Human Capital and insurance coverage accessibility by informal businesses in Dr JSMLM (Dr JS Moroka Local Municipality)

Abstract

Despite the increased need for and the importance of informal businesses in the South African economy, these businesses still face various challenges that prohibit them from meeting their business and financial goals. Informal businesses have a great potential of expanding their business operations and creating new job opportunities. The success of businesses relies on the accessibility of financial services products among other things. The limitation of access to such services is mostly due to a lack of entrepreneurial skills, knowledge, education, experience, affordability and ultimately financial control. Due to these circumstances informal entrepreneurs either end up getting their applications rejected particularly with credit and some end up taking financial services products that are not in line with the business goals and objectives. It is challenging for informal businesses to attract external investors due to their businesses being considered unattractive based on the potential risks these businesses are exposed to. This study has investigated factors that are embedded within the success of entrepreneurship which are important when taking out a financial services product. Therefore, the purpose of this research is to investigate the relationship between human capital and the insurance coverage accessibility by informal businesses in Dr JSMLM (Dr JS Moroka Local Municipality). This study follows a quantitative data collection approach. Self-administered surveys through Qualtrics were sent to informal businesses operating within the Mpumalanga province particularly in the DR JS Moroka Local Municipality. To effectively test the hypothesis that human capital elements have a positive relationship with access to insurance products correlation, and multiple regression analysis were employed. To test for the validity of the hypothesis the researcher made use of Amos SPSS and Structural Equation Modelling. Even though existing literature indicated that human capital has a positive relationship with financial products and or services, however, for this study the researcher found out that human capital does not have a direct relationship with insurance coverage accessibility. An interesting factor is that when each of the human capital elements increases so does insurance coverage accessibility due to the positive coefficient on all results. This proves that there might be other controlling, mediating, or moderating factors that influence the relationship other than financial control. Future research can focus on exploring factors such as organisational support, social networks, risk tolerance, risk perception, economic factors, political environment, and demographics to name a few. Future studies can use mixed-methods or qualitative approaches to capture the entrepreneur’s diverse opinions and have a broader understanding of this relationship.