Financing Small and Medium Enterprises and Role of the Banking Sector

Small and medium enterprises (SMEs) are universally recognized as a key force in driving forward the economic development; however, SME entrepreneurs face a variety of challenges including lack of access or limited access to formal financial services. Using mixed method research, the study attempted to analyses the SME ease of access to finance from banks and the impact of bank finance on their performance measured as return on assets (ROA). Contrary to many other studies, the results show that sample SMEs in Namibia had good access to finance from banks. The study further establishes that availability of bank loan is positively related to the performance of SMEs, while the age of enterprise was found to have negative relationship with performance.