Abstract

The right kind of funding for the company’s demands is critical to its success. It’s no secret that researchers are fascinated by SMEs’ access to credit. Despite being the backbone of the economy, SMEs face difficulties in gaining access to banking institutions. Thus, the study sought to investigate the effects Sources of finance on the survival of small businesses in Kumba.

Specifically, the study sought to examine the effect of internal sources of finance and external sources of finance on the survival of small businesses in Kumba. To achieved these objectives, the study employed a descriptive survey research design to sample 150 respondents of SMEs using a structured-questionnaire. Multiple’s regression analysis was employed in the study since we have multiple independent variables (like: internal and external sources of finance) and one dependent variable (i.e survival of SMEs).

The study findings revealed that SMEs depends on internal sources of finance from owners personal savings, finance from friends and family and also from njangi groups or associations. External sources of finance were limited to money lenders and financial institutions such as banks and microfinance. From the findings, it shows that each of the financial sources has a reasonable level connection with the survival of SMEs.

The study revealed that most SMEs employed all the internal sources of finance during business start-up. The study concludes that even though SMEs made used of both sources of finance, they are more likely to perform well or survived in the economy under the use of internal sources of finance. The study suggested that government should continue to support SMEs all over the country, by providing them with security and also providing the good infrastructure needed for the survival of SMEs.

CHAPTER ONE

GENERAL INTRODUCTION

1.0 Introduction

This chapter provides the research with an overview of the study’s context, describing the problem and intent, defining the scope, listing the aims, questions and hypotheses that drive this study, as well as suggesting the study’s significance. This chapter closes with the research organization stating how the various chapters will be organised

1.1 Background To The Study

We live in a world where the largest taxi company owns no vehicles (Uber, created in 2009), the largest store in the world has no inventory, (Alibaba.com e-commerce site sold the total of 17.8 billion Dollars in 24 hours in the last Black Friday of 2016), the largest platform of rental housing owns no houses, (Airbnb), and the largest social media produces no media content (Facebook, as of the fourth quarter of 2015, had 1.59 billion monthly active users connecting to the platform to inject media content).The world has suddenly become a global village and the business ecosystem has embraced innovation and improvements in the last half decade (Kingsley, 2017)

The role of small and medium enterprises (SMEs) in a national economy has been emphasised all over the world, as they play a crucial role in the creation of jobs, growing the economy and reducing poverty (Subhan, Mehmood and Sattar, 2013). SMEs are flexible and innovative, taking into account the size and the business structure. Hence, it appears that there is less attention given to SMEs operating in rural places; as a result, there is little knowledge about different challenges confronting them.

However, there is potential to improve the overall performance of SMEs and their competitiveness including those in rural areas with specific reference to Kumba. In order to compete locally and globally and be sustainably successful, rural businesses must not only excel in their growth, but also persevere over the long term (Raduan, Jegak, Haslinda and Alimin, 2009; Hua, Kabia and Arkady, 2015). Achieving such a sustainable growth and competitive advantage status is not possible, without a proper roadmap or strategy being outlined and put into practice.

A review of the literature from many countries indicates that governments focus more on making policies and allocating financial resources for rural development, which includes promoting small business, but without really understanding the problem of why small business cannot grow beyond the survival stage.

Rural areas have unique and different geographical profiles and the environment is unlike that of urban areas. These degrees of difference include business characteristics, personal attitudes towards growth, entrepreneurial orientation, entrepreneurial intention as well as entrepreneurial skills and resources. This means that business methods, systems, understanding of determinants and new growth models will be unique and distinct from those of urban areas. Therefore, new ideas and new thinking are required to address the challenges facing rural business communities.

Furthermore, a new and broad understanding of determinants and the adoption of growth models must be developed and implemented to ensure rural businesses’ growth. This study aims to identify and discuss the various sources of finance and their effects on the survival of small businesses within the Kumba municipality (Maclean, Jagannathan and Sarvi, 2013)

A glance at newspapers, business journals, or cable news channels reveals a succession of corporations struggling, and often failing, to avoid bankruptcy. In such tough times, knowing how to achieve survival is more critical than ever. The most important thing today’s small businesses can do is expose their organizations to critical self-analysis.

Small businesses survive not by competing head-on with global corporations, but by pursuing the market niches larger operators ignore. Such a strategy requires constant attention to detail, necessitating self-analysis well beyond the operational level; it is crucial that everything from the basic business model down to the operation of the mailroom is subject to rigorous study. This means determining what, precisely, the business is aiming to offer its customers, how this differentiates it from its competitors, and how well it is delivering on these core products and services (Agbenyegah, 2013).

The reality can be more different from the documents, which include always best practice approaches and favourable situation development. The author in process of writing Master’s Thesis will evaluate those instruments, which are implemented to address importance of the financial support to small businesses. To evaluate level of utilizing support, the author will rely on primary and second data. The primary data will be qualitative, and therefore not general, but secondary data more reliable.

This research seeks to investigate whether the source of finance is key threshold resource, which is required for company’s survival, growth and prosperity. Entrepreneurship is about profit, but if financial support helps increase profitability or it just fake illusion. Another reason is to evaluate if there is correlation between the sources of finance and survival of small businesses.

1.2 Problem Statement

Small businesses are the engine of economic development due to high added value to gross domestic product. The business environment determines efficiency of entrepreneurship: small, medium and large. For this reason well-defined property rights, effective institution work, information availability all increase company efficiency.

Many small businesses suffer lack of the financial support. This situation becomes worse with institution and government incapability to run sufficient state-aid programmes. The institutions issue different types of documents, which consist of development plans and strategies, how improve and make economy stable and profitable. Nevertheless, documents do not take in account many factors, such as personal behaviour, force-majeure and only serves as guidance.

Small businesses are seen as a crucial sector for long-term economic development, job creation, and poverty reduction around the world; hence their success is critical to most governments. The Cameroonian government recognizes this and is progressively promoting small company development as a source of economic growth and socioeconomic integration.

An effective government policy to decrease unemployment is to stimulate the number of new businesses. A well-known problem with new businesses is their high dissolution rate. Of every 100 start-ups, only 50 firms survive the first three years, hence authorities should not only stimulate start-ups, but also strive to minimise the number of business dissolution.

Despite the government’s contributions and attention to small businesses, these businesses continue to face challenges. One of these issues is a shortage of funds; as the saying goes, “it takes money to survive a business”. There are financial ramifications in every activity linked with a business from the time it is founded until it ceases to exist.

It is assumed that the survival of a business is depended on the sources of finance for which that business was formed. As a result, the purpose of this study is to look into sources of finance and their relationship with the survival of small businesses in Kumba municipality. For a proper understanding of this study, the following research questions must be answered.

1.3 Research Questions

1.3.1 Main research question

What is the effect of sources of finance on the survival of small businesses in Kumba municipality?

1.3.2 Specific research questions

This study is guided by the following specific questions

1. What is the effect of internal sources of finance on survival of small business in Kumba municipality?
2. What is the effect of external sources of finance on business survival of small businesses in Kumba municipality?

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