AN ANALYSIS OF MICRO AND SMALL ENTERPRISES (MSEs) ACCESS TO CREDIT FROM THE BARCLAYS BANK IN TAMALE

Abstract

The study was an analytical survey aimed at investigating micro and small enterprises (MSEs) access to credit from the Barclays bank in Tamale. More specifically, the study was aimed to identify and analyze: the Barclays bank lending conditions and MSEs access to credit; How MSEs access credit from the bank; socio-economic factors that determine MSEs access to credit; and the effects of access to credit on MSEs. To achieve these objectives, proportional stratified and simple random sampling (SRS) methods were employed to select 250 sample size for the study. Data were obtained from interviews conducted with and questionnaires administered to MSEs. Barclays bank staff. NBSSI and MASLOC. Both qualitative and quantitative techniques were used to analyze the data. The study revealed that the number of employees of a business, experience in credit use and number of fixed assets possessed, attitude towards risk, business size and new or existing business were considered as key determinants for credit by MSEs. It also showed that credit helps MSEs to meet orders placed by customers, acquisition of additional equipment, purchase of raw materials, rent/purchase of a workshop, payment for operational expenses and acquisition of new technology. There was strong evidence that lack of access to credit leads to: inability to meet customers' demands; inability to invest or expand and grow business; inability to promote products; lack of access to new/external markets; inadequate raw materials; difficulty in paying production/operational expenses; use of inappropriate and low level of technology; inability to pay for advanced business development trainings; and inability to engage skilled/qualified professional employees. It was therefore recommended that physical collateral as one of the major factors of MSEs access to credit can be replaced with group lending method by commercial banks. Also banks need to address the consequential 'fear of approach' held by MSEs. Banks should make a sustained effort to better communicate with MSEs at early stages in the lending application process to improve MSEs understanding. Commercial banks need to segment their service markets since they cannot serve the entire market as customers' needs and wants are diverse.