Designing the right financing model for microbusinesses in South Africa

Abstract

This paper investigates the prevailing financing models that are used to finance microbusinesses in developing economies with the objective of adapting one of these models for use within the South African context. Using India, Brazil, Ghana and Kenya as case studies the current successful microfinancing models and their advantages and disadvantages in these countries are assessed. The results indicate that microleasing is a possible effective financing model that can be used to finance microbusinesses in South Africa. Furthermore, possible ways of addressing microleasing shortfalls are explored in the paper, by drawing on the suitable features of financing innovations developed in the other developing economies. Most importantly, it was also found that the government, donors and the private sector have a significant role to play in order to encourage further development of the nascent microfinance industry in South Africa.