Impediments faced by South African financiers in granting credit finance to SMMEs
Date
2012-12-04
Authors
Kiwanuka, Kabito Baker
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Abstract
The Small, Medium and Micro Enterprise (SMME) sector has a positive role to
play in the South African economy. It is through this sector that the challenges
of job creation, economic growth, and financial equity can be dealt with.
Through legislative and policy frameworks, the post-apartheid South African
government has led to the creation of government-backed SMME support
institutions that would foster the growth of a favourable economic environment
to support SMME growth.
However various perspectives and opinions on the constraints hindering SMME
growth have been advanced, one of which is the alleged conservativeness of
commercial banks in dealing with SMMEs. This study follows a qualitative
research methodology approach towards investigating the impediments faced
by financial institutions in servicing the SMME sector.
The research findings identified poorly motivated business plans, unrealistic
market research, poor credit records of applicants and a lack of management
skills training and collateral as the impediments that hinder financial institutions
from servicing SMMEs. These findings are in contention with the perceived
conservativeness of financial institutions when dealing with SMMEs as
advocated by most authors in the literature. Furthermore, the research findings
highlight the fact that financial institutions should be included as joint interests in
any policy and legislative framework formation that is aimed at easing access to
credit finance by SMMEs.
Description
MBA thesis - WBS
Keywords
Credit financing, Small medium and micro businesses, SMMEs, Financing of businesses