The growth and financing of small and medium sized enterprises in Cameroon. The case of Bank financing

Details

Supervisors

Pierce, Robert

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

The growth and well-being of Small and Medium Size Enterprises (SMEs) is key to the development of most African economies and Cameroon in particular. The lack of finance has always been a major setback for the growth of SMEs in Cameroon. There are several means through which SMEs obtain finance the most formal of which are banks. However, a large proportion of SMEs in Cameroon shy away from bank financing. In this study a total of 54 SMEs and 6 commercial banks were considered in an attempt to decipher why bank financing to SMEs is still a problem in Cameroon. The study used primary data obtained through the use of questionnaires issued to both the SMEs and the banks. The results were first presented and discussed in the form of frequency tables generated using the Statistical Package for Social Science software (SPSS). Thereafter, a statistical analyses of the data using the Chi square analyses and the multinomial logistic regression was done to be able to predict which factors influence bank financing to SMEs. The results show that most SMEs do not go to the banks for loans because of complex loan procedures and high interest rates and rather prefer to get loans microfinance structures with lower interest rate or raise money from personal savings through social gatherings and from families. Based on the banks, the business knowledge of the SMEs owners and the confidence the bank has in the character of the individual influences the possibility of he or she getting a loan from the bank. In addition, the type of business portfolio for which the loan is intended determine whether it should be granted or not. For example, one bank mentioned the fact that they do not give out loans for investment on perishable goods. Also, some banks require the business to be fully registered and regulatory compliant to be eligible for a loan. Despite the unwillingness of SMEs to go the banks for loans and the hesitance of the banks to give out loans to SMEs, the results of this study show that the commercial banks in Cameroon have the right tools in place to ensure adequate financing for SMEs though a certain level of regulatory and procedural compliance is required.