Access to Debt Finance in Sub-Saharan Africa: Redefining the Problem from Risk Perspective and Way Forward

This article presents critical points of view relating to small and medium-sized enterprises (SMEs) access to debt finance in Sub-Saharan Africa (SSA). The prevailing view suggests that lack of credit information is a fundamental factor that contributes to the constraints faced by SMEs. We challenge this prevailing dominant view and argue that SMEs are constraints in accessing debt finance due to banks’ risk assessment strategies. At the same time, it suggests that banks modelling credit risk assessment for SMEs in SSA became extremely crucial for determining access to debt finance. This impacts on access to debt finance contrary to the popular claim that the opaque nature of SMEs is the major constraint limiting access to debt finance. In such a challenging context, SMEs are expected to either provide more information to banks to reduce the problem of information asymmetry as well as provide collateral and guarantees in the absence of reliable information to safeguard against the risk of default or maintain a long-term relationship with banks which is expected to result in an increase in debt financing. The authors emphasise the need to redefine the problem of access to debt finance so that financing obstacles for SMEs can be strengthened. The implications and alternative strategies for SMEs’ access to debt finance are discussed.