Access to Debt Finance in Sub-Saharan Africa: Redefining the Problem from Risk Perspective and Way Forward

This paper presents critical points of view relating to small and medium-sized enterprises (SMEs) access to debt finance in Sub-Saharan Africa (SSA). Prevailing view suggests that lack of credit information is a fundamental factor that contributes to the constraints faced by SMEs. We challenge this prevailing dominant view and argues that SMEs are constraints in accessing debt finance due to bank’s risk assessment strategies. At the same time, suggest that banks modelling credit risk assessment for SMEs in SSA became extremely crucial for determining access to debt finance. This impacts on access to debt finance contrary to popular claim that the opaque nature of SMEs is the major constraint limiting access to debt finance. In such challenging context, SMEs are expected to either provide more information to banks to reduce the problem of information asymmetry as well as provide collateral and guarantees in the absence of reliable information to safeguard against risk of default or maintain a long-term relationship with banks which is expected to result in an increase in debt financing. The authors emphasize the need to redefine the problem of access to debt finance, so that financing obstacles for SMEs can be strengthen. The implications and alternative strategies for SMEs access to debt finance are discussed.