Abstract:
The main purpose of this study was to examine challenges affecting SMEs development in Rwanda. The study objectives were; determination of whether SMEs face challenges related to finance in their activities, identification of the level of challenges encountered by SMEs in their development in Rwanda and assessment of the impact of the challenges faced by SMEs in their development in Rwanda. The statement of the problem is that, in Rwanda, SMEs are estimated to contribute a lot to GDP and reduce the level of unemployment and could have the greatest potential for further employment generation. However, this potential has been supported with limited impact which has made it difficult to exploit the existing potential to accelerate SMEs growth. SMEs contribute to the economic and social development of Rwanda and yet they lack adequate support from both the government and financial lending institutions. The undertaken
study considered 90 people including SME owners or operators or managers and purposively 10 people from Banks and Microfinance Managers. The study showed that financial challenges related to SMEs financing were classified into two main categories; challenges related to financial lending institutions and challenges related to SMEs in terms of accessing finance.
These challenges affect negatively the development of SMEs. Challenges related to access to finance on the side of SMEs are more harmful as indicated by the results of the regression model with the statistically significant effect (P-value<5%). The undertaken study ended by concluding that, although challenges are being encountered, SMEs are being developed but in a starved way.
Therefore, the study concludes by suggesting some subsequent recommendations to financial lending institutions and to SMEs in general to ensure successful cooperation, respecting rules and regulations while considering facilitation on both sides.
