Factors Affecting Availing of Trade Finance Facilities to Small and Medium Enterprises by Ncba Bank Kenya Plc

Abstract

The1 study aimed1 to investigate1 the1 factors1 affecting availing trade1 finance1 facilities1 to small and medium enterprises1 by NCBA Bank Kenya PLC. This1 study was1 anchored by the1 pecking order theory, and the1 financial intermediation theory. A descriptive1 research design was1 applied in this1 study. This1 study targeted NCBA Bank Kenya, being the1 case1 study. The1 unit1 of analysis1 was1 the1 senior managers1 and SME1 relationship managers1 in the1 26 branches1 in Nairobi. Therefore, the1 total respondents1 were1 252. A stratified sampling method was1 adopted to select1 a sample1 size1 of 73 respondents. Primary data was1 collected through the1 use1 of interview guide. The1 interviews1 were1 checked for consistency, cleaned, and the1 useful ones1 coded and analyzed. After collecting data responses1 from the1 questionnaire, the1 researcher analyzed1 the1 qualiitative1 data using content1 analysis. The1 information was1 displayed in prose1 form. The1 study found that1 NCBA Bank Kenya PLC requires1 the1 SMEs1 to provide1 some1 form of collateral in order to access1 both their funded and non-funded facilities. The1 study established further that1 cost1 of credit1 aspects1 include1 contract1 cost, processing levies, insurance1 fees, negotiation fees1 and interests1 of the1 loan. The1 study also found that1 improved quantity and quality of data may in particular benefit1 SMEs, which are1 often unattractive1 clients1 for (trade) finance1 given the1 relatively high transaction costs1 triggered by their opacity and resulting asymmetric information issues1 in relation to low financing volumes. The1 study concluded that1 collateral requirements, cost1 of credit, business1 risk and financial information asymmetry affect1 the1 availing trade1 finance1 facilities1 to small and medium enterprises1 by NCBA Bank Kenya PLC. The1 study recommends1 that1 the1 NCBA Bank’s1 management1 should conduct1 regular awareness1 campaigns1 to sensitize1 SMEs1 customers1 on various1 international finance1 products1 offered by the1 bank. Further, NCBA Bank and other financial institutions1 offering trade1 financing should offer basic financial training to SMEs1 on record keeping, entrepreneur skills1 and loan investment1 evaluation. Moreover, the1 study recommends1 that1 NCBA Bank must1 be1 appropriately incentivized to reduce1 rejection rates1 and provide1 more1 trade1 finance1 to their clients.