Journal of Economics, Management and Trade

Limited access to credit is one of the key factors inhibiting the growth of micro-small-medium scale enterprises (MSME’s) in developing countries like Ghana. Hence, this study sought to identify determinants of access to credit and the factors influencing the volume of credit disbursed to MSME’s in Kasoa municipality of Ghana. The study used primary data collected from 140 randomly sampled MSME’s who applied for loan from Progressive Microfinance Company limited. The paired sample t-test was used to test whether there is significant difference between the amount demanded and the amount of credit received. The study used Probit model to analyze factors influencing the probability of access to credit while the Tobit model was used to analyze the determinants of amount of credit disbursed to the MSME’s. The paired-sample t-test revealed that the amount of credit received was significantly lower than the amount of credit demanded by the MSME’s. Empirical results from the Probit regression model indicated that educational level, provision of a personal guarantor, duration in business, permanent place of business and household size are the variables that significantly influence the probability of MSME’s accessing credit from the MFI’s. Moreover, empirical results from Tobit regression model show that sales level, availability of collateral security, business income, stock level and availability of bank statement have significant influence on the amount of credit disbursed to MSME’s. The study therefore recommends that MSME’s should be granted the required loan amount to enable them achieve their investment plans, and MSME’s should be encouraged to operate bank account since it would increase their chances of accessing larger loan size.