Challenges of financing small, medium and micro-enterprises: The case of Botswana manufacturing sector

There is acute scarcity of detailed studies of the manufacturing sector in Botswana, especially the financing aspect, hence the need for the study. The study aims at exploring the financing challenges faced by manufacturing small, micro-and medium enterprises (SMMEs). It makes use of 100 questionnaires relevant to manufacturing SMMEs, and structured interviews were conducted with three commercial banks over a period of 8 months. Results show that SMMEs use more of internal financing than external financing because they cannot easily access external financing due to a lack of collateral security, high default rate, poor credit-rating, poor banking history, lack of honest reporting and lack of up-to-date records. It is recommended that commercial banks should offer financing on a case-by-case basis, consider financing SMMEs that have feasible ideas even when they have no collateral security and mentor and guide SMMEs rather than just financing them. SMMEs should keep up-to-date records. SMMEs need to save money for business' future. SMMEs should keep clean banking track record and operate with integrity. SMMEs should separate personal transactions from business transactions to avoid misappropriation of funds. They should also seek help from Local Enterprise Authority, bank officials or competent consultants to ensure they have feasible business plans rather than carry unrealistic dreams. Furthermore, SMMEs need to benchmark with companies in other countries. Commercial banks should develop financing packages that suit firms according to their growth stage. They should consider applications individually. Government should develop policies and incentives to lure financial institutions to finance SMMEs.