IMPACT OF GOVERNMENT POLICIES ON ACCESS TO CREDIT FOR SMALL BUSINESS IN KATHMANDU

Abstract

This study is motivated by the difficulty faced by SMEs in accessing credit from commercial banks to sustain business growth and performance. The study aims to identify, analyze and examine different factors that affect the performance of entrepreneurs in Small and Medium enterprises (SMEs) of the Kathmandu district. The study is conducted to fulfill the following objectives; (i) To examine the relationship between access to credit and performance of SMEs in Kathmandu District. (ii) To examine the relationship between the credit terms and performance of SMEs in Kathmandu District (iii) To analyze the effect of access to credit and credit term on the performance of the SMEs in Kathmandu District. The study is based on the descriptive and analytical survey design. Primary data was collected using self administered questionnaires issued to respondents who were owners/managers of the registered SMEs in Kathmandu district. A sample size of 70 respondents was taken into account out of 225 population for the study using convenience and purposive sampling method. Correlation and multiple regression analysis are carried out to establish the association among the variables. The results indicated a significant positive association among the variables of credit terms and performance of SME. Similarly, access to credit and performance of SMEs also have a significant positive relationship. Regression analysis revealed that access to credit and credit term combinely contributed 18% of the variance in performance of SMEs. In order to improve access to credit by SMEs, commercial banks and other lending institutions need to adjust credit terms in line with what borrowers can afford. If there is easy accessibility of the credit with the favorable credit terms for the SMEs then the overall performance of the SMEs can be enhanced.