The role of the government in resolving the funding gap for SMEs in South Africa
Date
2016
Authors
Mudau, Sedzani Faith
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Abstract
Business funding is essential for growth and it appears that Small and Medium Enterprises (SME) often struggle to secure external funding.
This study sought to determine whether a funding gap exists for SMEs in South Africa and also sought to ascertain the extent of interventions made by the South African Government through the Development Finance Institution (DFI).
A qualitative data collection method was used for this study, and respondents were interviewed face-to-face, in a one-on-one setting.
Some of the key findings included the confirmation that there indeed exists a funding gap for SMEs in South Africa. Although there are many government interventions through the DFI, it appears that the gap is not reducing rapidly enough. The study found that the factors listed below were among the main contributors to the funding gap.
i) Poor integration among DFI’s business funding programmes;
ii) Equity requirements that cannot be met by SME owners;
iii) Commercial banks appear to be unwilling to extend financing to small businesses due to lack for information; and
iv) Long turnaround times by the DFI on business funding applications.
However, it appears that this gap can be narrowed over time if processes within the DFI can be enhanced and if SME owners can enhance their skills.
Description
MBA
Keywords
Small business -- South Africa. Business enterprises -- South Africa. Economic development -- South Africa.