Thank you, Tinashe, for coming into the study and giving me constant hugs and kisses, glasses of water and always echoing my words back to me. The study examined the credit limit by financial institutions which is an obstacle to the growth of informal survival and non-survival small businesses operating in the Western Cape, Cape Town City catchment area. The objectives of the study were to investigate the impact of credit rationing on the growth of informal survival and non-survival small medium enterprises (SMEs).
The study recommends the benefits of tax incentives, financial institutions to support the structural mechanism for informal small and medium enterprises by enabling customized projects that allow the creation of financial packages for loans in small amounts with a lower rate of return and less requirements for such enterprises.
- BACKGROUND OF THE STUDY
- RESEARCH PROBLEM AND RESEARCH QUESTIONS
- RESEARCH OBJECTIVES AND HYPOTHESES
- SCOPE AND JUSTIFICATION OF THE STUDY
- ORGANIZATION OF THE STUDY
Such a declining growth rate is shown by the breakdown of the number of SMEs in the nine provinces of South Africa, from 2017 to 2018, as shown in Figure 1.1 below. The rest of the study is organized as follows: Chapter 1 presents the questions, objectives or hypotheses of the research problem. The purpose of the literature review is to show evidence of how SMEs have influenced their growth to some extent.
It is objectively carried out with the aim of showing what other authors have mentioned or said about the subject of study, with an exposition of the conceptual framework.
- Definition of terms and concepts
- Small Medium Enterprises (SMEs) Definition
- Survivalist and non-survivalist SME definition
- Growth definition
- Credit rationing definition
- Theoretical Framework
- Churchill Lewis Growth model
- Information asymmetry and credit rationing
- Credit rationing and growth
- Empirical literature
- Conclusion
The authors go on to describe how about 90% of both wannabe and wannabe entrepreneurs who entered business incubation programs had the desire to grow as their primary motivator. Stiglitz and Weiss (1981), the central pioneers of the asymmetric information credit rationing model, suggest that credit rationing equilibrium follows principle-agent theory. It also further shows how the application of this theory that SMEs hold key information regarding their financial position that financial institutions may not obtain in time, making the process of obtaining accurate information about borrowers too expensive for banks. even how to control their actions (F. Okurut et al., 2012). The fact that SMEs are not ready to freely disclose this important information triggers an information asymmetry that culminates in credit rationing on the part of providers of credit financial institutions.
Stiglitz and Weiss (1981) of the theoretical equilibrium model is based on the work of asymmetric information between the borrower and the lender explaining the relationship between risk and interest rate. This is also supported by Luçi (1997), who conveys that the probability of repayment of the loan interest rate, which creates the link between the bank's expected return and the interest rate, is important in explaining the existence of the loan ratio. On the other hand, geographical differences are also essential determining elements of the balance sheet liability structure.
Olawale and Garwe (2010), in their study which examined the barriers to the growth of new SMEs in South Africa through the use of the principal component approach. The findings of the study were that commercial banks are eager to serve SMEs and are making efforts to capture this potentially lucrative market segment. Okurut, Yunusa and Mongadi (2011) investigated how the growth potential of the vibrant SME sector in Botswana is limited by lack of access to bank credit.
Dong, Yong, and Jian (2017) conducted a study examining the effect of credit rationing on the export performance of SMEs in China, and the use of detailed firm-level data was provided by a dynamic survey of small and medium-sized enterprises. Access to finance has been identified as one of the major challenges impeding the survival and growth of the SME sector in the Ashanti region of Ghana. The above section provides definitions of the key essential elements of the study.
The above studies have shown empirical evidence on the effects of credit rationing on SME growth and effects on expansion and job creation and how to cope with this financial constraint compared to large entities.
- Introduction
- Research Approach
- Research Design
- Population and sample selection
- Data collection instrument and the data collection procedure
- Regression equation
- Dependent variable
- Independent variable
- Control variables
- Estimation approach
- Research limitations
- Conclusion
Numerically prove or disprove hypotheses testing the significant effect between credit rationing and subsistence and non-subsistence informal SMEs in the Western Cape, Cape Town area. This ensured that the sample elements of informal subsistence and non-subsistence SMEs in the Western Cape, Cape Town region represented a cross-sampling that provided a fair overview in capturing the required data. The layout had the first part of the questionnaire, which dealt with the demographic characteristics of the respondents.
For the purpose of this study, the dependent variable Growth of Small Medium Enterprises (SMEG) was measured using asset value (ASSV), over the lifetime of the enterprise. Change in the magnitude of one variable was associated with a change in the magnitude of the other variable (Schober & Schwarte, 2018). This was either - "weak", "moderate" and "strong". Period of Operation A dummy variable measuring the total Years of the establishment in operation or existence.
In analyzing the data, a mathematical regression model analysis technique was used to predict the value of one variable based on other variables. The purpose of the sample data was to estimate that the line best fits the data set. Ultimately, it helps provide a visual demonstration and confirmation of the relationship between the independent and dependent variable.
An observation of the effects and results of the X and Y variable in the survey analysis. The study was conducted during the time in world history as a whole, including Cape Town South Africa, where there was an outbreak of the Coronavirus (COVID 19) pandemic.
- Introduction
- Demographic characteristics of the respondents
- Gender distribution of the respondents
- Age distribution of respondents
- Marital status of respondents
- Number of children
- Educational level of the respondents
- Descriptive statistics of independent and dependent variables
- Correlation coefficients results
- Regression results
- Conclusion
As can be seen from the above figure, the majority of the respondent were aged 25-30 years. This age group contributed 30% of respondents, followed by those aged 41-50, who contributed 26%. From the table below, an overwhelming majority of respondents indicated that they were married.
This is confirmed by the results that reflect Table 4.2 that 50% of the respondents are married, 30% are single, 14% are divorced and 6% are those who do not disclose their marital status. Education helps strengthen research skills and improves communication skills and foresight of SME owners (Mzwanele, 2017). The SME respondents indicated that the majority of respondents (46%) were secondary school graduates.
Those who had a bachelor's degree were 24%, 20% of the respondents had a bachelor's degree, and the remaining 10% had a higher state diploma. To provide an insight into the credit rationing among the surveyed respondents, Table 4.5 above shows that 91.67% of the respondents were granted a loan and 8.33% were not granted a loan. The other variables, the same field as the previous job and help with training, are also positively correlated.
The P-value of the model which is 0.0046, which is less than 0.05 (F-test value =4.05), which means that the group of variables, Grantedloan, Anytraining, Aidingoftraning, Periodofoperation and Samefieldasprevjob (independent variables ), be used to reliably interpret the SMEG (dependent variable). This is similar to a study conducted by Amofah (2017) where 97% of respondents were concerned with applying for credit as a major need in business expansion.
- Introduction
- Summary and conclusion
- Policy and general recommendations
- Recommendations for future research
These are voluntary group associations where members who do not have access to formal financial institution assistance come together to obtain sticky funds from savings-led activities. There should also be considerations to study on the impact of credit rationing and growth in the informal SMEs during COVID-19 outbreak. Other avenues for further studies would be on the aspects of credit rationing and its impact on growth during the COVID-19 pandemic period.
Credit rationing of SMEs: Effects on SME growth and its impact on employment in Ghana, 6, 5–9. Credit rationing of SMEs: Effects on SME growth and its impact on employment in Ghana. Size, age and sector of activity on the growth of small and medium-sized companies.
A literature review on SME access to credit and support in South Africa. Access to finance by SMEs: A demand analysis in Gauteng, South Africa. Small and Medium Enterprise Financing and Credit: The Role of Banks in South Africa, (June).
Literature Review on Small and Medium Enterprise Access to Credit and Support in South Africa, 1–92. Formal versus informal financing of SMEs in the Libyan context: the case of Gharian city.
Regarding question 9, if the enterprise was started in the same field as the previous employment. 11. Regarding question 9, if the enterprise was not started in the same field as the previous employment. If so, please indicate which category best describes when you received the training.
To what extent do you think training helps you manage your business for growth? 22. Regarding question 20: If the amount of your company's sales revenue has increased from inception to now, which of the following percentages best describes the increase. Regarding question 20: If the amount of your company's sales revenue has decreased from inception to now, which of the following percentages best describes the decrease.
27. How would you describe the development of your company's assets in the period from inception to now. Besides you as the owner of the business, did you have any employees on the start date.
