- Title
- The influence of microfinance institutions on small, medium and micro-enterprises in South Africa
- Creator
- Baloyi, Norman Tinyiko
- Subject
- Microfinance -- South Africa Small business -- South Africa
- Date Issued
- 2017
- Date
- 2017
- Type
- Thesis
- Type
- Masters
- Type
- MPhil
- Identifier
- http://hdl.handle.net/10948/17459
- Identifier
- vital:28342
- Description
- South Africa, with its establishment of the National Department of Small Business Development, in 2014, made its intentions known for wanting to create a conducive environment by developing and supporting small businesses and cooperatives through financial and non-financial provisions. Nevertheless, there is still a high failure rate of Small, Medium and Micro-sized Enterprises (SMMEs), many of them failing on their first year due to various challenges and circumstances, one of which is lack of access to finances. Banks have been and still are unwilling to provide SMMEs with loans due to SMMEs’ having high-risk levels of failure rates. This gap gives an opportunity to micro-finance institutions (MFIs) to provide financial support to the SMMEs, which comes with the challenge of properly screening the SMMEs and the possible risk of non-payment. The big question is whether MFIs are willing to support SMMEs and whether SMMEs are interested in obtaining support from MFIs. If so, what are the roles, functions and influence of MFIs towards the SMMEs? This study was undertaken to examine the impact and effectiveness of microfinance institutions (MFIs) in discharging their duties and responsibilities towards SMMEs in South Africa, by first considering the nature, challenges and scope of SMMEs as well as the nature and extent, risks, credit ratings, impact assessment and regulations that affect the products and services of MFIs. Both quantitative and qualitative research methodologies were used in this study. It was found that most SMMEs are making use of the products and services of MFIs. MFIs have been found to provide different reasons for supporting SMMEs, which were also measured and assessed against the previous study, and similar trends were found.The study further found the following: 65% of SMMEs needed microfinance assistance/support from MFIs, 54% of SMMEs were satisfied with the services rendered by MFIs, 35% of MFIs reached out to SMMEs, and 67% of SMMEs preferred formal and registered MFIs for financing of their business activities. The types of risks that most MFIs are faced with were found to be loan repayments from SMMEs, providing smaller loans in order to cater for multiple clients, client dropouts, financial regression, switching of clients, clients engaged with multiple competing MFIs, and making use of informal and unregistered MFIs. Natural disasters such as floods was found to be the least type of a risk. Most SMMEs (approximately 82%) have alluded to the use of informal and unregistered MFIs, due to the convenience of getting support, where there is no screening of the applications, in spite of higher loan interest rates. About 61% of MFIs happen to have a formal screening process of the loan application, which comprises mainly credit checks. No thorough vetting process is done on the clients. Some MFIs (approximately 39%) do not have criteria for assessing whether to fund or not to fund microenterprises, and this is a huge risk, as these MFIs are exposing themselves to non-repayment vulnerabilities by the SMMEs. About 63% of the MFIs were not aware of most of the rules and regulations that affect MFIs, which gives an indication that there is a lack of awareness, education and training.
- Format
- xii, 74 leaves
- Format
- Publisher
- Nelson Mandela Metropolitan University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela Metropolitan University
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