Open AccessCOMMERCIAL BANKS AND THEIR EFFECT ON SMALL AND MEDIUM ENTERPRISES FINANCING IN RWANDA: A CASE STUDY OF KIGALI CITY AND SOUTHERN PROVINCE
Author(s) -
Mutamuliza Eularie,
Giramata Aurore
Publication year - 2021
Publication title -
agrofor
Language(s) - English
Resource type - Journals
eISSN - 2490-3442
pISSN - 2490-3434
DOI - 10.7251/agreng2101117e
Subject(s) - small and medium sized enterprises , loan , business , government (linguistics) , descriptive statistics , finance , order (exchange) , constraint (computer aided design) , small business , capital (architecture) , descriptive research , sample (material) , working capital , mechanical engineering , statistics , philosophy , chemistry , mathematics , archaeology , chromatography , engineering , history , linguistics
Commercial Banks worldwide are identified to be one of the key players in the financial industry that have positively affected individuals involved in business, and the economy at large, through the functions they perform in the economy. However, inadequate financing in the activities of Small and Medium Enterprises (SMEs) is still the major constraint faced by people involved in business activities. Even though the Government of Rwanda has made effort to improve the accessibility to credit, entrepreneurs still have some challenges to access financial services in order to improve their businesses. The purpose of this research was to assess the contribution of commercial banks in financing SMEs in Rwanda. A sample of 60 SMEs was selected in Kigali and Southern Province of Rwanda. Data was collected from the respondents through a structured questionnaire. The collected data were analyzed using descriptive statistics such as frequencies and percentage distributions. A Pearson Chi-Square Test was used to analyze the relationship between commercial banks and SMEs in Rwanda. The results indicated that the main purposes of loan application were start-up capital, working capital and expansion of businesses. The results also revealed that there was positive relationship between commercial banks and SMEs in Rwanda. The results revealed as well, that commercial banks in Rwanda played a crucial role in contribution to SME’s economic development and small and medium entrepreneurs who got credit from commercial banks expanded their businesses and increased their income.