Traditionally, commercial banks lend money to large, credit-worthy corporations and avoid doing business with small and medium enterprises due to the associated risks and costs. These small and medium enterprises depend on microfinance banks to obtain loans for their businesses, but for some reasons, some of these businesses do not approach microfinance banks for loans. This research investigates reasons why some businesses do not apply for loans from microfinance banks even though they need funds for the efficient running of their business. Results show that lack of collateral, ignorance of businesses about the existence of microfinance banks, and high interest rates are the main reasons that are hindering businesses in applying for loans from microfinance banks. Microfinance banks need to reach out to economically active poor businesses that cannot obtain loans from commercial banks or other financial institution.
This work by European American Journals is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License