THE IMPACT OF MICROFINANCE SUPPORT ON THE DEVELOPMENT OF MANUFACTURING SMEs OPERATING IN WINDHOEK, NAMIBIA
Keywords:Microfinance, Manufacturing SMEs, Business Development, Business Competitiveness, Business Development Model, Namibia
Over the years, the superlative contribution of SMEs on economic growth predominantly in emerging states such as Namibia has been gaining considerable prestige at a rapid rate. However, deficient access to cost-effective financial adequacy remains a leading stumbling block that denies them the opportunity to survive in a competitive market, grow and develop above the average. That being true, the rate of SMEs’ failure continues to escalate precisely among those that are in their early stage of operation. To curb that specific issue, microfinance institutions (MFIs) intervene to provide dual supports through the delivery of financial and non-financial services. Access to such support helps SMEs to reduce their financial constraints, resulting in sound and viable development for businesses. In this respect, the central objective of this study was to investigate the impact of microfinance acquisition on SMEs’ development with reference to the manufacturing firms in Windhoek, Namibia. Evenly relevant, the study sought to further assess the effect of acquired microfinance support on competitiveness and finally devise suitable strategies that MFIs could adopt or adapt to improve the provision of microfinance services to penurious SMEs. The study employed a pragmatistic paradigm. Therefore, mixed research methods constituting both quantitative and qualitative approaches were utilised to successfully attain the threefold objectives of the study. 60 questionnaires were disseminated through emails to the sampled SMEs for data collection where only 44, accounted for 73% were considered for further analysis. Regarding financial support, the study assessed the matter based on technology enhancement, assets capital accumulation, job creation, business’ branches extension, and product development and expansion. Similarly, assessment on non-financial support was focused on managerial and leadership skills, as well as unblemished financial management. To test the nexus between microfinance support and SMEs’ development, multiple regression analysis was employed at 5% level of significance. Findings presented by the study revealed a positive strong relationship between the variables. More to that, the correlation between microfinance support and SMEs’ competitiveness was tested using correlation coefficient analysis and results found the variable to be statistically correlated. To this end, the study affirms that there exists a significant positive impact of microfinance support on SMEs’ development and competitiveness, implying that healthy and ample microfinance institutions are immensely essential to provide the required support lucratively, using the most satisfying strategies for a mutual benefit of the involved parties. Therefore, three strategies for improving the provision of microfinance support, constituting Public Credit Guarantee Schemes (PCGS); compensation of interest rate with the repayment period; and the provision of tools and equipment were designed. Also, the study recommended government intervention in formulating policies necessary for easing collateral requirements. More, MFIs are also advised to find ways for fastening their evaluation processes and give feedback on approval or disapproval of the application soon. They should also allow potential SMEs to borrow multiple times in a year or increase the principal amount. Finally, the study suggested future studies to focus on the role of the government in addressing SMEs’ financial constraints and use a longitudinal approach with a predominant focus on other sectors.
Abor, J. Y., & Biekpe, N. (2006). SMEs’ access to debt finance: A comparison of male-owned and female owned businesses in Ghana. The International Journal of Entrepreneurship and Innovation, 7(2), 105-112. doi: 10.5367/000000006776928627.
Adams, J., Khan, H. T. A., Raeside, R., & White, D. (2007). Research Methods for Graduate Business and Social Science Students. Response Books, New Delhi (2nd ed.). New Delhi: SAGE Publications Ltd.
Adejimola, A. S., & Olufenmilayo, T. O. (2009). Spinning off an entrepreneurship culture among Nigerian university students: Prospects and challenges. Africa Journal of Business Management, 3(3), 080-088. Retrieved from http://www.academicjournals.org.
Asa, A. R., & Prasad, N. S. (2014). Analysis on the factors that determine sustainable growth of small firms in Namibia. International Journal of Management Science and Business Administration, 1(1), 5-11. doi:10.18775/ijmsba.1849-5664-5419.2014.11.1001.
Atmadja, A. S., Su, J. S., & Sharma, P. (2016). Examining the impact of microfinance on microenterprise performance: Implications for women-owned microenterprises in Indonesia. International Journal of Social Economics, 43(10), 962-981. doi:10.1108/MRR 09-2015-0216.
Babbie, E. (2010). The practice of social research. Belmont: Cengage Learning.
Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. (2013). The miracle of microfinance? Evidence from a randomised evaluation. American Economic Journal: Applied Economics, 7(1), 22 53. doi:10.1257/app.20130533.
Bank of Namibia (BoN). (2010). SME Development in Namibia. Windhoek: Retrieved from www.bon.com.na.
Baporikar, N., Nambira, G., & Gomxos, G. (2016). Exploring factors hindering SMEs’ growth: Evidence from Namibia. Journal of Science and Technology Policy Management, 7(2), 190–211. https://doi.org/10.1108/JSTPM-11-2015-0036.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2005). SMEs growth and poverty- Cross country evidence. Journal of economic growth. September 2005, 10(3), 199-229. doi: 10.1007/s10887-005-3533-5.
Cedric, L. H. (2012) microfinance in evolution an industry between crisis and advancement, Deutsche Bank, DB, Frankfurt. Retrieved from www.dbresearch.com.
Chipangura, A. & Kaseke N. (2012). Growth constraints of small and medium enterprises at Glenview Furniture Complex, Harare, Zimbabwe. International Journal of Marketing and Technology, 2(6), 40-83. Retrieved from https://www.ijmra.us.
Christopher, I. F. (2008). Impact of Microfinance on Small and Medium-Sized Enterprises in Nigeria: Wuhan, PR China: School of Management, Wuhan University of Technology, 1864-1871. Retrieved from https://www.semanticscholar.org.
Cook, M. (2010). Group-based financial institutions for the rural poor in Bangladesh: An institutional and household level analysis. Research Report of the International Food Policy Research Institute, (120), 97-100. Retrieved from https://www.ifpr.org.
Dahir, A. M. & Tall., A. (2015). The challenges facing microfinance institutions in poverty eradication. A case study in Mogadishu. International Journal of Humanities Social Sciences and Education, 2(2), 56-62. Retrieved from www.arcjornals.org.
Dimoso, O. J., & Masaanyiwa, Z. S. (2015). A critical look at the role of micro finance banks in poverty reduction in Tanzania: A case of Akiba Commercial Bank Limited. Business Insight, 2(1). Retrieved from http://repository.businessinsightz.org.
Ehigiamusoe, G. (2005). Tested Institutional Practices for Effective Microfinance Services Delivery: Proceedings of Seminar in Microfinance Policy, Regulatory and Supervisory Framework for Nigeria. Retrieved from https://www.cbn.gov.ng.
Farquhar, J. D. (2012). Quality in case study research: Case Study Research for Business, 100–113. London: Sage. doi: 10.4135/9781446287910.
Frank, A. & Amevor, B. A. (2015). The impacts of microfinance on the entrepreneurial activities of artisans at Abossey Okai in Accra. Research Journal of Commerce and Behavioral Science, 5(1), 116-123. Retrieved from www.theinternationaljornal.org.
Greener, S., & Martelli, J. (2018). An Introduction to Business Research Methods (2nd ed.). Retrieved from http://thuvienso.bvu.edu.vn.
Gupta, P., Guha, S., & Krishnaswami, S. (2013). Firm growth and its determinants. Journal of Innovation and Entrepreneurship, 2(1), doi: 10.1186/2192-5372-15.
Hall, G., Hutchinson, P. & Michaelas, N. (2000). Industry effects of the determinants of unquoted SME’s capital structure. International Journal of the Economics of Business, 7(3), doi: 10.1080/13571510050197203.
Hamukwaya, P. S., & Nautwima, J. P. (2019). Does microfinance really eradicate poverty in Africa? Africa Growth Agenda. Retrieved from https://ideas.repec.org.
Helwege, J., & Liang, N. (1996). Is there a pecking order? Evidence from a panel of IOP firms. Journal of Finance and Economics, 40(3), 429-458. doi: 10.1016/0304-405X(95)00855.
Holmes, S., & Kent, P. (1991). An empirical analysis of the financial structure of small and large Australian manufacturing enterprises. Journal of Entrepreneurial Finance, 1(2). Retrieved from https://www.EconPaper.repec.org.
Hugh, A. (2007). Finance begins with savings, not loans. In: ditcher, Thomas, D. and Malcolm H. (eds.), What’s wrong with microfinance? Warwickshire. Practical Action Publishing. Retrieved from https://developmentbookshop.com.
Irobi, N.C. (2008). Microfinance and Poverty Alleviation: A case study of Obazu Progressive Women Association Mbieri, Imo State- Nigeria. Uppsala: Department of Economics Retrieved from https://stud.epsilon.slu.se.
Kamwale, J. N., Chisoro, C., & Karodia, A., M. (2015). Investigation into the causes of small and medium enterprises failure in Windhoek, Namibia. Arabian Journal of Business and Management Preview (OMAN Chapter), 4(7), 080-109. Retrieved from https://www.arabianjbmr.com
Kessy, S. A., & Temu, S. S. (2010). The impact of training on performance of Micro and Small Enterprises served by microfinance institutions in Tanzania. REPOA, Dar es Salaam, 4, 103 111. doi: 10.3923/rjbm.2010.103.11.
Kisaka, S. E., & Mwewa, N. M. (2014). Effects of micro-credit, micro-savings and training on the growth of Small and Medium Enterprises in Machakos county. Research Journal of Finance and Accounting, 5(7). Retrieved from https://www.iiste.org.
Kumar, R. (2011). Research methodology: A step-by-step guide for beginners (3rd ed.). New Delhi, India. SAGE Publishing Pty. Ltd.
Leavy, P. (2017). Research Design: Quantitative, qualitative, mixed methods, art-based, and community-based participatory research approaches. New York, USA. The Guilford Press.
Ledgerwood, J. (1999). Microfinance Handbook: An Institutional and Financial Perspective. Washington, D.C: World Bank. Retrieved from www.worldbank.org.
Lincoln, Y. S., Lynham, S. A., & Guba, E. G. (2011). The SAGE handbook of qualitative research (4th ed.). Thousand Oaks, CA: Sage Publishing.
Liu, X. (2008). SME Development in China: A policy perspective on SME industrial clustering, in Lim, H. (ed.), SME in Asia and Globalisation. (ERIA Research Project Report No. 2007-5). Retrieved from http://www.eria.org.
Makorere, R. (2014). The role of microfinance in promoting small and medium enterprises (SMEs) in Tanzania: Empirical evidence from SMEs holder who have received microcredit from financial institutions in Morogoro, Tanzania. Global Business and Economics Research Journal, 3(4). Retrieved from http://www.journals.globejournal.org.
Morris, G., & Barnes, C. (2005). An assessment of the impact of microfinance: A case study from Uganda. Journal of Microfinance/ESR Review, 7(1). Retrieved from https://scholarsarchive.byu.edu/esr/vol7/iss1/4.
Mukata, C. M., & Swanepoel, E. (2017). Development support for small and medium enterprises in the financially constrained North-eastern regions of Namibia. Southern Africa Business Review, 21. Retrieved from www.ajol.info.
Nakusera, F., Kadhikwa, G., & Mushendami, P. (2008). Bank of Namibia. Windhoek. Retrieved from www.bon.com.na.
Namibia Manufacturers Association. (2015). Manufacturing Processing Directory. Windhoek: Namibia. Retrieved from www.nmanamibia.com. National Policy on Micro, Small and Medium Enterprise in Namibia 2016 – 2021 (2016). Retrieved from https://www.mti.gov.na.
OECD. (2015). OECD Science, Technology and Industry Scoreboard 2015: Innovation for growth and society, Paris. OECD Publishing. Retrieved from https://doi.org/10.1787/sti_scorebord-2015-en.
OECD. (2019). Chapter 7. Access to finance for SMEs (Dimension 6) in Western Balkans and Turkey. OECD Publishing. Retrieved from https://www.oecd-ilibrary.org.
Ogbokor, C.A., & Ngeendepi E.J. (2012). Investigating the Challenges Faced by SMEs in Namibia. Retrieved, from http://ir.polytechnic.edu.na/bitstream/.
Oni, E. O., Paiko I. I., & Ormin K. (2012). Assessment of the contribution of Micro Finance Institutions (MFIs) to sustainable growth of Small and Medium Enterprises (SMEs) in Nigeria. Interdisciplinary Journal of Contemporary Research in Business, 3(9). Retrieved from https://www.ijcrb.webs.com.
Robinson, M., S. (1998). The paradigm shift from credit delivery to sustainable financial intermediation: In Kimenyi, M. S., Wieland, R. C. and Von Pischke, J. D., Eds., Strategic issues in microfinance, 55-86, doi: 10.4324/9780429436574-4.
Salvatore, D., & Reagle, D. (2002). Statistics and econometrics (2nd ed.). New Delhi, India: McGraw Hill.
Schreiner, M., & Colombet, H. H. (2001). From urban to rural: Lessons for microfinance from Argentina. Development Policy Review, 19(3), doi: 10.1111/1467-7679.00138.
Sreejesh, S., Mohapatra, S., & Anusree, M. R. (2014). Business research methods: An applied orientation.
Storey, D. J. (1994). New firm growth and bank financing. Small Business Economics, 6(2), 139–150. doi: 10.1007/BF01065186.
Strauss, A. (1987). Qualitative analysis for social scientists. Cambridge, UK: Cambridge University Press.
Toindepi, J. (2016). Investigating a best practice model of microfinance for poverty alleviation: Conceptual note. International Journal of Social Economics, 43(4), 346-362. doi: 10.1108/IJSE-05-2014-0091.
World Bank, World Bank Indicators (2015). Namibia manufacturing annual growth rate. Retrieved from https://data.worldbank.orgindicator/NV.IND.MANF.KD.ZG?locations=na.
World Bank. (2014). 2014 Namibia enterprise survey report. World Bank Enterprise Surveys. http://www.enterprisesurveys.org.
Zeller, M., & Sharma M. (2007), Rural finance and poverty alleviation (Report No. 1-202-862 5600). International Food Policy Research Institute (IFPRI). Retrieved from www.cgiar.org/ifpri.
How to Cite
Copyright (c) 2021 Romeo Asa
This work is licensed under a Creative Commons Attribution 4.0 International License.