The study was guided by analyzing the contribution of commercial banks in economic development of SMEs The target population for the study consisted of registered SMEs in KCBR as their clients.A descriptive research design as well as an explanatory research design was used. The study used Bouchard formula to sample SMEs and then used random sampling to select the 105 SMEs. The respondents of the study were the owners and managers of the SMEs. The study used questionnaires to collect quantitative data using closed ended questions
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Data analysis will be done using SPSS statistical software version 21. Descriptive statistics (Frequencies, Means and Standard deviation) and inferential statistics (Correlations and regression) were used in analysis. A multiple linear regression model was used for analysis and all tests were conducted at 5% level of significance. The study findings indicated that banking services are positively related with economic development of SMEs. The study concluded that commercial banks in Nyarugenge district are favorable. The study also concluded commercial bank services are effective and they economic development of SMEs significantly.
SMEs in Rwanda suffer from weak financial performance and a high failure rate. Scholars argue that judging by the poor economic development of the informal sector, not much progress seems to have been achieved, despite government efforts to promote SME activity. Some of the key factors attributed to this poor performance is access to financial services. Therefore, the purpose of this study was to examine the contribution of commercial banks in economic development of SMEs
Normally, SMES play vital and significant contributors to economic development through their critical role in providing job opportunities and reducing poverty levels, an estimated number of up to 40% of the start-ups SMEs fail by year 2 and at least 60% close their doors by year 4.
This menace is attributed to poor financial management among small businesses. Accessing credit is a major constraint to the economic development and growth of SMEs and also to poor rural and urban households. This is mainly due to the behavior of lenders in terms of hedging against borrowers’ risks by demanding collateral, which they lack, and also information asymmetry.
Table of Contents
GENERAL INTRODUCTION
1. INTRODUCTION
2. PROBLEM STATEMENT
3. OBJECTIVES OF THE STUDY
3.1 GENERAL OBJECTIVES
3.2 SPECIFIC OBJECTIVES
3.2.1 RESEARCH QUESTIONS
3.2.2 Hypothesis1
3.2.3 Hypothesis 2
4. Scope of the study
4.1Time Scope
4.2 Geographical Scope
4.3 Content Scope
5. Significance of the Study
5.1 To the researcher
5.3 To the ULK Community
CHAPTER ONE: LITERATURE REVIEW
1.1 Introduction
1.2 Conceptual Review
1.2.1Commercial banks
1.2.2 Small and medium enterprise
Table1.1: SMEs definition
1.2.3 Economic Development
1.3 THEORETICAL REVIEW
1.3.1. THEORIES OF COMMERCIAL BANKS
1.3.2 Theories of SMEs economic development
1.4 Review Related Literature
1.5 Conceptual framework
CHAPTER TWO: METHODOLOGY
2.1 Research design
2.2Population study
2.3Sample size and selection
2.3.1Types of the Data
2.3.2Data Collection Methods and Instruments
2.3.2.1 Reliability and validity
2.3.2.3 Validity
2.3.3Documentary Review
2.3.4 Data Analysis Technique
CHAPTER THREE: PRESENTATION OF FINDINGS
3.1 EFFECTIVENESS KCBR FINANCIAL SERVICES TO SMEs
3.1.1 Types of Financial Services
3.1.2 Criteria Required for SMES Loan in KCBR
3.1.3 Size of Loans Amount Applied And Received By The SMEs In KCBR Nyabugogo Branch
3.1.4. Evolution of loans applied and received by customers
3.2. Contribution commercial banks in economic development of SMEs
3.2.1 Sources of Funds for SMEs
3.2.2 Financial performance of SMEs
3.2.3 FINANCIAL PERFORMANCE OF SMEs BEFORE AND AFTER GETTING KCBR FINANCIAL SERVICES
3.3 SUMMARY OF FINDINGS
3.4 CONCLUSIONS
3.5 RECOMMENDATIONS OF THE STUDY
Research Objectives and Themes
This study aims to investigate the contribution of commercial banks—specifically Kenya Commercial Bank Rwanda (KCBR)—to the economic development of Small and Medium Enterprises (SMEs) in the Nyarugenge district. The primary research goal is to assess how financial services provided by these institutions influence the growth, profitability, and overall sustainability of SMEs within the region.
- Effectiveness of commercial bank financial services for SMEs.
- Relationship between bank credit facilities and business performance.
- Role of banking products like savings, loans, and training in economic development.
- Impact of financial services on SME capital, sales, and profit growth.
- Barriers and constraints faced by SMEs in accessing external financing.
Excerpt from the Book
1.3.1.5 Contribution of commercial banks in economic development of SMEs
As seen above the main function of banks is to collect funds (deposits) from units in surplus and lend funds (loans) to units in deficit. According to William and Barrett (2000), Deposits typically have the characteristics of being small- size, low-risk and high-liquidity. Loans are of larger-size, higher-risk and illiquid.
Banks bridge the gap between the needs of lenders and borrowers by performing a transformation function such as Size transformation, Maturity transformation, and Risk transformation
Size transformation: According European Commission (2001), savers are willing to lend smaller amounts of money than the amounts required by borrowers. Banks collect funds from savers in the form of small -size deposits and repackage them into larger size loans Banks perform this transformation function exploiting economies of scale associated with the lending /borrowing function, because they have access to a larger number of depositors than any individual borrower (Siegel, 2001).
Summary of Chapters
CHAPTER ONE: LITERATURE REVIEW: This chapter reviews relevant academic and professional literature regarding the role of commercial banks in fostering SME development, including conceptual frameworks and theoretical models of banking.
CHAPTER TWO: METHODOLOGY: This section details the research design, target population, sample selection techniques, and the data collection and analysis methods, specifically involving survey questionnaires and quantitative statistical techniques.
CHAPTER THREE: PRESENTATION OF FINDINGS: This chapter presents the empirical results of the study, offering a detailed analysis of the data collected from KCBR clients regarding financial services, loan effectiveness, and the resulting economic impact on their businesses.
Keywords
Commercial Banks, SMEs, Economic Development, Financial Services, Loan Facilities, Credit Access, Financial Performance, Kenya Commercial Bank Rwanda, Capital Growth, Sales Growth, Profitability, Savings Mobilization, Banking Regulation, SME Development, Nyarugenge District
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on analyzing the contribution of commercial banks in Rwanda, specifically KCB Bank, to the economic development of Small and Medium Enterprises (SMEs).
What are the central themes of this work?
The central themes include the effectiveness of bank financial products, the relationship between credit access and business growth, and the role of financial institutions in mitigating constraints faced by small businesses.
What is the main objective of the study?
The primary objective is to assess the impact of financial services offered by KCBR on the performance and economic development of SMEs in the Nyarugenge district.
Which research methodology was utilized?
The study employed a descriptive and explanatory research design, using quantitative data collection through questionnaires and statistical analysis via SPSS software.
What topics are covered in the main body?
The main body covers the conceptual and theoretical review of banking and SME development, the presentation of findings based on survey data, and the correlation and regression analysis of variables.
How are the results characterized by key terms?
The results are characterized by terms such as financial performance, capital growth, loan accessibility, and banking-driven economic development.
What specific loan criteria does KCBR use?
KCBR evaluates business plans, collateral security, cash flow statements, and audited financial accounts, while also requiring a 10% compulsory savings contribution from loan applicants.
What was the key conclusion regarding bank training services?
The study concluded that bank training in management, finance, and technical skills positively and significantly impacts the financial performance of SMEs.
How did loan accessibility affect SME performance?
Results showed a strong positive correlation between access to banking services and increases in SME capital, monthly sales, and overall profitability.
- Arbeit zitieren
- Hitiyise Samuel (Autor:in), 2021, Commercial banks in economic development of SMEs. An analysis of their contribution, München, GRIN Verlag, https://www.grin.com/document/1037247
