Financing Of Small And Medium-Size Enterprises In Cameroon

Abstract

The study was conducted to determine the problems Small and Medium Size Enterprises (SMES) face in obtaining credits which could be a constraint to their creation and growth. Available data from the banking sector shows that as much as 78.7% of all commercial bank loans go to SMEs and large companies. This includes 86.2% of all medium term, 18.9% of all long term and 3.6% of all short term loans. SMEs and large companies pay back their loans better than the other classes of borrowers. Today the average loan repayment by all groups of bank clientele stands at 52.5% which is below World Bank standards. Even the SME loan repayment rate of 62.9% is still low by World Bank standards. From a survey conducted in the city of Douala in 1992, it was found out that the problem of SME financing in Cameroon today is not so much that of inadequacy of funds. Rather it is poor management of resources, the absence of collateral, and the absence of legality, which prevents many SMEs from obtaining loans from formal financing institutions. There is a lot of liquidity in informal financing houses but their lending is limited to members. The government must assist in creating and promoting a reliable environment informal banking institutions which will attract these funds from informal sources so as to make them available to a wider population of borrowers. To further improve on the financing environment of SMEs in Cameroon we may want to switch, from the so called hardware support approach to the software approach which facilitates access to money market information, research findings; which encourages linkages with large firms, within or out of the country; and finally, encourages the development of an entrepreneurial class.

African Journal of Finance and Management Vol.9(2) 2001: 8-18