Contribution of business development fund to the financial access by Small and Medium Enterprises in Rwanda

Abstract

SMEs play an important role in creating employment and wellbeing. Having a strong, vibrant, competitive and resilient base of SMEs is key to enhancing wealth creation and social well-being, but to fully achieve that, SME need to have sufficient and easy access to finance. Yet, in most developing countries, the majority of SMEs are unable to acquire the financing they need to reach their potential. Governments, particularly financial regulators like those of Rwanda, have established various measures, programs and schemes aimed at providing SMEs with better access to financing. For the case of the Rwanda, the Business Development Fund (BDF) was set up to increasing access to finance for SMEs. The purpose of this study was to assess the contribution of the Business Development Fund to the ease of access to finance among Small and Medium Enterprises in Kigali city and the Southern Province. The study adopted a mixed methods approach. The study population was personnel of SMEs that are facilitated the Business Development Fund in Kigali city and the southern province. Purposive sampling was use to sample the districts and convenience sampling for the SMEs. The study used structured questionnaires and interview guides as the primary data collection tools. The qualitative tool following the data collection method describe above was the key informant interview guides. Structured interviews were the quantitative data collection methods used in this study. Key informant interviews were used to collect qualitative data. The qualitative tool was the key informant interview guides. The data was analyzed using SPSS 22. Thematic analysis was used to analysis qualitative data. The majority of the respondents representing their SMEs reported having easy access to finance when need (n = 112, 93%).About three quarters of the received training in the different areas of investment from BDF (n = 96, 76.5%). The majority of the respondents mentioned that BDF had guaranteed their SMEs a loan at some point in time (n = 111, 92.5%), and for about half of those who had been guaranteed a loan, the percentage of the loan BDF guaranteed was less than 50% (n = 55, 49.5%). Still for those who had been guaranteed a loan, the guarantee period give to the majority of their SMEs was less than five year (n = 103, 92.8%). The majority of the respondents (SMEs) reported that BDF had not coached and mentored them or other staff in the SME about business management (n = 81, 67.5%) and still the majority had not been provided with business advisory services in business management by BDF (n = 69, 57%).SMEs where staff had received investment advisory services from BDF were twice as likely to report easy access finance (AOR = 2.208, CI = 1.043 - 3.192). SMEs were staff had received business advisory services from BDF were four times as likely to report having easy to access finance (AOR = 4.405, CI = 4.405, CI = 2.013 - 5.416). Generally, Small and medium sized enterprises in Kigali city and the southern Province have easy access to finance. The majorities of the SMEs in these areas are given loan guarantees, and are trained in business investment; however, the majorities do not receive mentorship and business advisory services from BDF. BDF has to some extent contributed to the ease of access to finance among the SMEs at majorly one front; this is the provision of advisory services (investment and business advisory).