CHALLENGES SMES FACE IN ACQUIRING LOANS FROM BANKS
ABSTRACT
Small and Medium-sized Enterprises make significant contribution to the socio-economic and political infrastructure of developed and developing countries. The ability of SMEs to develop, grow, sustain and strengthen themselves is heavily dependent on their capacity to access and manage finance. The ability to access finance is a major factor affecting the growth and success of SMEs. Many businesses face a lot of challenges acquiring loans from banks and SMEs are the most affected. This thesis reviews the debt options available to SMEs, the determining factors banks consider before granting loans to SMEs and make comparative analysis of the challenges SMEs face in accessing bank loans between Finland and Ghana, and recommend solutions in averting the challenges.
The findings of thesis shows that banks in general perceive SMEs to have high credit risk as compared to big corporations. Banks consider managerial character, capacity, environ-mental condition and collateral guarantee before making loan decisions. Banks in Ghana are strict on the collateral guarantee due to the high risk of loan default by their SME customers. Poor business proposal/plan, unprofitable investment decisions, unfavorable governmental economic policies and insufficient collateral are some of the challenges SMEs face in access-ing bank loans. Information asymmetry and high interest rate are unique loan challenges for SMEs accessing loans from Ghana. Low interest which makes loans unprofitable to banks in Euro Area is also specific challenge to Finnish SMEs.
Recommendations such as managerial skills workshops for SMEs, favorable economic and monetary policies and governmental support are suggested to avert some of the challenges the SMEs face in accessing loans.
Key words
Corporate finance, collateral, credit risk, equity, financial market, loan, information asym-metry, small and medium-sized enterprises.
CHAPTER ONE
1.0 Introduction
Small and Medium-sized Enterprises make significant contribution to the socio-eco-nomic and political infrastructure of developed and developing countries. Vibrant and expanding SMEs sector is very important for continual competitive advantage and economic growth for nations. (Berger and Udell 2006.)
In the current corporate environment, every organization with the goal of maximizing profit and minimizing losses require some kind of financing to enable it to increase the value of the owners’ investment. Financing in this context is the funds or capital raised by investors or lenders into a business to effectively conduct its activities to achieve its goal (Farlex 2003). Berger and Udell (2006) suggested that transactional returns of SMEs do not adequately meet their financial needs. The ability of SMEs to develop, grow, sustain and strengthen themselves is heavily dependent on their capacity to access and manage finance. One of the most reliable means for businesses especially Small and Medium-sized Enterprises to raise capital to achieve their goals is through bank loans. (Moro, Fink, and Kautonen 2014).
The ability to access finance is a major factor affecting the growth and success of SMEs. Thus, the availability of sufficient access to finance ensures the ability of SMEs contribution to the economic growth of a country. Many businesses face a lot of chal-lenges acquiring loans from banks and SMEs are the most affected (Moro et al. 2014). This is not just because banks are not ready to grant loans to SMEs, there are a lot of factors that limit the readiness of banks to grant loans to SMEs to help them grow their businesses (Abor and Biekpe 2005).
Earlier studies suggest that Banks and other financial institutions find it difficult to ac-quire information from SMEs to assist them in assessing their businesses before granting loans to them (McMahon and Holmes 1991; Mason and Stark 2004). SMEs in different economies (developed and developing markets) confront varying chal-lenges in acquiring loans from lending institutions.
The purpose of this research is to study the factors that make it difficult for SMEs obtain loans from Banks. What do banks expect from the SMEs before granting loans to them? What risk do banks consider in the markets before granting loans? Make the comparison and contrast the mechanisms banks use in the different markets (devel-oped and developing markets) in granting loans to SMEs. Also, the study will base on its findings gathered to recommend possible solutions that will reduce or eliminate the challenges SMEs and Banks in transacting loan facilities. This thesis will focus on studying the challenges SMEs face in obtaining loans from banks in different markets and what banks in different markets consider in granting loans to SMEs.
The research is conducted basically on interviews. The choice of qualitative research method is because of the nature of this research topic. The interviews provide the researcher the opportunity to ask to follow up questions based on the topic to get clarity of the responses given by the respondents. The purpose of this research is not to accept or reject a hypothesis but to understand the research subject from the per-ceptive of the respondents. The theories and concepts that are reviewed are the bases on which the main research is conducted. Corporate Finance is a topic and research on a branch of the topic needs theoretical conceptualization through literature review on concepts, theories related to the studies to form the framework of the research. The second part of the research is the interviews on which the two selected banks from the different markets is examined to evaluate the challenges confronting the SMEs in ac-cessing loans from banks. The interview method is used for this research because it gives an accurate data from the sources on which the research is conducted. It will reduce speculations on the research topic and draw more precise conclusions and recommendations of the topic.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
Procedure for Downloading the PDF (Docx) Material
Challenges SMEs Face in Acquiring Loans From Banks can be downloaded by requesting the full set of materials at the project or seminar cost. The document will be sent via Microsoft Word (MS-Word) format via WhatsApp (e-mail) following payment confirmation.
| Seminar Material Cost ₦3,000 | Project Material Cost ₦5,000 |
Request Complete Material
 | Click here to request the Complete Material via WhatsApp including;
|
TABLE OF CONTENTSPRELIMINARY PAGES
- Title page
- Approval page
- Dedication
- Acknowledgement
- Table of Contents
- Abstract
INTRODUCTION
- 1.0 Introduction
- ⋮
LITERATURE REVIEW
- 2.1 Introduction
- 2.2 Conceptual Review
- 2.3 Theoretical Framework
- ⋮
- 2.4 Empirical Studies
- 2.5 Research Gaps
- 2.6 Summary of Literature Review
CHAPTER THREE
RESEARCH METHODOLOGY
- 3.1 Introduction
- 3.2 Research Design
- 3.3 Population of Study
- 3.4 Sampling and Sampling Technique
- 3.5 Validation of Research Instrument
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Questionnaire Administration
- 3.9 Ethical Consideration
- 3.10 Statistical Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULT AND DISCUSSION
- 4.1 Introduction
- 4.2 Presentation and Analysis of Data
- 4.3 Re-statement of Research Questions
- 4.4 Test of Hypotheses
- 4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
- 5.1 Introduction
- 5.2 Summary of Findings
- 5.3 Conclusion
- 5.4 Recommendation
- 5.5 Suggestion for Further Study
REFERENCES
APPENDIX A - “QUESTIONNAIRE”
Disclaimer for Complete Material Utilization
The displayed research work titled "Challenges SMEs Face in Acquiring Loans From Banks" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
PRELIMINARY PAGES
- Title page
- Approval page
- Dedication
- Acknowledgement
- Table of Contents
- Abstract
INTRODUCTION
- 1.0 Introduction
- ⋮
LITERATURE REVIEW
- 2.1 Introduction
- 2.2 Conceptual Review
- 2.3 Theoretical Framework
- ⋮
- 2.4 Empirical Studies
- 2.5 Research Gaps
- 2.6 Summary of Literature Review
CHAPTER THREE
RESEARCH METHODOLOGY
- 3.1 Introduction
- 3.2 Research Design
- 3.3 Population of Study
- 3.4 Sampling and Sampling Technique
- 3.5 Validation of Research Instrument
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Questionnaire Administration
- 3.9 Ethical Consideration
- 3.10 Statistical Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULT AND DISCUSSION
- 4.1 Introduction
- 4.2 Presentation and Analysis of Data
- 4.3 Re-statement of Research Questions
- 4.4 Test of Hypotheses
- 4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
- 5.1 Introduction
- 5.2 Summary of Findings
- 5.3 Conclusion
- 5.4 Recommendation
- 5.5 Suggestion for Further Study
REFERENCES
APPENDIX A - “QUESTIONNAIRE”
Disclaimer for Complete Material Utilization
The displayed research work titled "Challenges SMEs Face in Acquiring Loans From Banks" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
Frequently Asked Questions (FAQ)
Can the material for “The Effects of Staff Welfare Scheme on Employee Productivity” be used as a guide for Industrial Relations and Personnel Management (IRPM) Project?
Yes it can be used — The Nigerian Local Government system has been fraught with a lot of problems since its inception in the colonial days. This is informed due to the various reforms that has been carried out by successive governments both at colonial and post impendence era. Despite these reform the Local Government has been characterized by low productivity corruption ineptitude and low morale to work. The Surulere Local Government Council is not an exception. Motivation of staff is a pivot to productivity of nay organization. Therefore, it becomes necessary to motivate workers to enable them work assiduously towards the goals and objectives of the organization. Ovation may not necessary be monetary compensation but also favourable condition of service which may not be quantified in terms …
Can this topic “Design and Implementation of GSM Home Based Security System” be used for Computer Science (CS) Project?
Yes it can be utilized for research — GSM Home Security systems in any various means are devices designed to guard person and property against broad hazards, including crime, fire accidents, espionage, sabotage, subversion and attack through GSM notification system. The aim of this project is to develop GSM based smart home system that will allow its users to remotely control and monitor multiple home appliances and detect intrusion using a cellular phone. In achieving this aim, the following specific objectives were laid out to design a GSM smart system for home control and implement the system using appropriate tools. The methodology adopted in this study is the structured system analysis and design methodology (SSADM) which is a technical approach for analyzing and designing an application or system …
Can this topic “Design and Implementation of Fixed Assets Management System” be used for Computer Science (CS) Project?
Yes it can be utilized for research — Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. The aim of the study is to design and implement a Fixed Assets Management System. In achieving this aim, the following specific objectives were laid out as follows to develop an application software that will facilitate an online recording and modifying of assets using electronic keyboard and enhance automatic depreciation of an asset, proper storage and speedy retrieval any asset value. The motivation that led to the implementation of the proposed system is as a result of improper accounting for school assets, illegal use of the institutional assets, inefficient recording keeping of institutional assets. Also, there …
Can the material for “Management and Control of Inventory in a Manufacturing Organisation” be used as a guide for Business Administration and Management (BAM) Project?
Yes it can be used — The purpose of this study is to examine the effectiveness of inventory control in manufacturing industries with particular reference to S. I. O. Industry Ltd Asaba. Due to the unprecedented growth in manufacturing and merchandising industries over the years, inventory has been accorded the save Center of those industries. It therefore follows that in trying to hold the industries in these should be adequately and properly controlled with a view to minimizing costs. Hence, in conducting research, the researcher made use of Oral interview and questionnaire; she also reviewed other related literatures necessary to provide the required data for the study. The data collected for the study were analyzed in tables using Chi Squares. The findings were that through the management hires as …
Is the topic “An Effective Antenatal Care Service a Remedy to Anaemia in Pregnancy” recommended for Midwifery Project?
Yes it is highly recommended — The study was carried out to determine the Effective Antenatal Care Service a Remedy to Anaemia in Pregnancy using Enugu State Primary Health Care as a case study. In achieving this aim, the following objectives were laid out to assess the Antenatal Mother Care Service towards Anaemia in Pregnancy in Enugu State Primary Health Care Service, determine the attitude of health care worker towards Antenatal Mother, and examine the effect of Anaemia on Pregnant women during Antenatal Care Service in Enugu State. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 250 (two hundred and fifty) respondents were selected for this study to represent …
Can the material for “The Role of Food Science in Human Nutrition” be used as a guide for Food Science Project?
Yes it can be used — The study was carried out to determine the Role of Food Science in Human Nutrition. In achieving this aim, the following specific objectives were laid out as follows to: investigate the effect of poor nutrition in human body, and determine the role of food science towards human understanding of nutritional requirements. In a nutshell, food science is the scientific study of food from the period of harvesting, processing, storage and packaging. Human nutrition now is concerned with the utilization of this food in the human system. Because both cases are referring to food, it shows that both terms are inter-related. Actually, food science plays significant roles in human nutrition as it broadens our horizon on the foods we consume. Some …
Can this topic “Design and Implementation of Congestion Control System for GSM Operation” be used for Computer Science (CS) Project?
Yes it can be utilized for research — Congestion Control System collect and analyze driving information of vehicles in the area, perform the optimal traffic signal control in accordance with the constantly changing road traffic situation, and provide useful traffic information to drivers based on the data collected. The aim of the study is to Design and Implement a Congestion Control System. In achieving this aim, the following specific objectives were laid out as follows to design and develop an application that will: identify, examine, daily signals, monitor problems associated with traffic control on the aforementioned junction, withstand high temperature, wind blow and rainfall, which affect the manual system that does the task, assume the computer screen as the point of traffic light installation where light will be …
Can the material for “Strategies for Enhancing Students Interest in Technical Drawing in Senior Secondary Schools” be used as a guide for Education Project?
Yes it can be used — Technical drawing is a graphical representation of objects and structures and is done using freehand, mechanical, or computer methods. The study was carried out to investigate the Strategies for Enhancing Students’ interest in Technical Drawing in Senior Secondary Schools. In achieving this aim, the following specific objectives were laid out to x-ray how the strategies of teaching Technical drawing in Senior Secondary School can enhance students’ interest and examine the effective use of instructional materials as a factor for enhancing students’ interests. Investigation revealed that lack of qualified teacher to teach technical drawing and high cost of instructional material had resulted into low enrolment of students in Technical drawing which is a consequence of low interest and attitude of students …
Can the material for “Design and Implementation of a Web Based Campus Fund Raiser System” be used as a guide for Computer Science (CS) Project?
Yes it can be used — Campus fund-raising is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies. The aim of the study is to design and implement a Web Based Campus Fund Raiser System. In achieving this aim, the following specific objectives were laid out as follows to develop an application software that will reduce money laundering among students officials and eliminate duplicate data entry and errors in time and entries. The motivation that led to the implementation of the proposed system is that some institutions use manual paper fund raising sheets for funds collection while this will be difficult for record keeping and also to keep track of the large number of students donating towards …
Is the topic “Unemployment and Reaction of Parents Towards Their Children Education” recommended for Education Project?
Yes it is highly recommended — The aim of the research is to find out the reactions of parents towards their children’s education in view of the present level of unemployment opportunities in Wamakko Local Government area of Sokoto state. It will seek to find out whether parents consider education nowadays as a waste of human and financial resources in view Of unemployment problem. In addition, this research will investigate whether parents attach any importance to the education of their female children in view of present unemployment problems. It will further seek to know unemployment has effect on parental view as regards the type of courses children will read. In order to find out all these problems, the researchers will formulate questionnaires for the parents to …