The funding challenged faced by small and medium enterprises: A case of Windhoek, Namibia
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Date
2018
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Publisher
University of Namibia
Abstract
This study aimed to investigate the funding challenges faced by small and medium enterprises in Windhoek city. The specific objectives that this study sought to address were to ascertain whether SMEs have challenges in accessing credit in Namibia and if so, determine these specific challenges; to determine how financing challenges affect the operations of Small and Medium Enterprises and recommend to policy makers on how to overcome these funding challenges and thus improve accessibility of funding to SMEs. This should result in the improvement of both the performance and growth of the SME sector. To achieve the above objectives, this study adopted a quantitative research design and used a sample of 293 SMEs that were drawn from Windhoek City using simple random sampling. The sample was drawn from various business sectors including construction, retail, manufacturing, beauty and cosmetics, transport and others. This study revealed that there were several factors that hinder the ability of SMEs to apply and obtain loan finance from commercial banks in Namibia. Among the major limitations to accessibility of loans by SMEs were: lack of sufficient collateral security, low profitability levels of SMEs, high interest rates on bank loans, lack of bankable business plans, and long and complicated loan application procedures and requirements. The findings of this study indicated that limited access to finance affects SMEs by limiting SME expansion, diluting the competitive power of SMEs, precipitating the closure of SMEs, limiting the ability of SMEs to make profits, grow and to create job opportunities. This study recommends that there is need for current and prospective
SME entrepreneurs to have access to advice on viable investment options in order to ensure that investments are directed to areas where there is both a need and high yield returns to the investors; the government should, through the central bank, reduce the interest rates charged on loans granted by commercial banks to SME businesses. By reducing the interest rate, SMEs will be encouraged to borrow and all else being equal, generate sufficient profits; commercial banks should relax their lending conditions to SMEs and reduce transaction costs associated with borrowing money.
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration-Finance
Keywords
Small medium enterprises