Access to finance problems for small retail businesses in South Africa: comparative views from finance seekers (retailers) and finance providers (banks)

  • Received February 26, 2017;
    Accepted March 24, 2017;
    Published June 23, 2017
  • Author(s)
    Holger J. Schmidt ,
    Roger B. Mason
    ORCID Researcher ID , Juan-Pierré Bruwer , Jonathan Aspeling
  • DOI
    http://dx.doi.org/10.21511/bbs.12(2).2017.02
  • Article Info
    Volume 12 2017, Issue #2, pp. 20-30
  • TO CITE АНОТАЦІЯ
  • Cited by
    6 articles
  • 1460 Views
  • 466 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Small retail businesses are essential for the growth of the South African economy. Though many of these business entities need more assets to seize business opportunities, previous research studies suggest that their overall access to finance through banks and other finance providers seems to be limited. In general, small retail businesses are usually managed by entrepreneurs who lack financial knowledge, but banks, when deciding on credit applications, rely heavily on financial information, which is provided by these entrepreneurs. Notwithstanding the aforementioned, this study aimed to explore barriers that limit access to finance for South African small retailers, from the perspectives of finance providers (banking institutions) and finance seekers (small retailers). Additionally, measures were highlighted to show how those hurdles could be overcome. Qualitative research was conducted, whereby data were collected via semi-structured interviews with management personnel at banks and other financial institutions, as well as independent experts and small retail business owners and managers. The findings show that many financing opportunities are available to small retail businesses, but access to these opportunities is limited mainly owing to, inter alia, strict bank regulations and factors that are inherent to small retail business owners.

view full abstract hide full abstract
    • Table 1. Literature review on finance accessibility for SA SMEs
    • Table 2. Outline of the views of finance providers and seekers
    • Table 3. Suggestions for stakeholders to overcome barriers to access to finance
    • Beck, T., Fuchs, M. J., and Uy, M. (2009). Finance in Africa - achievements and challenges. World Bank Policy Research Working Paper Series.
    • Berger, A. N., and Udell, G. F. (2004). A More Complete Conceptual Framework for SME Finance.
    • Cant, M. C., and Wiid, J. A. (2013). Establishing the challenges affecting South African SMEs. The International Business & Economics Research Journal (Online), 12(6), 707.
    • Cassidy, S. (2016). SMEs look to Gordhan’s budget to cut red tape.
    • Charmaz, K. (2006). Constructing Grounded Theory: A Practical Guide Through Qualitative Analysis, Introducing Qualitative Methods Series. London, Sage.
    • Chibanda, M., Ortmann, G. F., and Lyne, M. C. (2009). Institutional and governance factors influencing the performance of selected smallholder agricultural cooperatives in KwaZulu-Natal. Agrekon, 48(3), 293-315.
    • Chimucheka, T., and Mandipaka, F. (2015). Challenges Faced By Small, Medium And Micro Enterprises In The Nkonkobe Municipality. The International Business & Economics Research Journal, 14(2), 309.
    • Cole, R., and Sokolyk, T. (2016). Who needs credit and who gets credit? Evidence from the surveys of small business finances. Journal of Financial Stability, 24, 40-60.
    • Connelly, B. L., Ketchen Jr, D. J., and Slater, S. F. (2011). Toward a “theoretical toolbox” for sustainability research in marketing. Journal of the Academy of Marketing Science, 39(1), 86-100.
    • Davis, G. F., and Cobb, J. A. (2010). Resource dependence theory: Past and future. Research in the Sociology of Organizations, 28(1), 21-42.
    • Dennis, A., and Piatti, D. (2015). African Powers of Retailing: New horizons for growth.
    • Department of Trade and Industry. (2015). SME development financial assistance.
    • Fatoki, O. (2014). The Perception of New Small Business by Trade Creditors in South Africa. Mediterranean Journal of Social Sciences, 5(16), 27.
    • Glaser, B. G., and Strauss, A. L. (1967). The discovery of grounded theory: Strategies for qualitative research. New York, Aldine de Gruyter.
    • Grimm, J., and Richter, M. (2006). Financing small-scale irrigation in sub-Saharan Africa. Eschborn, World Bank.
    • Hailey, J. (1992). The politics of entrepreneurship-affirmative-action policies for indigenous entrepreneurs. Small Enterprise Development, 3(2), 4-14.
    • Iwu, C., Gwija, S., Tengeh, R., Cupido, C., and Mason, R. B. (2015). Project 2015/18: The unique role of the survivalist retail entrepreneur: Job creation, poverty reduction and educational and training needs. Cape Peninsula University of Technology, Wholesale and Retail Leadership Chair, Cape Town.
    • Jere, M., Jere, A., and Aspeling, J. (2015). A study of small, medium, and micro-sized enterprise (SME) business owner and stakeholder perceptions of barriers and enablers in the South African retail sector. Journal of Governance and Regulation, 4(4), 620-630.
    • Kanyane, M. H., and Ilorah, R. (2015). The cooperative landscape in South Africa: analyzing critical issues. Africa Today, 61(3), 2-14.
    • Kauffmann, C. (2005). Financing SMEs in Africa. African Economic Outlook, 7(1), 1-4.
    • Kauppinen-Räisänen, H., and Grönroos, C. (2015). Are service marketing models really used in modern practice? Journal of Service Management, 26(3), 346-371.
    • Lekhanya, L. M., and Mason, R. B. (2014). Selected key external factors influencing the success of rural small and medium enterprises in South Africa. Journal of Enterprising Culture, 22(3), 331-348.
    • Marshall, M. N. (1996). Sampling for qualitative research, Family practice, 13(6), 522-6.
    • Meyer, N. (2015). Poor People’s Perceptions of Government Support for Entrepreneurship and Small Business Promotion in a Developing Country. Journal of Economics and Behavioral Studies, 7(6), 6-12.
    • Ndungu, K., and Theron, J. (2008).‘What Kind of Jobs?’ Creating Opportunities for Decent Work. Unpublished report, NALEDI (Johannesburg) and Labour and EnterprisePolicy Research Group, University of Cape Town.
    • Nkonki-Mandleni, B., and Anim, F. D. (2014). Determining factors of support for co-operatives in South Africa. Journal of Human Ecology, 47(2), 171-174.
    • Orobia, L. A., Byabashaija, W., Munene, J. C., Sejjaaka, S. K., and Musinguzi, D. (2013). How do small business owners manage working capital in an emerging economy? A qualitative inquiry. Qualitative Research in Accounting & Management, 10(2), 127-143.
    • PMG. (2012). Access to funding by small enterprises: Commercial banks and Development Finance Institutions briefing [Online].
    • Raap, P., and Mason, R. B. (2014). Project 2014/09: The nature of existing and emerging cooperatives in the wholesale and retail sector, Cape Peninsula University of Technology, Wholesale and Retail Leadership Chair, Cape Town.
    • Rowley, J. (2012). Conducting research interviews. Management Research Review, 35(3/4), 260-271.
    • Scherr, F. C., Sugrue, T. F. and Ward, J. B. (1993). Financing the small firm start-up: Determinants of debt use, The Journal of Entrepreneurial Finance, 3(1), 17.
    • Seed Academy. (2016). Seed Academy's Second Annual Startup Survey Results 2016 [Online].
    • Sibindi, A. B., and Aren, A. O. (2015). Is Good Corporate Governance Practice The Panacea For Small-To-Medium Businesses Operating In The South African Retail Sector? Corporate Ownership & Control, 12(2/6), 579.
    • Snape, D., and Spencer, L. (2013). The Foundations of Qualitative Research. In Ritchie, J., Lewis, J., Nicholls, C. M. and Ormston, R. (Eds.)., Qualitative research practice: A guide for social science students and researchers. (pp.1-23). London, Sage.
    • South Africa. (1996). National Small Business Act No. 102 of 1996.
    • Statistics South Africa. (2015). Gross Domestic Product (GDP), 1st quarter 2015.
    • Steyn, J. (2013). Project 2013/01: Priority research needs of the South African Wholesale and Retail Sector, Cape Peninsula University of Technology, Wholesale and Retail Leadership Chair, Cape Town.
    • Timm, S. (2011). How South Africa can boost support to small businesses: lessons from Brazil and India.
    • Timm, S. (2016). Government red tape: Tripping over triplicate.
    • Vos, E., and Forlong, C. (1996). The agency advantage of debt over the lifecycle of the firm. The Journal of Entrepreneurial Finance, 5(3), 193.
    • W&RSETA. (n.d.). The Premier Authority in Skills Development in the Wholesale and Retail Sector: brochure. Centurion, W&RSETA.
    • W&RSETA. (2013). Sector Skills Plan 2011-2016. 2013 Update.
    • W&RSETA. (2014). Sector Skills Plan Update 2014-2015.
    • Weijland, H. (1992). Trade Networks for Flexible Rural Industry. Research-Memorandum, 1992-36, Amsterdam, Vrije Universiteit.
    • Zentes, J., Swoboda, B., and Foscht, T. (2012). Handelsmanagement [Retail Management], Vahlens Handbücher der Wirtschafts- und Sozialwissenschaften, 3rd ed., München, Vahlen.
Related Articles

  • Evaluating the nationalization & privatization effect: a case of Indian banking industry

    Manju Rajan BabuORCID , Ashok Kumar M.ORCID doi: http://dx.doi.org/10.21511/bbs.13(1).2018.02
    Banks and Bank Systems Volume 13, 2018         Issue #1         pp. 11-21 Views: 2854 Downloads: 403 TO CITE АНОТАЦІЯ

    The facilitation of economic transactions and friendly investor environment is undertaken through effective performance of financial systems. Mobilization of savings and funding the profitable business opportunities are essential in improving the efficiency of intermediation. The study aims to evaluate the effects of nationalization and privatization on Indian banks. Various factors have been considered to examine the effects of privatization and nationalization, including sources of public sector inefficiency, measures of firm performance, econometric issues, and the mode of privatization. The data was collected for the period of 1998 to 2016 from Indian banks. Data Envelopment Analysis (DEA) was used to evaluate the financial reports of the banks selected to evaluate the efficiency of input and output variables. Positive results were observed, concerning the efficiency and profitability of banking industry after banks’ privatization. Performance of private banks has been observed effective and efficient as compared to the public sector banks. Privatization of banks must be increased and maintained to sustain the efficiency of the banks and implement strategies to maintain the assets. Future studies may recruit more appropriate sample size to evaluate the privatization and nationalization effects of Indian banking industry. Greater number of banks will provide more precise results, using data envelopment analysis.

  • ERP implementation in banks: success factors & impact on financial performance

    Munther Al-Nimer , Ahmed Omush , Adel Almasarwah doi: http://dx.doi.org/10.21511/bbs.12(4).2017.02
    Banks and Bank Systems Volume 12, 2017         Issue #4         pp. 17-30 Views: 2694 Downloads: 1144 TO CITE АНОТАЦІЯ

    The study aims to measure the extent of implementing ERP systems in the banking sector in Jordan, and identify the main factors that influence the implementation decision, in addition to measure the impact of the post-implementation of the ERP system on the financial performance. The study utilized a content analysis as a research instrument. The study of population consisted of all the banks in Jordan, where the study applied ‘Purposive Sample’ type. Therefore, the study included 11 banks from 2011 to 2016.
    The study indicated that the implementation year of the ERP system started in most of the Jordanian banks in 2013, and the rates vary from bank to bank according to their importance and the level of awareness. Training courses are considered the main variable that these banks face in the process of implementation. In addition, awareness of the advantages, the cost, and supporting the infrastructure are the core factors needed to influence the implementation decision.
    There is no impact when implementing an ERP system on the financial performance of the Jordanian banks in regard to the ROI and the DPS; on the other hand, there is an impact of the ERP system on the overall performance of the banks.
    The study recommends to disseminate knowledge on the advantages of implementing of ERP system in Jordanian banks and to develop the IT department efficiency. Moreover, it will be worthwhile to examine the effect of ERP systems by utilizing financial and non-financial measurements.

  • Internal audit and financial performance of Yemeni commercial banks: Empirical evidence

    Saddam A. HazaeaORCID , Mosab I. TabashORCID , Jinyu Zhu , Saleh F. A. KhatibORCID , Najib H. S. FarhanORCID doi: http://dx.doi.org/10.21511/bbs.16(2).2021.13
    Banks and Bank Systems Volume 16, 2021          Issue #2         pp. 137-147 Views: 1967 Downloads: 726 TO CITE АНОТАЦІЯ

    This study seeks to verify the contribution of internal audit (IA), especially its role in improving financial performance in Yemeni commercial banks, with a specific focus on three factors, namely: the independence and objectives of IA, the quality of IA and the size of IA. This study reviews some existing literature on the contribution and role of IA in improving financial performance. It relies on available data from questionnaires. 90 questionnaires were distributed to nine commercial banks in Yemen (23 branches) working under the supervision of the Central Bank of Yemen; 81 questionnaires (90%) were regained and used in the process of analysis. To analyze the data, three analysis approaches were used, including description, correlation, and regression. The results showed that the IA has a significant impact on the overall performance of Yemeni commercial banks. Furthermore, the results showed that the auditors’ efficiencies, as well as their financial and accounting experiences, have a significant and positive impact on financial performance. It was revealed that the independence and objectivity of internal auditors are highly insignificant for financial performance. However, the size of IA and the frequency of the auditors’ meetings have a negative and significant effect on financial performance. This study provides some recommendations for improving the effectiveness of IA, which in turn will contribute to improving financial performance.

Download Preview
Close
Banks and Bank Systems
Banks and Bank Systems