entrepreneurs on the capacity of their small and medium-sized businesses accessing financial resources informally. To this end, data collected from Chinese entrepreneurs active in the principal business center of Brazil were used. From non-parametric tests, the principal results suggest that: i) different levels of guanxi allow small and medium-sized businesses to obtain informal access to financial resources, even operating in a non-Confucionist western society; ii) different types of informal financing are most used, or judged to be more significant, depending on the level of guanxi of the entrepreneur in terms of parental and non-family ties; iii) unlike the western literature on the financial cycles of start ups, the significance of the types of informal financing can extend beyond the initial stage of the business. The relevance of this article is based on the study of the impact of guanxi on the ability of small and medium-sized businesses to attract capital when operating outside of Confucionist societies.

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