The Role of Microcredit and Financial Capability in the Growth of Smes: a Case Study of Montserrado County, Liberia.
Abstract
SMEs overtime has been important in the Liberian economy in the aspect of employment,
reduction in vulnerability and poverty alleviation. The growth of SMEs in the private sector
increases employment which significantly reduces the burden of employment on government in
low income countries and emerging economies like Liberia. Despite the importance of SMEs in
Liberia, the sector faces a series of impediments that hamper their growth and development,
access to credit, lack of finance and financial capability of SMEs owners has been prominent
growth impasse in numerous studies that SMEs face. This paper therefore sought to examine the
effect of microcredit and financial capability on the growth of SMEs in Montserrado County,
Liberia by examining whether access to credit and financial capability influence enterprise
growth among SMEs owners in Montserrado County. The study established the practical role of
financial capability of SMEs owners, indicators of success of SMEs and indicators of access to
credit as well as the relationship between access to credit and SMEs growth and the relationship
between financial capability and SMEs growth. To achieve the study objective, a field survey
consisting of a structured questionnaire was used and administered to SMEs owners in
Montserrado County. Qualitative data was collected during the interview period, a total sample
of 119 respondents who were SMEs owners and managers were interviewed from a population
of 357 enterprises, 96 respondents were then analyzed due to the removal of 23 interviews that
had interview duration of less than 10 minutes for data integrity purpose. The data was analyzed
using SPSS and results were presented in tables, graphs and interpretation was made based on
research objectives. The study found that access to credit by SMEs was very poor. This can be
noted from the fact that even at the startup level; only 10.3% of the participants had access to
loans from formal financial institutions as their startup capital. Moreover, the study established
that a very small portion (26%) of the participants had accessed financial literacy training,
despite a low percentage of financial literacy training, over 75% of the respondents were doing
good in terms of financial capability, this is due to the fact that the study recorded over 70%
respondents had university degree and diplomas which enhanced their financial knowledge for
the business. This study recommends that financial institutions come up with target lending to
SME in Liberia which provides an adequate source of financing and additionally develop
products which suit the nature of their businesses.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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