The survival of business enterprises and access to finance: the case of 4 African countries
-
Author(s)Yohannes WorkuLink to ORCID Index: https://orcid.org/0000-0003-0482-6603
,
Mammo MuchieLink to ORCID Index: https://orcid.org/0000-0003-4831-3113
-
DOIhttp://dx.doi.org/10.21511/ppm.17(1).2019.28
-
Article InfoVolume 17 2019, Issue #1, pp. 326-338
- Cited by
- 1130 Views
-
233 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Microfinance institutions render essential services to start-up small, micro, medium-sized enterprises (SMMEs) by way of extending loans to entrepreneurs. SMMEs operating in South Africa have relatively better access to microfinance loans in comparison with those operating in Nigeria, Kenya and Ethiopia. A survey was conducted in order to compare the relative ease of access to microfinance loans in South Africa, Nigeria, Kenya and Ethiopia based on a survey conducted in the four Sub-Saharan African countries. The ease of access to microfinance loans was assessed based on criteria defined by Barry and Tacneng (2014). A total of 401 SMMEs participated in the study. Loan applicants were asked to provide answers to questions that indicated the ease of securing loans and meeting loan repayment conditions. Emphasis was placed on the demand for collateral as a requirement for extending loans to applicants, the assessment of entrepreneurial and auditing skills of loan applicants, the difficulty of meeting loan repayment conditions, and adherence to regulations and guidelines recommended by governments. Descriptive, bivariate and multivariate methods of data analyses were used for data analyses. The study found that about 21% of SMMEs were satisfied with the ease of securing loans, whereas the remaining 79% of SMMEs did not. The ease of access to microfinance loans varied by country in which South African loan applicants were the most satisfied in comparison with the remaining three countries. Securing microfinance loans, as well as fulfilling loan repayment conditions were easiest in South Africa, and most difficult in Ethiopia. In terms of ease of securing loans and meeting loan repayment conditions, the order of nations was ranked as South Africa, Nigeria, Kenya and Ethiopia. In all four countries, the ease of access to microfinance loans was influenced by country of business operation, extent of benefits realized by SMMEs, and highest level of formal education.
view full abstract
- Keywords
-
JEL Classification (Paper profile tab)D20, G21
-
References48
-
Tables11
-
Figures1
-
- Figure 1. Framework for improved services to SMMEs by microfinance institutions
-
- Table 1. General characteristics of participants of study (n = 401)
- Table 2. Duration of operation of businesses (n = 401)
- Table 3. Turnover generated by businesses (n = 401)
- Table 4. Difficulties and benefits associated with loans (n = 401)
- Table 5. Assessment of difficulties in meeting requirements for loans (n = 401)
- Table 6. Defaulting on loans taken from microfinance institutions (n = 401)
- Table 7. Ways and means in which national government can assist SMMEs (n = 374)
- Table 8. Significant bivariate interactions (n = 401)
- Table 9. Ordered probit regression coefficients
- Table 10. Significant two-by-two associations
- Table 11. Extracted factors and eigenvalues
-
- Abate, G. T., Borzaga, C., & Getnet, K. (2014). Cost‐Efficiency and Outreach of Microfinance Institutions: Trade-offs and the Role of Ownership. Journal of International Development, 26(6), 923-932.
- Ayele, G. T. (2015). Microfinance Institutions in Ethiopia, Kenya and Uganda: Loan Outreach to the Poor and the Quest for Financial Viability. African Development Review, 27(2), 117-129.
- Bassem, B. S. (2014). Total Factor Productivity Change of MENA Microfinance Institutions: A Malmquist Productivity Index Approach. Economic Modelling, 39(1), 182-189.
- Banerjee, A., Duflo, E., Goldberg, N., Karlan, D., Osei, R., Pariente W., Shapiro, J., Thuysbaert, B., & Udry, C. (2015). A Multifaceted Program Causes Lasting Progress for the Very Poor: Evidence from Six Countries. Science, 348(6236), 1260799.
- Banerjee, A., Karlan, D., & Zinman, J. (2015). Six Randomized Evaluations of Microcredit: Introduction and Further Steps. American Economic Journal: Applied Economics, 7(1), 1-21.
- Barry, T. A., & Tacneng, R. (2014). The impact of Governance and Institutional Quality on MFI Outreach and Financial Performance in Sub-Saharan Africa. World Development, 58(1), 1-20.
- Bazilian, M., Nakhooda, S., & Van de Graaf, T. (2014). Energy Governance and Poverty. Energy Research & Social Science, 1(1), 217-225.
- Biosca, O., Lenton, P., & Mosley, P. (2014). Microfinance Non-Financial Services as a Competitive Advantage: The Mexican Case. Strategic Change, 23(7-8), 507-511.
- Brautigam, D., & Gallagher, K. P. (2014). Bartering Globalization: China’s Commodity‐Backed Finance in Africa and Latin America. Global Policy, 5(3), 346-352.
- Bruton, G. D., Ketchen, J. R., & Ireland, R. D. (2013). Entrepreneurship as a Solution to Poverty. Journal of Business Venturing, 28(6), 683-689.
- Chakrabarty, S., & Bass, A. E. (2013). Encouraging Entrepreneurship: Microfinance, Knowledge Support, and the Costs of Operating in Institutional Voids. Thunderbird International Business Review, 55(5), 545-562.
- Chatterjee, S., & Hadi, A. S. (2015). Regression Analysis by Example. New York: John Wiley & Sons.
- Cramm, J. M., & Nieboer, A. P. (2011). The Influence of Social Capital and Socio-Economic Conditions on Self-Rated Health Among Residents of an Economically and Health-Deprived South African township. International Journal for Equity in Health, 10(1), 51-59.
- Crane, A., & Matten, D. (2016). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford: Oxford University Press.
- Defusco, R. A., McLeavey, D. W., Pinto, J. E., Anson, M. J., & Bunkle, D. E. (2015). Quantitative Investment Analysis. New York: John Wiley & Sons.
- Edoho, F. M. (2015). Entrepreneurialism: Africa in Transition. African Journal of Economic and Management Studies, 6(2), 127-147.
- Henrekson, M. (2014). Entrepreneurship, Innovation, and Human Flourishing. Small Business Economics, 43(3), 511-528.
- Filmer, D., & Fox, L. (2014). Youth Employment in Sub-Saharan Africa. Washington DC: World Bank Publications.
- Fosu, A. K. (2015). Growth and Institutions in African Development. New York: Routledge.
- Guerin, I., Morvant-Roux, S., & Villarreal, M. (2013). Microfinance, Debt and Over-Indebtedness: Juggling with Money. New York: Routledge.
- Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data Analysis: A Global Perspective. London: Pearson.
- Haneef, M. A., Pramanik, A. H., Mahommed, M. O., & Muhammad, A. D. (2014). Integrated Waqf Based Islamic Microfinance Model (IWIMM) for Poverty Alleviation in OIC Member Countries. Middle-East Journal of Scientific Research, 19(2), 286-298.
- Jaffari, S. I. A., Saleem, S., Abideen, Z. U., Kaleem, M. M., Malik, N., & Raza, M. (2011). An Examination of Challenges and Prospects of Microfinance Sector of Pakistan. Europe Journal of Economics, Finance and Administrative Studies, 31(1), 146-159.
- Julian, S. D., & Ofori-Dankwa, J. (2013). Financial Resource Availability and Corporate Social Responsibility Expenditures in a Sub-Saharan Economy: The Institutional Difference Hypothesis. Strategic Management Journal, 34(11), 1314-1330.
- Kemboi, J. K., & Tarus, D. K. (2013). Macroeconomic Determinants of Stock Market Development in Emerging Markets: Evidence from Kenya. Review of Quantitative Finance and Accounting, 4(9), 84-95.
- Khale, S., & Worku, Z. (2015). Benefits of Good Corporate Governance Principles: A Study of the City of Tshwane, South Africa. Journal of Corporate Governance and Control, 13(1), 753-770.
- Kolk, A., Rivera-Santos, M., & Rufin, C. (2014). Reviewing a Decade of Research on the Base/Bottom of the Pyramid (BOP) Concept. Business & Society, 53(3), 338-377.
- Mersland, R., & Strom, O. (2014). Microfinance Institutions: Financial and Social Performance. New York: Springer.
- Mori, N., Golesorkhi, S., Randoy, T., & Hermes, N. (2015). Board Composition and Outreach Performance of Microfinance Institutions: Evidence from East Africa. Strategic Change, 24(1), 99-113.
- Musamali, M. M., & Tarus, D. K. (2013). Does Firm Profile Influence Financial Access Among Small and Medium Enterprises in Kenya? Asian Economic and Financial Review, 3(6), 714-721.
- Nega, B., & Schneider, G. (2014). NGOs, the State, and Development in Africa. Review of Social Economy, 72(4), 485-503.
- Newman, A., Schwarz, S., & Borgia, D. (2014). How Does Microfinance Enhance Entrepreneurial Outcomes in Emerging Economies? The Mediating Mechanisms of Psychological and Social Capital. International Small Business Journal, 32(2), 158-179.
- Okpara, G. C. (2010). Microfinance Banks and Poverty Alleviation in Nigeria. Journal of Sustainable Development in Africa, 12(6), 177-191.
- Otieno, O. A., & Moronge, M. (2014). Influence of Product Diversification on the Financial Performance of Selected Commercial Banks in Kenya. European Journal of Business Management, 1(11), 336-341.
- Oni, E. O. (2012). Assessment of the Contribution of Micro Finance Institutions (MFIs) to Sustainable Growth of Small and Medium Scale Enterprises (SMEs) in Nigeria. Interdisciplinary Journal of Contemporary Research in Business, 3(9), 2-6.
- Page, J., & Soderbom, M. (2015). Is Small Beautiful? Small Enterprise, Aid and Employment in Africa. African Development Review, 27(S1), 44-55.
- Rolffs, P., Ockwell, D., & Byrne, R. (2015). Beyond Technology and Finance: Pay-as-you-go Sustainable Energy Access and Theories of Social Change. Environment and Planning, 47(12), 2609-2627.
- Rose-Ackerman, S., & Palifka, B. J. (2016). Corruption and Government: Causes, Consequences, and Reform. Cambridge: Cambridge University Press.
- Rottenburg, R., Merry S. E., Park, S. J., & Mugler, J. (2015). The World of Indicators: The Making of Governmental Knowledge Through Quantification. London: Cambridge University Press.
- Schwittay, A. F. (2014). Making Poverty into a Financial Problem: From Global Poverty Lines to Kiva. Journal of International Development, 26(4), 508-519.
- Segun, K. R. S., & Anjugam, M. (2013). Measuring the Efficiency of Sub‐Saharan Africa’s Microfinance Institutions and its Drivers. Annals of Public and Cooperative Economics, 84(4), 399-422.
- Shisia, A., Marangu, W. N., & Omwario, B. (2014). Assessment of the Contribution of Credit Reference Bureau Regulation Towards Mitigating Credit Risks in the Kenya’s Banking Industry. European Journal of Business and Management, 6(14), 1-8.
- Sila, A. K. (2014). Relationship Between Training and Performance: A Case Study of Kenya Women Finance Trust Eastern Nyanza Region, Kenya. European Journal of Business and Social Sciences, 3(1), 95-117.
- Siwale, J. N., & Ritchie, J. (2012). Disclosing the Loan Officer’s Role in Microfinance Development. International Small Business Journal, 30(4), 432-450.
- Taiwo, J. N., Onasanya, A., Yewande, A., Edwin, M., & Benson, K. N. (2016). The Role of Microfinance Institutions in Financing Small Businesses. Journal of Internet Banking and Commerce, 21(1), 21-32.
- Wijesiri, M., & Meoli, M. (2015). Productivity Change of Microfinance Institutions in Kenya: A Bootstrap Malmquist Approach. Journal of Retailing and Consumer Services, 25(1), 115-121.
- Worku, E. B., & Worku, Z. B. (2008). Factors That Affect the Long Term Survival of Micro, Small and Medium Enterprises in Ethiopia. South African Journal of Economics, 76(3), 548-568.
- Worku, Z. (2016). Barriers to the Growth of Small, Micro and Medium-Sized Business Enterprises in the Vaal Triangle Region of South Africa. African Journal of Science, Technology, Innovation and Development, 8(2), 134-141.
Close
Problems and Perspectives in Management