Credit provision by banks: a case study analysis of small businesses in South Africa

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Small business sector is considered as an important economic driver by many countries. In South Africa, small business sector has been acknowledged as the driving force to boost the economic growth and an important source of job creation. This article aims at identifying factors that are a challenge in obtaining bank finance by small businesses in South Africa.
Primary data for this study involved a survey questionnaire directed to owners of small businesses operating in Ekurhuleni Metropolitan area, Gauteng, South Africa. Factors that were deemed to influence bank loan decision were examined. The research findings revealed that factors such as age of business, business plans availability, educational background of business owner, experience of business owner and availability of a collateral have an influence on the bank loan decisions. This research also found that the accessibility of loan funding from banks was a constraint on business operations and growth. The findings of this study indicate that the mentioned factors are a challenge for small businesses in accessing bank loans to fund their operations.
The findings of this study will be of great value to small business owners and policy makers in finding solutions to address the identified barriers.

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    • Table 1. Business age
    • Table 2. Business plan
    • Table 3. Educational level
    • Table 4. Business owner experience
    • Table 5. Collateral provided
    • Table 6. Importance of a loan
    • Table 7. Chi-square tests