The Role of Banks in Financing Business Enterprises (A Review Article)

Abstract

Banks and financial and credit institutions play a pivotal role in economic growth, job creation, and private sector development due to critical functions such as converting savings into investments, risk management, reducing transaction costs, providing long-term financing, developing financial markets, and supporting innovation. By financing business enterprises through banks, the production and investment cycle is accelerated, thereby contributing to improving the standard of living in society. This review study examines previous research on various methods of financing small and medium-sized enterprises (SMEs) by banks, aiming to propose solutions for addressing existing challenges and obstacles to financing Iranian enterprises by Iranian banks. In terms of nature, the article is descriptive, and the data collected in this study are library-based, presented in four sections. The first section briefly presents the introduction. In the second section, theoretical discussions and required definitions are first reviewed, followed by an examination of previous research related to the study’s topic. Subsequently, the third section describes the research methodologies reviewed. Furthermore, the results presented in the fourth section indicate that banks play a highly significant role in financing various industries and that the development of these industries is not possible without the support of banks. Therefore, banks require planning and the adoption of diverse and up-to-date financing methods using information technology tools to support Iranian business enterprises, enabling remarkable progress in production growth and job creation through these enterprises across Iran.