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Working Paper 146 - Bank Financing to Small and Medium Enterprises in East Africa: Findings of a Survey in Kenya, Tanzania, Uganda and Zambia

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    Abstract

    This paper describes the main findings of a survey of SME financing in four East African countries, namely Kenya, Tanzania, Uganda and Zambia. We find that the SME segment is a strategic priority for the banks in the region. SMEs are considered a profitable business prospect and provide an important opportunity for cross-selling. Banks consider that the SME lending market is large, not saturated and with a very positive outlook. A number of obstacles are, however, constraining banks’ further engagement with the SME segment, including SME-related factors, macroeconomic factors, business regulation, the legal and contractual environment, the lack of a more proactive government attitude towards the segment, some areas of prudential regulation and some bank-specific factors. Nonetheless, banks have adapted to their environment and developed mechanisms to cope with it through innovation and differentiation. We conclude that this trend should be supported and encouraged through reforms to soften the negative impact of those obstacles which are hindering the further involvement of banks with SMEs.

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    Bibliographic Info

    Paper provided by African Development Bank in its series Working Paper Series with number 377.

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    Date of creation: 26 Mar 2012
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    Handle: RePEc:adb:adbwps:377

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