Abstract

In this study, the authors aimed to examine the role of the informal financial sector financing new innovative startups projects. It is popular that the formal financial sector including banking and other financial institutions always try to avoid financing new innovative startups especially in their early stages where the risk is classified as very high.

This study was based on descriptive analytical approach with reliance on statistical instruments in order to test the hypotheses of this study. Thus, 120 survey questionnaires were distributed over the study’s sample. One hundred of those questionnaires were retrieved and used for the analysis. Results revealed that there are many barriers for financing new innovative startups, and that the formal financial sector, including banking institutions, tends to avoid financing new innovative startups especially at the first phases. This study contained implications and recommendation for academics and practitioners.

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