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Influence of access to finance on the competitive growth of SMEs in Lesotho

Author

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  • Donald O. E. Amadasun

    (Limkokwing University of Creative Technology)

  • Ashley T. Mutezo

    (University of South Africa)

Abstract

Background Access to finance has been identified as one of the biggest problems faced by small and medium-sized enterprises (SMEs) in most developing economies. Similarly, access to finance has been identified as a dominant constraint facing the SME sector in Lesotho. This paper established the factors related to access to finance that influence the competitive growth of the SME sector in Lesotho. The factors that were identified include financial information access, bank and business support services, the structure of banks, and the collateral requirements of the financial sector. Findings The results from our analysis indicated that a relationship exists between the independent variables of financial information access, bank and business support services, the structure of banks, and the collateral requirement by commercial banks. As such these independent variables are associated with SMEs’ capacity to attain competitive growth in Lesotho. Explicitly, the results indicated that Basotho entrepreneurs and managers see the predictors (collateral requirement, financial information access, and bank and business support services) as critical factors of access to finance that constrain most enterprises from accessing the necessary credit from banks, which ultimately influence the SMEs’ capacity to attain competitive growth in Lesotho. Conclusions The study concludes that access to finance significantly affects the competitive growth of SMEs in Lesotho. Thus, this study suggests that several specific and harmonized financial policy actions are needed in the Lesotho financial market to establish an enabling policy that will ease enterprises’ access to adequate funding programs. These funding programs should target improved financial schemes that are coordinated, competitive, and directed towards Basotho SMEs’ access to finance, and enables a harmonized credit policy that guarantees a win–win for SME loan applicants and the financial market operators.

Suggested Citation

  • Donald O. E. Amadasun & Ashley T. Mutezo, 2022. "Influence of access to finance on the competitive growth of SMEs in Lesotho," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-20, December.
    • Handle: RePEc:spr:joiaen:v:11:y:2022:i:1:d:10.1186_s13731-022-00244-1
    DOI: 10.1186/s13731-022-00244-1
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    References listed on IDEAS

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    1. Hala El-Said & Mahmoud Al-Said & Chahir Zaki, 2015. "Trade and access to finance of SMEs: is there a nexus?," Applied Economics, Taylor & Francis Journals, vol. 47(39), pages 4184-4199, August.
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    5. Hezron Mogaka Osano & Hilario Languitone, 2016. "Factors influencing access to finance by SMEs in Mozambique: case of SMEs in Maputo central business district," Journal of Innovation and Entrepreneurship, Springer, vol. 5(1), pages 1-16, December.
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    Cited by:

    1. Isaac Kofi Biney, 2023. "Adult education and entrepreneurship: getting young adults involved," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-27, December.

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