An Investigation Into Challenges In Accessing Finances By Smes From Financial Service Providers In Khomas Region, Namibia

ABSTRACT 

Small and Medium Enterprises (SMEs) assumes a definitive part in any growing economy. In Namibia around 60 % of the SMEs are the source of employment. Despite the fact that there is an expansion in SMEs, however, there are likewise incalculable difficulties connected with the growth of SMEs. Thus, this study investigates the challenges in accessing finances by SME’s from financial service providers in the Khomas Region in Namibia. Evidence from Namibia show that small firms are discriminated against by relatively large firms, in most cases, due to experience. Large scale firms can cope and solve their hurdles because they possess sound experience and financial position. There are also some hidden and apparent obstacles in the path of growth of SMEs in Namibia. The most important ones include labour issues, lack of coordination and regular information exchange mechanism amongst different institutions. The research study employed a mixed method approach, comprising of the qualitative and quantitative research designs. Interviews and Questionnaires with the use of both open-ended and close questions were used to collect qualitative empirical data from financial services providers in the region. Secondary data was obtained directly from previous literature reviews, books, journals and the internet. The descriptive statistics analyzed the data and conclusions were drawn from it. In this study, random sampling methodology was used to sample a population of 87 respondents and the data was obtained with the help of questionnaires. The data was further analyzed using graphs and tables. It was found that the majority of SMEs faces challenges in finance due to lack of collateral, risk and prolonged loan processing and procedures. It is suggested that for SMEs to improve access to finance, some of the recommendations that should be taken into consideration includes the provision of incentives for banks’ lending to SMEs as well as strict enforcement of the Credit Reporting Act. The findings of the research revealed that at each stage SMEs have different financial requirements and will source their financial needs from different sources. The problem of access occurs due to the gaps that exist between the suppliers of external financing and the demand for financial resources. The research recommends that SMEs improve their   knowledge of the financial procedures and the workings of the financial institutions, as it is crucial to their survival, while the financial institutions are implored to engage SMEs on improved support and contractual terms in order to reduce information asymmetry, moral hazards and adverse selection.