Strategies to help small and medium enterprises access funding: a case of Cotonou-Benin

Abstract

The main objective of this study was to examine the accessibility of funding of selected small and medium enterprises (SMEs) in Cotonou. A descriptive research design was adopted to carry out the study. The population of our research includes the SMEs of Benin, resulting from the various branches of industry. The size of our sample was 100. This study utilized primary data. Data was collected using a structured questionnaire and the data was analyzed for descriptive statistics (frequencies and percentages). The study revealed that many SMEs depend on their own personal savings as a major source for funding and 72% of the respondents indicated that access to finance is their major challenge. Also, about 72% said that it is during the start-up and growth stages that accessing fund for their business poses the greatest challenge. The SMEs also face several factors that block them from getting the needed funds. The factors include absence of collateral, insufficient capital, insufficient profitability andlack of business plan. According to the SMEs, they don’t get funding because of high interest rates and perceived risks associated with their business and some unfavorable credit policies by the banks. Besides, the banks do not support their business. Also, more than 90% of the sampled SMEs said they do not enjoy any form of support from the Government of Benin. The study, therefore, concludes that SMEs in Benin largely depend on personal savings as a source of funding their business and access to funding is a major challenge confronting the SMEs as a result of lack of collateral and business plans. In addition, the study concludes that financial institutions’ stringent loan conditions also inhibit SMEs access to financing. Finally, the findings show that the government is not supporting the SMEs. The study concludes that the lack of government interventions such as giving subsidies, recognitions, funds, trainings and some tax reliefs, among other factors, may affect SMEs access to funding.