The survival of business enterprises and access to finance: the case of 4 African countries


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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.

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    • 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