| Previous studies regarding small-scale industries in developing countries did not provide quantitative measurement of the amount and timing of short-term credit needs from commercial banks. This study has attempted to fill this void.; In response to this need, a generalized linear programming model was constructed that can be applied to any small-scale industry providing certain essential data are available. For this study the model was adapted for analyzing the need for short-term credit by firms in the cement product and the ready-made garment industries in Thailand.; The generalized linear programming model has the following characteristics: (1) multiperiod to analyze one 12 month production cycle; (2) separate production and marketing activities with input prices and wage vary by seasons; (3) a differentiation between cash and credit transactions for input purchases and product sales; (4) a finished product inventory by product in physical terms by season adjusted by production, sales, and carryover phenomenon; (5) a seasonal cash flow and financial accounting (row activity); and (6) an objective function to maximize net return to fixed assets, family labor, and equity capital subject to demand, inventory, machinery, borrowed capital, and other financial constraints.; Results of the analysis of short-term credit needs can be summarized as follows: (1) the amount of credit needed from commercial bank sources varies directly with the level of total production, the percentage of production costs paid in the form of cash, the amount of trade credit provided to buyers and the inventory maintained for finished product; (2) it appears that the credit needs and timing of these needs of small-scale firm varies substantially among firms even for those of comparable size and product line; (3) shadow prices of borrowed capital varies widely by season according to the production, inventory, input acquisition and sale strategies of the firm as they relate to the lending policies of commercial banks; and (4) when the firm expands (other things equal), the amount of credit needed in any period will increase or decrease depending on the type of expansion, raw material acquisition policy, and the credit sales policy which the firm chooses to follow. |
