Credit accessibility and small and medium enterprises performance in Kathmandu

Abstract

This study examines the accessibility of credit and its impact on the financial performance of small and medium enterprises (small and medium enterprises) in the Kathmandu. The research aims to assess business owners' perceptions regarding several key factors: loan pricing, loan repayment schedules, record-keeping practices, availability of financial institutions, and collateral security. Additionally, the study explores the relationships between these factors and their effects on small and medium enterprises' financial performance. A descriptive research design was employed, with data gathered from 385 small and medium enterprises using structured questionnaires that utilized a five-point Likert scale. The study found that correlation and regression analyses indicate that favorable perceptions of loan pricing, flexible repayment schedules, effective record-keeping, and better access to financial institutions are positively associated with improved financial performance among small and medium enterprises. Conversely, stringent collateral requirements have a negative impact on financial outcomes, highlighting a critical area needing reform. The study suggests that reducing collateral demands and enhancing the accessibility and flexibility of financial services could significantly benefit small and medium enterprises financial health. These findings underscore the need for financial institutions and policymakers to address the challenges associated with collateral security and improve overall credit accessibility. By reforming collateral requirements and expanding financial service availability, a more supportive environment for small and medium enterprises growth and financial stability can be fostered. This research provides valuable insights for enhancing credit policies and practices to better support small and medium enterprises in the Kathmandu.