Access to Credit for Non-Formal Micro-Enterprises in Botswana

The literature on microenterprises identifies a lack of capital as a primary constraint to enterprise development. Potentially, Botswana could be different as the commercial banking system has excess liquidity and the government has established relevant lending institutions and several financial assistance programmes. On the basis of a 1992 survey of 1,140 microenterprises engaged in nonformal activities in seven urban centres and villages in Botswana this study finds the situation in Botswana to be similar to the conclusions reported in the literature for other countries. The Botswana experience indicates that the overall availability of funds for investment is not the primary cause of the financial constraints faced by microenterprises. Rather, institutional and programme faults are the main cause. There is a need for institutional changes which channel loanable funds to microenterprises in a manner that addresses their respective capital constraints and encourages the entrepreneurs to become responsible savers and borrowers. The paper draws on the literature and on the experience of successful microenterprise loan schemes in other countries to outline the essential features of needed programme delivery changes. Bibliogr., notes, sum.