Commercial Bank Services and Growth of Small Scale Enterprises in Bujumbura, Burundi

ABSTRACT The importance of commercial banks to eradication of poverty cannot be overemphasized. Commercial banks offer financial services to active poor who were traditionally neglected by conventional banks with a view towards lifting them out of poverty. Hence, this study sought to establish the effect that commercial bank services have on the growth of small scale enterprises in Bujumbura- Burundi. Even if it is a government policy to ensure that all people have access to financial services but many businesses in Bujumbura have continued to suffer from lack of proper skill, the inability to access credit, high interest rate on short-term investment loan which have led to a high failure rate of small scale enterprises in Burundi. The objectives were to establish the effect of seed capital on the growth of small scale enterprises, to determine the effect of financial skills training on the growth of small scale enterprises and to assess the effect of mobilization of savings by commercial banks on the growth of small scale enterprises. The study employed a cross-sectional research design. The data were collected from people operating in small scale enterprises in Bujumbura- Burundi. A sample of 176 respondents were determined from 315 target population. The data was analysed using simple regression analysis. The study findings were that provision of seed capital affect the growth of small scale enterprises by 24.6% implying low effect, skills training have a 49.4% effect on the growth of small scale enterprises and mobilization of savings had 82.1% effect on growth of small scale enterprises. On the first objective the researcher established that seed capital had less effect on the growth of small scale enterprises; meaning that there are other factors that account more for the small scale enterprises growth, even that the argument that seed capital is not provided to starting small scale enterprises is a proof for not growing well. The effect on the second research objective that established financial skills training on the growth of small scale enterprises was low though substantive, the researcher concludes that training could be not so adequately advanced to the small scale enterprises explaining the low growth rate regarding this other factors contributions are considerably low. The third objective established that there was a high significant effect of saving mobilization on growth of small scale enterprises in Bujumbura- Burundi. The researcher recommended that the status of the business operations need to acquire collateral security before operation in order to attain value for seed capital, there is need for more training by commercial banks to small scale enterprises and there is need for improving savings through providing attractive interests on savings and other relevant practices. 

TABLE OF CONTENTS

DECLARATION.......................................................................................................................i

APPROVAL..............................................................................................................................ii

DEDICATION.........................................................................................................................iii

ACKNOWLEDGEMENT......................................................................................................iv

TABLE OF CONTENTS ........................................................................................................... v

LIST OF TABLES ..................................................................................................................ix

LIST OF ACRONYMS............................................................................................................ x

ABSTRACT............................................................................................................................. xi

CHAPTER ONE....................................................................................................................... 1

INTRODUCTION.................................................................................................................... 1

1.1 Background of the Study...................................................................................................... 1

1.1.1 Historical Perspective........................................................................................................ 1

1.1.2 Theoretical Perspective ..................................................................................................... 2

1.1.3 Conceptual Perspective ..................................................................................................... 3

1.1.4 Contextual Perspective...................................................................................................... 4

1.2 Problem Statement ............................................................................................................... 8

1.3 Purpose of the Study ............................................................................................................ 8

1.4 Specific Objectives of the Study .......................................................................................... 8

1.5 Research Questions.............................................................................................................. 9

1.6 Research Hypotheses............................................................................................................ 9

1.7 Scope of the study ................................................................................................................ 9

1.7.1 Geographical Scope........................................................................................................... 9

1.7.2 Content Scope ................................................................................................................. 10

1.7.3 Time Scope...................................................................................................................... 10

1.8 Significance of the study .................................................................................................... 10

1.9 Definition of Key Terms .................................................................................................... 11

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CHAPTER TWO.................................................................................................................... 11

LITERATURE REVIEW...................................................................................................... 11

2.0 Introduction ........................................................................................................................ 11

2.1 Theoretical Review ............................................................................................................ 12

2.1.1 Collateral Pledging Theory ............................................................................................. 12

2.1.1.1 Tangible Assets Availability ........................................................................................ 13

2.1.1.2 Group Guarantees Availability..................................................................................... 14

2.1.2 Transaction Cost Approach............................................................................................. 15

2.2 Conceptual Review ............................................................................................................ 15

2.3 Review of Related Literature ............................................................................................. 18

2.4 Empirical Review............................................................................................................... 23

2.5 Research Gap...................................................................................................................... 25

CHAPTER THREE ............................................................................................................... 26

METHODOLOGY................................................................................................................. 26

3.0 Introduction ........................................................................................................................ 26

3.1 Research Design................................................................................................................. 26

3.2 Target Population ............................................................................................................... 26

3.3 Sample Size ........................................................................................................................ 26

3.4 Sampling procedure............................................................................................................ 27

3.5 Sources of Data .................................................................................................................. 28

3.6 Research Instruments ......................................................................................................... 28

3.6.1 Questionnaire .................................................................................................................. 28

3.6.2 Secondary Source............................................................................................................ 28

3.7 Validity and Reliability of Instruments.............................................................................. 29

3.8 Data Collection Procedure ................................................................................................. 30

3.9 Data Analysis ..................................................................................................................... 31

3.10 Ethical Consideration ....................................................................................................... 32

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CHAPTER FOUR.................................................................................................................. 33

DATA PRESENTATION, ANALYSIS AND INTERPRETATION................................. 33

4.0 Introduction ........................................................................................................................ 33

4.1 Response Rate .................................................................................................................... 33

4.2 Demographic profile of the respondents............................................................................ 33

4.3 Descriptive Statistics for Commercial Bank Services........................................................ 35

4.3.1 Provision of Seed Capital................................................................................................ 35

4.3.2 Descriptive Statistics for Financial Skills Training......................................................... 36

4.3.3 Descriptive Statistics for Mobilization of Savings.......................................................... 38

CHAPTER FIVE.................................................................................................................... 46

DISCUSSION, CONCLUSION AND RECOMMENDATION......................................... 46

5.0 Introduction ........................................................................................................................ 46

5.1 Discussion of the Study...................................................................................................... 46

5.1.1 Discussion of Findings on Seed Capital and the Growth of Small Scale Enterprises..... 46

5.1.2 Discussion of Findings on Financial Skills Training and the Growth of Small Scale 

Enterprises................................................................................................................................ 47

5.1.3 Discussion of Mobilization of Savings on the Growth of Small Scale Enterprises........ 47

5.2 Conclusion.......................................................................................................................... 48

5.2.1 Effect of Provision of Seed Capital on the Growth of Small Scale Enterprises ............. 48

5.2.2 Effect of Financial Skills Training on the Growth of Small Scale Enterprises............... 48

5.2.3 Effect of Savings Mobilization on the Growth of Small Scale Enterprises.................... 49

5.3 Recommendations.............................................................................................................. 49

5.3.1 Recommendation on Provision of Seed Capital.............................................................. 49

5.3.2 Recommendation on Financial Skills Training............................................................... 49

5.3.3 Recommendation on Mobilization of Savings................................................................ 50

5.4 Limitations to the Study ..................................................................................................... 50

5.5 Suggestions for Further Research ...................................................................................... 51

5.6 Contribution to the Knowledge .......................................................................................... 51

REFERENCES....................................................................................................................... 53

Appendix I: Introduction letter................................................................................................. 61

Appendix II: Questionnaire...................................................................................................... 62

APPENDIX IV: TIME FRAMEWORK.................................................................................. 67

APPENDIX V: INTRODUCTION LETTER.......................................................................... 68