Venture Capital as Source of Finance for Small and Medium Enterprises

Venture capital is an important source of finance for small businesses although it is least understood. The study established that governments are the main financer of venture capital financing. Further, stable economic environment, investor protection and corporate governance and well developed capital markets were found to be main determinants of venture capital financing. The study also established that the role of venture capital financing played an important role in the areas of employment creation, investment, export growth as well as innovation and creativity. Overall venture capital financing is an alternative financing option for SMEs. However, the development of venture capital market is being constrained by the economic environment, lack of a vibrant capital market, no regulatory framework regards corporate governance and investor protection. The study recommends that development of entrepreneurship by having an active venture capital market, stable macroeconomic environment and regulatory framework that protect investors.