Small and medium size enterprises' access to external finance in Lesotho

[摘要] The objective of this study is to identify the main obstacles to SMEs' access to externalfinance in Lesotho. The research is conducted against a backdrop of access to externalfinance continuing to be a significant challenge for SMEs, resulting in their failure tocontinue operations, grow or maintain competitiveness. The lack of access to finance bySMEs is highly pertinent �?especially for a least-developed country like Lesotho �?as itnot only constrains SMEs growth and success, but also hampers the economic growthand development of countries.An empirical research was conducted using a quantitative approach and nonprobability,convenience sampling technique. The sample size of 82 was drawn from apopulation of SME owners and managers in Lesotho and the research instrument usedwas a self-administered questionnaire.The study found that only 50% of the SMEs surveyed have tried to access credit, andpersonal savings of owners was the leading source of start-up capital. Working capitalwas the leading reason SMEs needed external finance. Retained earnings remain theleading source of current funding, followed by up to 63.4% of SMEs that still usedpersonal savings of owners as source of current funding. Meanwhile, a majority ofSMEs preferred banks as their main source of future funding over other sources.The main demand-side obstacles to access to external finance for SMEs in Lesotho,identified by this research and in order of significance, are; 1) SME owners/managersbelieve they do not need credit, 2) inadequate cash flow to cover monthly loanrepayments, 3) high interest rates and other costs of getting a loan, 4) lack of collateral,5) equity base that is too small, 6) not wanting to be told how to run their businesses byfinanciers, 7) lack of the required business plan, 8) lack of information required byfinanciers, 9) financing is not available at all and, 10) lack of time to understand andcomplete loan applications.

[发布机构] University of the Free State