In 2017, Wilbert Mutoko of North-West University, South Africa, and University of Botswana, published a research titled “Factors influencing small, medium and micro-sized enterprises’ borrowing from banks: The case of the Botswana manufacturing sector”.

The main objective of this study was to determine the factors that influence manufacturing small, medium and micro-sized enterprises’ (SMMEs) borrowing from banks.

As published, the following was what they discovered and recommended thereafter;

Challenges of small, medium and micro-sized enterprises

There is been an ongoing debate on SMME development and their contribution to Botswana’s economy. The debate focuses on SMMEs’ role in employment creation, poverty eradication, GDP contribution and economic. Wiklund and Shepherd (2005) argue that small firms dominate world economies and also that they are a source of livelihood and employment for many. Their growth and sustainability is crucial, and especially for SMMEs in the manufacturing sector.

Jefferis (2014) and Moore et al. (2010) say that, although manufacturing SMMEs have the potential to create long-term employment, there are some challenges that threaten their survival and growth.

These challenges include access to markets, financial challenges, lack of business acumen, poor or no recordkeeping on business performance, poor quality products and lack of competitiveness.

Key Findings

A research finding done of how SMMEs initially financed their business revealed in 2015 revealed that 79% use their own money, 4% from Family and friends, 3% from CEDA, 11% get Government support, 2% from Bank, and 1% from Micro lenders.

The result shows that female SMME owners are more likely to get loans compared to their male counterparts in Botswana. Women in Botswana are regarded as responsible.

That is why generally in schools, girls perform better than boys. In positions of power in the corporate world, there are many women at the top.

Most homes have women as breadwinners. Historically, women have been known to be more loyal than men.

Based on these observations, it can be understood why women in Botswana would be more likely to get loans than men. The other reason that influences married people obtaining loans more than unmarried SMME owners is to do with the cost involved in defaulting.

When couples default, they will be blacklisted in all the financial institutions in Botswana as bad borrowers. This also affects any activities in the future that involve trust.

Recommendations

The results show that most of the manufacturing SMMEs started their businesses with their own money and such should be a sign that there is hope for expansion.

However, given that banks are not governmental organisations but are profit-making entities, credit rationing plays a significant role in lending.

The major hindrance for an SMME’s growth is lack of finance and related factors.

The factors that influence banks to lend SMMEs money include the marital status and experience of the management and annual turnover.

The article recommends that manufacturing SMMEs should focus more on marketing, networking and the ability to manage their resources efficiently.

Since SMMEs are struggling with accounting records, shortage of skills and scarce resources, they should engage in regular formal and informal training to keep abreast with the changing business environment so they can remain relevant.

The formal training can include sending management and staff on refresher courses, workshops, seminars and short courses.

Informal training can include personal development encouraged by having a company library, which helps staff and management to study and remain open-minded and stay abreast of changes in the industry.