Which New Small and Medium Enterprises in South Africa Have Access to Bank Credit?

Abstract

New SMEs are very important to the economy of South Africa. Their failure rate at about 75% is one the highest in the world. Lack of finance is one of the primary reasons for the failure of new SMEs in South Africa. About 75% of all applications for bank credit by new SMEs are rejected. This objective of the paper was to investigate the determinants of credit approval for new SMEs. The survey method and self-administered questionnaires were used for data collection. 445 respondents took part in the survey. Data was analysed by logistic regression. The results indicate that managerial competencies, business information, networking, location, crime, business size and incorporation are significant determinants of credit approval.

Is the Lending Decision-Making Process Affected by Behavioral Biases? <br/>—Evidence from Southern Italy

“…According to this theoreticalhypothesis, several studies investigated the relation between education and access to credit. Zarook et al [34] as well as Slavec and Prodan [29] found evidence of a positive correlation between the age of the applicant and the access to credit. Same findings have been found, among others, by Pandula [35], Kira [36], Mukiri [37], through entrepreneurial orientation, and Le et al [38], through networking capabilities [18].…”

“…The same findings have also been shown by Herz [15] and Muravyev et al [26], providing evidence that banks discriminate against woman applicants. Age: The age of the applicant is another commonly studied factor in the field [29] no evidence of age bias has been provided. However, Nguyen and Luu [27] and Abdulsaleh and Worthington [30], among others, found that age does have an effect on the capability to succeed in loan issuance.…”

Determinants of bridging loan among small and medium sized enterprises in the South African Construction Industry

“…[19]explicates that lack of collateral is the most widespread problem, particularly if the entrepreneur is applying for working capital. Other issues affecting the decision to provide finance include blacklisting, and inadequate financial records.…”

Pro-Activeness and Survival of Small and Medium Scale Enterprises in Nigeria

“…According to Okpala, (2000) ;Fatoki, and Odeyemi (2010) SMEs in the developing countries, faces two major challenges: Internal factors such as lack of entrepreneurial competencies, management skill, commitment, resources, good strategy choice and External factors, including competitors, culture, technology, infrastructure, policy inconsistencies in Government and official bureaucracy. In providing answers to these challenges, Mcgrath and McMillian, (2002), are of the opinion that organization using conventional strategies are overrun and out-run by entrepreneurial competitors because tools, training and business models that worked for businesses before are no longer yielding positive results again.…”