Investigating obstacles of accessing formal financial services by small medium enterprises in Khomas region

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University of Namibia
This study investigates the obstacles to accessing formal financial services by small and medium enterprises in the Khomas region. It further identified obstacles that hinder the SMEs’ access to formal financial services in Namibia. Primary data was collected through the use of structured questionnaires which were issued out to a sample of forty firms selected from a population of fifty-five SMEs which are presently operational at Soweto and Dr. Libertina Amadhila center. Additionally, secondary data was extracted from annual reports and documents from the relevant banking and nonbanking institutions in Namibia. Analysis of survey result by descriptive statistics in tables, graphs and charts indicates that most SMEs owners use own savings or borrow money from friends and relatives as an initial source to start-up and run their businesses. The result of this study indicates that, there is a substantial difficulty by SMEs to access finance from formal financial service providers. Moreover, SMEs unable to obtain access from formal financial providers cited the major obstacles to their financial access as; lack of information and advice from financial institutions, complexity and cumbersome processes in loan applications, as well as inadequate collateral. It is therefore recommended to introduce a participatory program where the borrower and the bank discuss the credit scheme and the loan disbursement decision making process. Moreover, SMEs are encouraged to use government services assistance of SME incubation program as well as equipment finance and credit guarantee schemes.
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration (Finance)