Determinants of Zambia national commercial bank (ZANACO) trade finance access by small and medium enterprises.
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Date
2022
Authors
Mbewe, Luke
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Zambia
Abstract
Small and Medium Enterprises (SMEs) play an important role in the economic development of Zambia. Access to trade finance is important for the growth of SMEs. This study, therefore, was undertaken to assess the significance of the major determinants of Zambia National Commercial Bank (ZANACO)’s access to trade finance by Small and Medium Enterprises (SMEs). The study followed the explanatory research design. The quantitative approach was employed, particularly correlation, mean scores and percentages. SPSS and Excel were used to analyse the data. Questionnaires were circulated to 152 respondents who SMEs are holding active bank accounts with ZANACO. The major determinants being collateral, information asymmetry, regulatory authority and awareness of funding. The research found that collateral requirement had a strong positive relationship with the accessibility to trade finance. When mean and standard deviation were computed on primary data, it was established that collateral requirement was a significant determinant of access to trade finance at ZANACO by SMEs. Further, the research determined that information asymmetry had positive but less significance on accessibility to trade finance. This shows that information asymmetry is a weak determinant of accessibility to trade finance by SMEs at ZANACO. The factor, regulatory authority, showed different effect on the dependent variable. The relationship between regulatory authority and access to trade finance by SMEs was found to be negative and insignificant. This shows that a regulatory authority plays a very insignificant role in SMEs’ access to trade finance. On the last objective, the research discovered a very strong and positive relationship between the independent and the dependent variables. The awareness of funding opportunities was found to be a strong determinant of access to trade finance by SMEs at ZANACO. The study concludes with some recommendations based on the research findings. The research recommended that there is need for ZANACO to review the collateral requirement so that it facilitates more SMEs’ access to trade finance while taking care of the bank’s risk exposure. Credit guarantee schemes or insurance could be one other mitigant to managing credit risk by SMEs hence the regulators and banks themselves could look at such options to increase accessibility of trade finance by SMEs. Further, the study recommends that trade finance awareness campaigns should be undertaken by banks to bridge the information gap. Additionally, more research should be done in investigating the determinants of accessing trade finance from the banks’ perspective.
Key words: Trade Finance, Small and Medium Enterprises (SMEs), Zambia National Commercial Bank (ZANACO), Significance, Assess
Description
Thesis
Keywords
Access to financial services--Small and medium enterprises.