A Study on Commercial Bank's Lending Policy to Smes

In: Other Topics

Submitted By tunn
Words 478
Pages 2
ABSTRACT
SMEs cannot develop without financial support from commercial banks; however it has become a concern of these banks to satisfy the SMEs request for finance. The banks evaluate the requests of the enterprises using specific criteria in order to decide on granting finance. The purpose of this study is to evaluate and explore the lending policy of commercial banks to Small and Medium Enterprises (SMEs) in Namibia in order to see how these commercial banks evaluate SME loan applications and make financing decisions.
In order to analyse the research problem, the research considered the following questions: 1. What is the credit assessment procedure and lending policy of commercial banks in Namibia? 2. What criteria do commercial banks use during SME loan evaluation and how important are they to decision making? 3. What recommendations are there on how SMEs can improve their loan applications?
The researcher believes the banks will correctly and sufficiently provide information which will enable the researcher to answer all the research questions. In this research, self administered questionnaires were used and physically delivered to commercial banks giving loans to SMEs in order to gather primary information.

All commercial banks have a lending policy and credit assessment procedure to mostly meet regulatory standards and to ensure profitability. The study found that there are three lending policy and credit assessment procedure within the commercial banks namely the use of the 5 Cs that is collateral, capacity, capital, condition and character, the credit scoring and the credit assessment model. There is no single policy in each bank however, the use of 5 Cs is the only policy used in all commercial banks.
SME loan applications are treated differently. Business viability, capacity to repay, financial strength, credit with the bank and other…...

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