The effect of bank credit to private sector on the growth of small and medium enterprises in the manufacturing sector in Zambia.
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Date
2024
Authors
Kabwe, Kabaso F.
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Zambia
Abstract
The manufacturing sector is key to the industrialization agenda in Zambia, which is driven by the private sector. The small and medium enterprises constitute a bigger proportion of the private sector and are regarded as the backbone of economic growth in the country. This study investigated the effect of bank credit or loans on the growth of SMEs in the manufacturing in Zambia between 2013-2023. The turnover or sale quarterly data for SMEs in manufacturing sector was used as a proxy for SME growth. Bank credit or loans disbursed to MSMEs in manufacturing was used as the key explanatory variable. However, other variables were included to help explain the growth movements in the model. Descriptive statistics, correlation matrix and the co-integration and error correction model (ECM) was used to test the hypotheses and answer the research questions. The study revealed that bank credit to the SMEs in the manufacturing sector though important, did not have statistically significant effect on the growth of the SMEs in the manufacturing sector both in the long run (p=0.132) and short run (p=0.133). In the same light, the effect of GDP on growth of SMEs in the manufacturing sector was not statistically significant though positive in both the long run (p=0.168) and short run (p=0.094). However, this study revealed that inflation had statistically significant negative effect on the growth (turnover) of SME in the manufacturing sector during the period considered in the long run (p=0.020) and short run (p=0.010). The study recommends that a stable macroeconomic environment is necessary for growth and survival of SMEs in manufacturing sector in Zambia. Further, the monetary authorities should address the rigidities in bank lending by relaxing some stringent conditions which prohibit SMEs from accessing credit to grow and survive.
Description
Thesis of Master of Business Administration.