Sponsoring Entrepreneurship : A qualitative study on the effectiveness of government financing programs in sponsoring SME entrepreneurship in Botswana

Abstract: The value of entrepreneurship in catalysing economic and social development in developing economies is well-documented. Government SME financing programs in Botswana have helped increase access to capital for entrepreneurs, but high default rates on loans have held down overall performance. By interviewing decision-makers at government agencies providing SME financing programs, a qualitative assessment of the mechanisms used to regulate the screening and monitoring of loan-takers is rendered from an agency theory perspective. It is found that there are methods of raising effectiveness in government financing programs by introducing mechanisms to mitigate the adverse effects of agency costs found in the relationship between lender and borrower. These results provide new areas of research in the study of SME financing programs and help decision-makers recognize some of the available policy options to contribute economic and social improvement.