Report: Limited access to capital the biggest barrier to SMEs growth
MARKET Limited access to capital is the largest barrier hindering Small and Medium Enterprises (SMEs) in the country from doing business with corporate buyers, a report has revealed.
According to a recent survey by the International Finance Corporation (IFC), inadequate operational capacity and access to resources to improve skills is the second largest barrier while limited access to information and networks to find tender opportunities is the third largest barrier.
Corporate buyers
This is true for both women and men-owned SMEs and applies to those supplying directly to corporate buyers as well as those sub-contracted by other SMEs.
However, women-owned SMEs (WSMEs) are more disadvantaged compared to men or jointly- owned ones with corporate buyers estimating that only three percent of procurement purchases go to women-owned SMEs.
“SMEs cited access to finance and buyers’ payment terms as their largest barriers in being able to consistently supply to companies,” reads the report in part.
“When it comes to buyers’ payment terms, SMEs reported that these were unfavourably long, which negatively impacted their cash flow,” it added.
For SMEs supplying directly to corporate buyers, more women-owned SMEs complained of unfavourably long payment period compared to 38 per cent of male/joint owned SMEs who complained of the same.
The case is slightly different for sub-contracted SMEs where more men/joint-owned SMEs (44 per cent) complained of lack of access to capital compared to 35 per cent among the women-owned SMEs.
According to the report, the most common financial need for SMEs is accounts receivable financing (53 per cent), followed by access to timely credit to purchase raw materials and other supplies (41 per cent), and Local Purchase Order (LPO) financing (39 per cent).
Limited to access capital by SMEs results in frequents delays in meeting the needs of their corporate buyers and reduced ability to source the quality products needed.
