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International: $20
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Quantitative study
Analytical tool
Descriptive Statistics
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Despite its acknowledged role in economic growth and poverty reduction, financing for small and medium-sized enterprises (SMEs) in Cameroon has remained problematic.

This study will investigate obstacles for financing institutions (FIs) to support the expansion of entrepreneurs’ small and medium-sized enterprises (SMEs) in Mezam Division.

Using a standard questionnaire, heads of 15 banks, 26 microfinance institutions (MFIs), 18 njangi groups, 12 private money lenders, and 15 trade creditors were interviewed from the largest urban (Bamenda II) and rural (Bafut) sub-divisions in Mezam – Northwest Cameroon.

All other types of FIs possessed significantly less operating capital than banks ( = 0.05). There were no discernible differences between the other financial institutions.

However, financing from njangi tended to be inadequate and insufficient to meet the needs of a number of SMBs.

While key clients for 57.7% of MFIs and 53.3% of trade creditors were very small businesses, those for the majority of other FIs were individuals regardless of institution type.

With the exception of the 19.2% of MFIs whose primary clients were individuals, the remaining 23.1% and 47.7% of MFIs and trade creditors, respectively, were distributed among SMEs.

Unlike private money lenders, which were indifferent to the type of SME they supported, the majority of the four remaining types of FIs favored trade-oriented SME financing.

Eighty percent of the types of FIs ranked “good credit history” as the most important eligibility criterion for SME financing.

The order of the remaining criteria varied depending on the type of FI. All private money lenders demanded ‘land as security’ from small and medium-sized enterprises in exchange for financing.

Other than private money lenders who were deterred by ‘limited collateral,’ ‘failure to meet loan repayment deadlines’ was the most significant barrier preventing the majority of other FIs from supporting SMEs. All financial institutions would like to continue financing SMEs despite the obstacles.



Small- and medium-sized enterprises (SMEs) in developing nations rely on financial resources more than any other factor, according to numerous business surveys (ITC, 2009).

Access to capital enables entrepreneurs to make productive investments for the expansion of both large and small businesses, as well as the acquisition of cutting-edge technology to ensure competitiveness (UNCTAD, 2001).

In spite of their size and contribution to job creation and economic growth, particularly in developing nations, SMEs find it difficult to secure financial resources from available sources (ITC, 2009).

Recent research in the Mezam Division of the North West Region (NWR) of Cameroon supports this hypothesis, as 83.3% of entrepreneurs surveyed cited lack of capital as the most significant factor impeding the expansion of small and medium-sized enterprises (SMEs) in the agriculture, manufacturing, information and technology, recreation, service, and trade sectors.

A small enterprise in Cameroon is defined as a business that employs up to 20 people, whereas a medium-sized enterprise employs between 21 and 100 people (Law No. 2010/001 of 13th April 2010 to promote SMEs in Cameroon).

A number of informal financial institutions, such as village banks, cooperative credit unions, and social venture funds, provide business and social services that initially target the poor, as well as savings and credit services for small and medium-sized enterprises (Germidis et al. 1991; Heidhues et al. 2002).

However, research indicates that under such a system, businesses are more likely to fail (Maloney, 2003).

In the event of business failure, those who are gainfully employed in these enterprises will lose their jobs and become even poorer.

Recent years have seen a rise in the country’s recognition of microfinance institutions as key institutions supporting the government’s pursuit of constant economic growth (Yunus, 2003).

The role of small and medium-sized enterprises (SMEs) in enhancing livelihoods in Cameroon and the NWR has been monumental.

Residents of the Mezam Division of the NWR, for instance, operate and work in a variety of small businesses, including restaurants, gas stations, supermarkets, animal/crop farms, bakeries, tailoring shops, saw mills, quarries, garages, hotels, inns, bars, and cabarets, among others. The enterprises are an integral part of this administrative division’s economy.

However, the survey reveals that entrepreneurs find it challenging to meet the criteria governing the provision of funds by financial institutions.

High interest rates and collateral requirements have been identified as significant contributing elements to the difficulty in gaining access to capital (Banji, 2006).

In addition, there appears to be a degree of reluctance among financial institutions to fund SME activities for unclear reasons (ITC, 2009).

This study aims to investigate the barriers preventing the flow of funds from financing institutions to entrepreneurs for the expansion of small and medium-sized enterprises in Mezam Division.

Therefore, this research contributes to the development of a strong SME base for the purpose of strengthening the economy and enhancing living conditions in the research region.

1.1. Statement of the problem

Funding for small and medium-sized enterprises (SMEs) remains one of the most crucial factors for economic growth in developing nations. However, entrepreneurs find it difficult to access sufficient and timely funds from available sources for business development (Thurik and Wennekers, 2004).

In Mezam Division, it is difficult for entrepreneurs to secure funding from financial institutions.

This issue appears to be widespread in developing nations (Bangi, 2006). In addition, the findings of our most recent studies in Mezam indicate that financial institutions are frequently reluctant to provide funds for the development of small and medium-sized enterprises (ITC, 2009).

This research seeks to answer questions regarding why these enterprises find it difficult to acquire funds from the perspective of small and medium-sized enterprises (SMEs) and why financing institutions are generally reluctant to fund SMEs.

This study aims to close this knowledge gap. By investigating this crucial issue, it is hoped that new knowledge will be generated that is crucial for the development of small and medium-sized enterprises (SMEs) in the research region in particular, and in developing countries in general, where SMEs are responsible for the livelihoods of a significant portion of the population.

1.2. Objectives of the study

The overall objective of this work is to explore financing constraint(s) between financing institutions and SMEs to facilitate the flow of funds for expansion of the latter in Mezam sub Division.

The specific objectives are:

  1. To identify financing institutions available to SMEs in Mezam Division
  2. To examine conditions specific to the different types of financing institutions for funding the activities of SMEs
  3. To investigate reasons behind the reluctance of financing institutions in supporting SMEs


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