The strength of every nation’s economy is usually a direct reflection of the viability of the Small and Medium scale Enterprise (SME) sector.

The impact of SMEs on the Gross Domestic Product (GDP) of nations cannot be over-emphasized. In most cases, especially developing countries, SMEs account for as much as 35-40% of the total GDP.

SMEs lack of loan options

The backbone of the SME sector of the economy is its access to affordable funding schemes. Strenuous banking processes and high interest rates appear to be major stumbling blocks to the success of SMEs, especially in developing countries.

Among other factors, the risk posed by the inability of SMEs to repay loans play a huge role in the reluctance of most banks when dealing with such organizations. Since most SMEs may not have assets that could pass as sufficient collateral, most banks would rather deal with companies with established track record and tangible assets.

Therefore, while banks seek guarantees for their facilities, these enterprises struggle to go a step further than just an idea.