Credit rationing of small firms by major banks in South Africa
No Thumbnail Available
Date
2018
Authors
Madziwa, Stephen Rutendo
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
SMEs are key to economic growth, development and fighting unemployment, yet
their growth or survival continues to be threatened by their lack of access to credit
finance from the major banks in South Africa. This lack of access has been
attributed to a lack of creditworthy borrowers. Credit rating, relationships with the
banks, the presence of hard information and the availability of collateral or thirdparty
guarantees were identified as possible borrower characteristics that might
affect the outcome of their loan applications. The study was informed by data
collected using a survey-type questionnaire, from which responses were used to
ps with the banks, whether they
presented hard information or whether they presented collateral or third-party
guarantees with their applications and the outcome of the loan applications.
Having relationships with the banks or presenting hard information were found to
be insignificant factors in predicting the
applications. A good credit rating, defined as having a credit scores above a
threshold value, or the presence of collateral or third-party guarantees or both,
give the borrower a good chance of loan application success. Small businesses in
South Africa need to maintain a good credit rating or be able to present collateral
or third-party guarantees if their loan applications at the major banks are to be
successful.
Description
MBA
Keywords
Small business -- South Africa -- Finance. Bank loans -- South Africa.