Sunday, July 12, 2009

SMEs in South Africa - why is finance difficult to access

SMEs in South Africa do struggle to raise start-up finance from banks. The question is why?

There has been little, if any, in-depth research into why banks are not lining up to lend to this large, risky, yet very profitable market.

I myself am hoping to research the following suggestion in order to see if it has any validity. The suggestion is that a major contributory factor is that SME and entrepreneur are being interchangably used in South Africa.

There is a continuum of entrepreneurial endeavour suggested by Burch, and I believe that the SME owner is not synonymous with being an entrepreneur. Some SME owners may well be entrepreneurial, but it is not a given.

Consequently, banks have no tools with which to assess these SME owners, which makes the loaning of finance to them extremely difficult.