The impact of loans on the financial performance of small and medium enterprises (sme) in tamale metropolis

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The importance of smes to the growth and development of developing countries is well established. In this respect, smes have attract great interest from government and academics alike. In the finance literature financial performance of smes has taken centre stage and studies focusing on it has grown phenomenally. Against this, this study was conceived to examine the effects of credits on the financial performance of smes and their subsequent sustainability in the Tamale Metropolitan Assembly in Ghana. A mixed method approach involving quantitative and quality techniques were employed. Data collection instruments used to gather primary data included questionnaire and observation method. Using a sample of 98 smes and adopting the simple random sampling procedures with the aid of Krejcie and Morgan’s (1970) Table for determining sample size, the study obtained the following findings. Loan facilities have medium impact on the financial performance of smes. It also revealed credit accessed assist in smes to increase their working capital, support smes to acquire important assets and for stock financing. As regards to the challenges in accessing financial loans, the findings further indicated that the major constrains are paltry amount of loans and interest charges. Based on the findings this research recommended that banks must design systems and structure tailored to smes and also, the central government must established an SME bank to cater for smes financing needs. For further research, the study suggested that a large sample size representative of all smes in tama could be conducted in order the findings could be generalized to cover the entire smes in tama.
A thesis submitted to the institute of distance learning In partial fulfilment of the requirements for the degree of Master in business administration (finance option)