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

Author

Listed:
  • Prof. Erastus Mwanaumo

    (The University of Zambia)

  • Kabemba Steve Ngoy

    (The University of Zambia)

  • Victor Kunda

    (The University of Zambia)

Abstract

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.

Suggested Citation

  • Prof. Erastus Mwanaumo & Kabemba Steve Ngoy & Victor Kunda, 2025. "Exploring Determinants of Financial Access for SMEs in Zambia's Construction Sector," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 6(1).
    • Handle: RePEc:cwk:ajocsk:2025-20
    DOI: 10.59413/ajocs/v6.i.1.3
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    References listed on IDEAS

    as
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    4. PhD Mohammed CHOWDHURY & Zahurul ALAM, 2017. "FACTORS AFFECTING ACCESS TO FINANCE OF SMALL AND MEDIUM ENTERPRISES (SMEs) OF BANGLADESH," The USV Annals of Economics and Public Administration, Stefan cel Mare University of Suceava, Romania, Faculty of Economics and Public Administration, vol. 17(2(26)), pages 55-68, December.
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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
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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