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Credit Constraints and Financial Exclusion of SMES in Africa: A Sectoral Analysis Across Selected Countries

Author

Listed:
  • Matthew O. Omotoso
  • Francis A. Oni

    (National University of Lesotho, Maseru)

Abstract

Small and medium-sized enterprises (SMEs) are vital to economic activity in Africa, yet access to formal credit remains limited. This study investigates the determinants and systemic features of SME credit constraints in selected African economies over the period 2004–2024, using the Credit Gap Ratio as a measure of unmet credit demand. Panel regression results show that credit gaps are primarily driven by collateral requirements, non-performing loans, and institutional factors, while lending rates play a limited role. The dynamic connectedness analysis further reveals significant sectoral spill overs, indicating that SME credit constraints are structural and systemically linked.

Suggested Citation

  • Matthew O. Omotoso & Francis A. Oni, 2026. "Credit Constraints and Financial Exclusion of SMES in Africa: A Sectoral Analysis Across Selected Countries," The African Finance Journal, Africagrowth Institute, vol. 28(1), pages 32-50.
    • Handle: RePEc:afj:journl:v:28:y:2026:i:1:p:32-50
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-finj_v28_n1_a3
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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