Exploring Determinants of Financial Access for SMEs in Zambia's Construction Sector

This study explores determinants in accessing finance for Small and Medium Enterprises (SMEs) in the Zambian construction industry, with a specific focus on the impact of financial literacy, collateral requirements, and credit history. The research adopted a survey approach to collect data from 78 SMEs operating in the construction sector. The findings highlight key determinants, including stringent collateral requirements, high interest rates, and short repayment periods associated with bank loans. The study also reveals a significant positive correlation between financial literacy and access to finance, suggesting that SMEs with a higher level of financial knowledge are more likely to secure financing. Moreover, the research identifies collateral requirements and credit history as critical factors influencing access to finance for SMEs in the construction industry. SMEs struggle to provide adequate collateral, leading to challenges in accessing credit from financial institutions. Engaging with financial institutions to reduce lending rates or establishing a construction bank to provide specialized financing and guarantees to financial institutions on behalf of SME entrepreneurs can positively impact the Zambian construction sector.