Examining disbursement and repayment of loans by SMEs at Agricultural Development Bank (Adum Branch)

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In most developing countries, capital requirements of enterprises especially Small and Medium Scale Enterprises (SMEs) greatly exceed the financial resources owned by themselves. This certainly does not augur well for economic growth of a nation. It is to arrest this problem that the government established some banks like ADB to assist SMEs in their business by granting them loans. Loan repayment rate by these enterprises however seems to have a relation with the amount of loans granted by these banks. This study looked at the relation of interest rates and repayment rates to the amount of loan granted to SMEs. It was discovered in the study that, as interest rates decreased, repayment rate by SMEs increases and as a result, the bank also increase the amount of loan given to SMEs. Monitoring, technical advice to SMEs and provision of collateral were among factors that was seen to be affecting the repayment rate of loans by SMEs. The study used both primary and secondary data collected through administering questionnaire, using face to face interviews and other authoritative books. The study further used descriptive statistics to give summary of the data collected. In addition, tables, charts and percentages were used in the presentation of the data. Data was mainly collected from Agricultural Development Bank and other selected Small and Medium Scale Enterprises (SMEs). The study apparently showed that the workload at the credit section of the bank was too much for the staff there and sometimes loans given to SMEs also delayed. Financial mismanagement was also seen to be a problem with some SMEs. Thus, to boost the rate of repayment by SMEs several recommendations were made by the researcher. Among those were employing more qualified personnel to work at the credit section of the bank. The bank could also make follow-up visits to these SMEs to verify if the loan is being used for its intended purpose. Again, it is recommended that ADB increase their long-term loans to SMEs to enable them also to invest in long - term projects.
A thesis submitted to the Department of Accounting & Finance, Kwame Nkrumah University of Science & Technology, in partial fulfillment of the requirements for the award of Master of Business Administration, 2008