Alternative Sources of Finance: Evidence from Micro, Small and Medium Scale Enterprises (MSMEs) in Dala Local Government Area-Kano State of Nigeria

Abstract

This study assesses the alternative sources of financing of MSMEs in Dala local government area. The major objectives of the study is to determine the level of access and usage of alternative sources of finance, and to assess the effectiveness of MSMEs in securing financing as well as the constraints faced by MSMEs in applying for and securing funding from the lending agencies. The study employs the survey research design, data were collected via questionnaire, and analysed using descriptive statistics. The findings of the study revealed that MSMEs in Dala local government are accessing and using all the available alternative sources of financing, although many of which are on a limited scale. And the best external sources of finance for MSMEs are trade credits and borrowing from family and friends. The findings also indicate that, except for trade credits and loans from family and friends, most MSMEs were not applying for loans from the external sources or are largely not wholly successful in their application for loan from the lending agencies. The study has identified the problems limiting the ability of MSMEs to obtain funds from the lending agencies to include information asymmetry, lack of collateral, high cost of capital etc. Furthermore, the study recommends that, Government should educate and enlighten owners of MSMEs on its various programmes and schemes aimed at providing finance, and to reduce the conditions and requirements for collecting loans and credits from formal sources to ease access to finance.