Determinants of internal resources of small and medium sized-enterprises in Cameroon

Abstract

Financing decisions have direct impact on financial structure and financial performance of firms. The aim of this study is to examine the specificity of capital structure of SMEs and that internal financial resources of Cameroonian SMEs. A binary discrete choice regression; the probit model is used to estimate the probability of the use of internal resource as principal financing source, World Bank 2009 enterprise survey was used in this study. Descriptive statistics was also used to verify the fact that the financial structure of SMEs differ from that of large firms. The principal results of this research shows that SMEs use more of internal sources of finance while large firms use more of external financing. We also noticed that when SMEs are family owned, sole proprietors have a higher probability of using internal source of financing as the principal source of financing, we also noticed that informal enterprises use more of non-bank external financing.