Financing Difficulties of Small and Medium Enterprises (SMEs) in the West African Economic and Monetary Union (WAEMU) Area

Abstract

Difficulties in financing small and medium enterprises (SMEs) of the West African Economic and Monetary Union (WAEMU) zone, which is composed of eight member countries, is a very delicate topic and a serious cause for concern, as the SMEs that constitute the pillars of the sub regional economy of this zone, are experiencing difficulties in getting banks and/or other financial institutions to finance their activities. The aim of this paper is to highlight the specific challenges inhibiting SMEs in accessing credit in this area. In accordance with this objective, some questions have been asked as following: Do SMEs have challenges in accessing credit in WAEMU countries? To what extent have these challenges affected their operations? In this light, a quantitative study was conducted among 120 (70 Togo's capital City-Lome and 50 in Mali's capital city-Bamako) SMEs via email using questionnaires. According to the empirical results of this study (performed by statistical descriptive analysis) in which 100 firms responded, 84 of the firms have recourse to bank loans at least once, most of which have faced challenges in mobilizing financial and mortgages guarantees and high interest rates resulting in difficulties in loan repayment; whereas just 16 had never made reliance on loans in the conventional and unconventional banks due to high level of guarantee required by the bank and the phobia of not being able to repay loans with a high interest rate. As recommendations, WAEMU authorities must establish a large sub-regional structure that should have mission to put in place support mechanisms for SMEs through several aspects by creation of agencies in each of the eight countries. This study permits to open eyes for WAEMU' authorities, financial institutions, and banks authorities to find an adequate solution for these problems encountered by SMEs which remain the sub-regional economy's corner stone.