scholarly journals Credit rationing and risk management for SMEs: The way forward for South Africa

2013 ◽  
Vol 10 (2) ◽  
pp. 153-163 ◽  
Author(s):  
Ashley Teedzwi Mutezo
Keyword(s):  
South Africa ◽  
Commercial Banks ◽  
Financial Intermediation ◽  
Small And Medium Enterprises ◽  
Credit Rationing ◽  
Factors Affecting ◽  
Credit Risks ◽  
Lending Decision ◽  
Loan Approval ◽  
Medium Enterprises

Small and medium enterprises are increasingly seen as playing an important role in the economies of many countries. Studies identify adequate and accessible financing as a critical component of SME development. Many SMES are unable to access loans from the commercial banks due to lack of financial knowledge, collateral and credit history. The drive to minimise risks informs the decision of banks to minimise loan approval for SMEs. The question that now arises is how to strike a balance between financial intermediation towards achieving economic development, while reducing operational and credit risks that confront financial intermediation at large, especially banks. The aim of this paper is to investigate the factors affecting the SME lending-decision process of commercial banks and uncover the possible way forward for South Africa

scholarly journals AN EMPIRICAL STUDY ON LENDING PATTERN AND PERCEPTION OF COMMERCIAL BANKS TOWARDS SMALL AND MEDIUM ENTERPRISES LENDING

2021 ◽  
pp. 26-36
Keyword(s):  
Commercial Banks ◽  
Small And Medium Enterprises ◽  
Secondary Data ◽  
Foreign Banks ◽  
Loan Default ◽  
Factors Affecting ◽  
Academic Knowledge ◽  
Significant Difference ◽  
Medium Enterprises ◽  
Sme Lending

Micro, Small and Medium sector (MSME) is the most dynamic sector due to its capacity for innovation, competence for advancements and perseverance to face multiple challenges. Though this sector contributes 8 per cent to GDP, 45 per cent towards manufacturing output and 40 per cent of exports. Still, they lack support to grow exponentially. Understanding the lending pattern of the banks and the perception of commercial banks towards MSME lending is essential not only for academic knowledge but also could necessitate policy changes. The objective of the research is to understand the lending pattern of banks to SMEs and the perception of commercial banks towards SME lending. The researcher used both primary and secondary data. Statistical tools ANOVA and Kruskal Wallis tests are used to analyze the collected data. The results indicate that there is no significant difference in the lending pattern of public sector banks, Private sector banks and foreign banks and the bank staff have a similar level of perception on difficulties in lending to SMEs, perception on the rejection of loan, perception on reluctance to serve SME sector, perception on loan default and factors affecting credit decisions irrespective of the type of the bank and experience in SME lending.

scholarly journals Factors affecting the performance of small and medium enterprises in KwaZulu-Natal, South Africa

2016 ◽  
Vol 14 (2) ◽  
pp. 277-288 ◽  
Author(s):  
Sharmilee Sitharam ◽  
Muhammad Hoque
Keyword(s):  
South Africa ◽  
Business Performance ◽  
Small And Medium Enterprises ◽  
External Factors ◽  
Technological Advancement ◽  
Cross Sectional ◽  
Factors Affecting ◽  
Kwazulu Natal ◽  
Medium Enterprises ◽  
Internal And External Factors

Small and medium enterprises (SMEs) have an important role to play in the development of the country. A strong SME sector contributes highly to the economy, contributing to the gross domestic product, by reducing the level of unemployment, reduction in poverty levels and promotion of entrepreneurship activity. In South Africa (SA), the growth of SMEs and prevalence of SMEs is significantly low. Therefore, the aim of the study is to identify the internal and external factors affecting the performance of SMEs in KwaZulu-Natal, SA. This was a cross-sectional study conducted among 74 SMEs owners/managers who were members of the Durban Chamber of Commerce via online using anonymous questionnaire. The results revealed technological advancement would improve the performance of the business. With regards to challenge, the majority of the respondents viewed competition as a major challenge. Almost all the respondent indicated that crime and corruption affecting business performance. Competition was the only factor amongst the studied internal and external factors that revealed a significant association with the performance of SMEs in KwaZulu-Natal (p = 0.011). SMEs need to recognize they must prepare for both domestic

scholarly journals Factors Affecting Small and Medium Enterprises’ Financial Sustainability in South Africa

2021 ◽  
Vol 3 (1) ◽  
pp. 103-117
Author(s):  
Odunayo Olarewaju ◽  
Thabiso Msomi
Keyword(s):  
South Africa ◽  
Financial Literacy ◽  
Small Businesses ◽  
Quantitative Research ◽  
Small And Medium Enterprises ◽  
Multivariate Regression Analysis ◽  
Financial Sustainability ◽  
Access To Finance ◽  
Factors Affecting ◽  
Medium Enterprises

The dwindling growth of small businesses and their rate of failure in South Africa has been traced to poor financing. Thus, the factors affecting the financial sustainability of small and medium-sized enterprises in South Africa are examined in this study. Using purposive sampling, data were collected from 310 respondents, however six were incorrectly completed. The analysis was based on data collected from 304 respondents which cut across owners and/or managers from small and medium construction, manufacturing, retail, and agricultural enterprises. A quantitative research design that falls under the positivist paradigm was used. Specifically, through a descriptive and multivariate regression analysis, it was found that financial awareness, budgeting, accounting skills, and access to finance have positive and significant effects on the financial sustainability of SMEs with all the variables, having 0.005 probability values, respectively. Out of all the variables examined, budgeting and access to finance have the largest absolute values of 0.425 and 0.373, respectively. Thus, it was concluded that workshops, training, and seminars to improve the financial literacy of small and medium enterprises should be organised. This will improve owner’s ability to deploy the accounting and budgeting skills and they will be exposed to meeting loan criteria and conditions from financial institutions. Also, adequate funds should be allocated to cater for the regular training and development of small business owners using the services of financial experts.

scholarly journals Factors Affecting Small and Medium Enterprises Success: An Exploratory Study

2013 ◽  
Vol 64 (3) ◽  
Author(s):  
Abdul Karim Kanaan Jebna ◽  
Ahmad Suhaimi Baharudin
Keyword(s):  
East Asia ◽  
Cash Flow ◽  
Exploratory Study ◽  
Business Performance ◽  
Small And Medium Enterprises ◽  
South East Asia ◽  
Factors Affecting ◽  
Competitor Orientation ◽  
Growing Economy ◽  
Medium Enterprises

Small and medium enterprises (SMEs) are the main contributor toward prospering the Malaysian economy [1]. Despite the fact that Malaysia is a fast growing economy in South-East Asia, death of SMEs is unavoidable. An exploratory study was conducted to investigate the factors that have an impact on business performance and success in Malaysia. Interviews with SMEs from different industries were conducted. Several factors were found to contribute to the success of business. The factors are classified into financial and non-financial determinants. These factors include customer satisfaction, service quality, experience, business expansion, competitor orientation, solving problems, cash flow, and the amount of sales and revenue. Building on these interviews, a discussion and conclusion have been provided.

scholarly journals COMMERCIAL BANKS AND THEIR EFFECT ON SMALL AND MEDIUM ENTERPRISES FINANCING IN RWANDA: A CASE STUDY OF KIGALI CITY AND SOUTHERN PROVINCE

AGROFOR ◽  
2021 ◽  
Vol 6 (1) ◽  
Author(s):  
Mutamuliza EULARIE ◽  
Giramata AURORE
Keyword(s):  
Financial Services ◽  
Commercial Banks ◽  
Small And Medium Enterprises ◽  
Financial Industry ◽  
Chi Square ◽  
Southern Province ◽  
Start Up ◽  
Chi Square Test ◽  
The Government ◽  
Medium Enterprises

Commercial Banks worldwide are identified to be one of the key players in the financial industry that have positively affected individuals involved in business, and the economy at large, through the functions they perform in the economy. However, inadequate financing in the activities of Small and Medium Enterprises (SMEs) is still the major constraint faced by people involved in business activities. Even though the Government of Rwanda has made effort to improve the accessibility to credit, entrepreneurs still have some challenges to access financial services in order to improve their businesses. The purpose of this research was to assess the contribution of commercial banks in financing SMEs in Rwanda. A sample of 60 SMEs was selected in Kigali and Southern Province of Rwanda. Data was collected from the respondents through a structured questionnaire. The collected data were analyzed using descriptive statistics such as frequencies and percentage distributions. A Pearson Chi-Square Test was used to analyze the relationship between commercial banks and SMEs in Rwanda. The results indicated that the main purposes of loan application were start-up capital, working capital and expansion of businesses. The results also revealed that there was positive relationship between commercial banks and SMEs in Rwanda. The results revealed as well, that commercial banks in Rwanda played a crucial role in contribution to SME’s economic development and small and medium entrepreneurs who got credit from commercial banks expanded their businesses and increased their income.

The determinants of bank selection criteria of SMEs: a fuzzy analytic hierarchy approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manpreet Kaur ◽  
Sanjay Gupta
Keyword(s):  
Commercial Banks ◽  
Selection Criteria ◽  
Small And Medium Enterprises ◽  
Research Process ◽  
Analytic Hierarchy ◽  
Content Type ◽  
Valid Instrument ◽  
Two Phases ◽  
Quota Sampling ◽  
Medium Enterprises

Purpose Small and medium enterprises (SMEs) have been reported as a credit-constrained sector in the earlier literature. Amidst the available external financing options, SMEs are dependent upon banks for their financial needs, hence they offer an important profitable segment for banks. Commercial banks need to develop effective targeting strategies for this segment and ranking the priorities of SMEs in selecting commercial banks will be of great help to them. The purpose of this paper is to implement a fuzzy analytic hierarchy process (FAHP) multi-criteria decision model for commercial bank’s selection by SMEs. Design/methodology/approach The research process was carried out in two phases. In Phase I, a self-structured scale was developed to measure bank selection criteria of SMEs after an extensive review of the literature of relevant studies on the topic. A sample of 600 SMEs was selected through non-proportionate quota sampling and only 313 valid responses were received. Phase II was conducted to prioritize the extracted factors through FAHP, a multi-criteria decision-making technique. For this purpose, another questionnaire was designed in the form of pair-wise evaluation and the response was taken on the same from those 313 SMEs again. Findings The results showed that SMEs bank selection criteria can be categorized under six heads, namely, bank attributes, accommodation of credit needs (AC), bank personnel, financial factors (FF), service quality (SQ) and business knowledge. The research study produced a reliable and valid instrument for studying the bank selection criteria of SMEs. The results further revealed that AC is the most important factor considered by SMEs followed by FF and SQ. Going further, global weights were also calculated through the FAHP which revealed that the most important consideration (variable) viewed upon by SMEs is willingness to accommodate credit needs followed by flexible collateral requirements and absence of hidden charges. Research limitations/implications The results of the present study offer significant insights as to the factors SMEs consider while making a bank selection decision. It is of utmost importance for banks to identify true determinant factors used by SMEs while making bank choice decisions as they offer ample profit and revenue opportunities to banks. The results of the study provide a practical approach to banks that would help them in framing strategies for SMEs customers. Originality/value This is the first study of its kind which has not only focused on the hierarchy of factors measuring bank selection criteria of SMEs rather on the hierarchy of single variables also through the calculation of global weights. As banks cannot focus on all the dimensions of the criteria, they can focus on the spirit of that particular criteria.

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