The influence of access to financial services and effective financial management practices on SME success in South Africa
- Authors: Sisusa, Ubenathi
- Date: 2024-10-11
- Subjects: Financial services industry South Africa , Democratization of finance , Small business Finance , Small and medium enterprises , Resource-based view
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/463527 , vital:76417
- Description: The success rate of small and medium enterprises (SMEs) in South Africa is still low due to the majority failing in their early stages of initiation. The main reasons why SMEs fail can be ascribed to their lack of access to financial services and effective financial management practices. Access to financial services refers to the ability of SMEs to obtain financial products and services from formal financial institutions at affordable prices, while effective financial management practices refer to the adoption of cash and credit management practices to efficiently manage finances within the SMEs. This study investigated the influence of access to financial services and effective financial management practices on SME success in South Africa. Access to financial services was measured by SMEs’ access to transactional bank accounts, savings accounts, credit facilities, and insurance products. Effective financial management practices were measured according to their cash and credit management practices. Lastly, SME success was measured as SMEs operating for over five years, reporting growth according to the owner’s perception, and earning annual profits of R15 000 and above. This study applied the quantitative research design to investigate the influence of access to financial services and effective financial management practices on SME success in South Africa. The study used existing data collected by Ipsos for the FinMark Trust FinScope South Africa MSME 2020 with a sample of 4 897 respondents. The study used secondary data to investigate the independent variables, namely access to financial services and effective financial management practices, on the dependent variable, SME success. Pearson’s correlation coefficient and the multiple regression analysis were used to test the hypotheses of the study. The results showed that these SMEs were mostly from the Gauteng Province (40%), the majority had between 11 and 50 employees (76%), and the owner was the manager (73%). Pearson’s correlation coefficient results showed a significant positive correlation between access to financial services and SME success. It also showed a significant positive correlation between effective financial management practices and SME success. Furthermore, this study’s multiple regression analysis showed that access to financial services and effective financial management practices significantly influence SME success. Thus, SMEs with access to financial services (transactional bank accounts, savings accounts, credit facilities, and insurance products) and adopting effective financial management practices such as cash and credit management are likely to succeed. This study emphasises the importance of access to financial services and effective financial management practices on SMEs’ success. Therefore, it is recommended that to enhance SME success, SMEs need to open transactional bank accounts as soon as they start operating to ensure that they build favourable profiles with the financial institutions to gain access to other financial services such as credit facilities and insurance products. Furthermore, in terms of effective financial management practices, SMEs need to adopt the relevant cash and credit management practices, ensuring that they can meet the financial institutions’ requirements, subsequently enabling them to access financial services. Lastly, this study recommends that financial institutions offer relevant and affordable financial products and services to SMEs to ensure they can access more financial services. This study contributes to SMEs and formal financial institutions in South Africa by identifying the factors that influence SME success, the measures that SME owners can put in place for the SMEs to be successful, the role that formal financial institutions play in enabling SMEs’ success, and the changes they can implement to aid SMEs to access financial services at affordable costs. , Thesis (MCom) -- Faculty of Commerce, Management, 2024
- Full Text:
- Date Issued: 2024-10-11
- Authors: Sisusa, Ubenathi
- Date: 2024-10-11
- Subjects: Financial services industry South Africa , Democratization of finance , Small business Finance , Small and medium enterprises , Resource-based view
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/463527 , vital:76417
- Description: The success rate of small and medium enterprises (SMEs) in South Africa is still low due to the majority failing in their early stages of initiation. The main reasons why SMEs fail can be ascribed to their lack of access to financial services and effective financial management practices. Access to financial services refers to the ability of SMEs to obtain financial products and services from formal financial institutions at affordable prices, while effective financial management practices refer to the adoption of cash and credit management practices to efficiently manage finances within the SMEs. This study investigated the influence of access to financial services and effective financial management practices on SME success in South Africa. Access to financial services was measured by SMEs’ access to transactional bank accounts, savings accounts, credit facilities, and insurance products. Effective financial management practices were measured according to their cash and credit management practices. Lastly, SME success was measured as SMEs operating for over five years, reporting growth according to the owner’s perception, and earning annual profits of R15 000 and above. This study applied the quantitative research design to investigate the influence of access to financial services and effective financial management practices on SME success in South Africa. The study used existing data collected by Ipsos for the FinMark Trust FinScope South Africa MSME 2020 with a sample of 4 897 respondents. The study used secondary data to investigate the independent variables, namely access to financial services and effective financial management practices, on the dependent variable, SME success. Pearson’s correlation coefficient and the multiple regression analysis were used to test the hypotheses of the study. The results showed that these SMEs were mostly from the Gauteng Province (40%), the majority had between 11 and 50 employees (76%), and the owner was the manager (73%). Pearson’s correlation coefficient results showed a significant positive correlation between access to financial services and SME success. It also showed a significant positive correlation between effective financial management practices and SME success. Furthermore, this study’s multiple regression analysis showed that access to financial services and effective financial management practices significantly influence SME success. Thus, SMEs with access to financial services (transactional bank accounts, savings accounts, credit facilities, and insurance products) and adopting effective financial management practices such as cash and credit management are likely to succeed. This study emphasises the importance of access to financial services and effective financial management practices on SMEs’ success. Therefore, it is recommended that to enhance SME success, SMEs need to open transactional bank accounts as soon as they start operating to ensure that they build favourable profiles with the financial institutions to gain access to other financial services such as credit facilities and insurance products. Furthermore, in terms of effective financial management practices, SMEs need to adopt the relevant cash and credit management practices, ensuring that they can meet the financial institutions’ requirements, subsequently enabling them to access financial services. Lastly, this study recommends that financial institutions offer relevant and affordable financial products and services to SMEs to ensure they can access more financial services. This study contributes to SMEs and formal financial institutions in South Africa by identifying the factors that influence SME success, the measures that SME owners can put in place for the SMEs to be successful, the role that formal financial institutions play in enabling SMEs’ success, and the changes they can implement to aid SMEs to access financial services at affordable costs. , Thesis (MCom) -- Faculty of Commerce, Management, 2024
- Full Text:
- Date Issued: 2024-10-11
The relationship between human, social and financial capital and small and medium enterprise (SME) performance in South Africa
- Authors: Siso, Masiso Nomakha
- Date: 2024-10-11
- Subjects: Small business South Africa , Small and medium enterprises , Enterprise performance management , Financial literacy , Human capital , Social capital (Sociology) , Financial capital , Resource-based view
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/462823 , vital:76338
- Description: The COVID-19 pandemic has had a severe impact on developing countries, exacerbating economic stagnation, high poverty rates, and unemployment. South Africa, in particular, faces significant challenges, with a 35.3 percent unemployment rate and a 17.4 percent GDP decline in 2021. Small and Medium Enterprises (SMEs) are crucial during these economic challenges, traditionally employing a substantial workforce and contributing significantly to the GDP. Despite their importance, SMEs often struggle, with a small percentage surviving the initial two years. Limited research has been conducted on the resources and capabilities crucial for enterprise performance in South Africa. While studies in developed countries exist, few explore the relationship between resources and capabilities facilitating SME performance in developing contexts. This study focuses on human capital, bonding, bridging, and linking social capital, and financial capital as key resources and capabilities. Given the backdrop that many entrepreneurs in South Africa may not possess formal education or extensive work experience, this study contends that financial literacy—encompassing financial knowledge, behaviour, and attitude—serves as a proxy for human capital. Additionally, a notable portion of entrepreneurs in South Africa face a deficit in the skills and knowledge essential for identifying entrepreneurial opportunities. Even among those possessing these capabilities, the challenge lies in the lack of necessary resources, including social and financial capital, to effectively transform such prospects into viable new ventures. This study employed a causal research design and adopted a quantitative research approach within a post-positivist paradigm. The primary objective was to investigate the relationship between the following independent variables; human (where financial literacy was used as a proxy which consisted of financial knowledge, attitude and behaviour), bonding, bridging and linking social capital, and financial capital and the dependent variable; SME performance. An online self-administered questionnaire was used to gather data from SME owners/managers. A pilot study was undertaken, in which an electronic link to the questionnaire was sent to potential respondents. Potential respondents were identified using purposive and convenience sampling methods. Data collection yielded 334 usable responses from SME owners/managers in South Africa. After cleaning the data, the analysis examined the relationship between independent and dependent variables. Confirmatory Factor Analysis (CFA) and Cronbach Alpha Coefficient analysis were used to confirm the validity and reliability of the measurement instrument, respectively. Descriptive statistics, regression, and correlation results were reported. Furthermore, a group mean analysis, including independent sample t-tests and one-way ANOVAs, were performed to investigate potential significant differences in variables based on demographic and enterprise related variables. The findings revealed a significant positive relationship between financial capital and SME performance. This indicates that an entrepreneur's ability to access financial capital or possess financial capital contributes to the performance and success of enterprises in South Africa. This finding underscores the crucial role of financial capital in facilitating the growth and sustainability of enterprises, as it provides a buffer against unfavourable economic shocks, enables entrepreneurs to pursue more capital-intensive strategies, and affords them more time to learn and overcome challenges. Conversely, no significant relationships were found between financial knowledge, behaviour, and attitude, bonding, bridging, and linking social capital, and SME performance. This study contributes to the development of SMEs in South Africa by identifying the critical resources and capabilities essential for their survival and growth. Additionally, it offers valuable recommendations for policymakers to create a conducive environment for entrepreneurs and suggests potential educational initiatives and support structures. Furthermore, this study advocates for the exploration of innovative financing approaches to build a financial cushion and bolster resilience against economic upheavals. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2024
- Full Text:
- Date Issued: 2024-10-11
- Authors: Siso, Masiso Nomakha
- Date: 2024-10-11
- Subjects: Small business South Africa , Small and medium enterprises , Enterprise performance management , Financial literacy , Human capital , Social capital (Sociology) , Financial capital , Resource-based view
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/462823 , vital:76338
- Description: The COVID-19 pandemic has had a severe impact on developing countries, exacerbating economic stagnation, high poverty rates, and unemployment. South Africa, in particular, faces significant challenges, with a 35.3 percent unemployment rate and a 17.4 percent GDP decline in 2021. Small and Medium Enterprises (SMEs) are crucial during these economic challenges, traditionally employing a substantial workforce and contributing significantly to the GDP. Despite their importance, SMEs often struggle, with a small percentage surviving the initial two years. Limited research has been conducted on the resources and capabilities crucial for enterprise performance in South Africa. While studies in developed countries exist, few explore the relationship between resources and capabilities facilitating SME performance in developing contexts. This study focuses on human capital, bonding, bridging, and linking social capital, and financial capital as key resources and capabilities. Given the backdrop that many entrepreneurs in South Africa may not possess formal education or extensive work experience, this study contends that financial literacy—encompassing financial knowledge, behaviour, and attitude—serves as a proxy for human capital. Additionally, a notable portion of entrepreneurs in South Africa face a deficit in the skills and knowledge essential for identifying entrepreneurial opportunities. Even among those possessing these capabilities, the challenge lies in the lack of necessary resources, including social and financial capital, to effectively transform such prospects into viable new ventures. This study employed a causal research design and adopted a quantitative research approach within a post-positivist paradigm. The primary objective was to investigate the relationship between the following independent variables; human (where financial literacy was used as a proxy which consisted of financial knowledge, attitude and behaviour), bonding, bridging and linking social capital, and financial capital and the dependent variable; SME performance. An online self-administered questionnaire was used to gather data from SME owners/managers. A pilot study was undertaken, in which an electronic link to the questionnaire was sent to potential respondents. Potential respondents were identified using purposive and convenience sampling methods. Data collection yielded 334 usable responses from SME owners/managers in South Africa. After cleaning the data, the analysis examined the relationship between independent and dependent variables. Confirmatory Factor Analysis (CFA) and Cronbach Alpha Coefficient analysis were used to confirm the validity and reliability of the measurement instrument, respectively. Descriptive statistics, regression, and correlation results were reported. Furthermore, a group mean analysis, including independent sample t-tests and one-way ANOVAs, were performed to investigate potential significant differences in variables based on demographic and enterprise related variables. The findings revealed a significant positive relationship between financial capital and SME performance. This indicates that an entrepreneur's ability to access financial capital or possess financial capital contributes to the performance and success of enterprises in South Africa. This finding underscores the crucial role of financial capital in facilitating the growth and sustainability of enterprises, as it provides a buffer against unfavourable economic shocks, enables entrepreneurs to pursue more capital-intensive strategies, and affords them more time to learn and overcome challenges. Conversely, no significant relationships were found between financial knowledge, behaviour, and attitude, bonding, bridging, and linking social capital, and SME performance. This study contributes to the development of SMEs in South Africa by identifying the critical resources and capabilities essential for their survival and growth. Additionally, it offers valuable recommendations for policymakers to create a conducive environment for entrepreneurs and suggests potential educational initiatives and support structures. Furthermore, this study advocates for the exploration of innovative financing approaches to build a financial cushion and bolster resilience against economic upheavals. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2024
- Full Text:
- Date Issued: 2024-10-11
A business model framework for mission-driven organisations
- Authors: Thackeray, Sean Robin
- Date: 2023-03-31
- Subjects: Nonprofit organizations South Africa Makhanda , Business model , Sustainable development South Africa Makhanda , Resource-based view , Social responsibility of business South Africa Makhanda
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/419123 , vital:71618
- Description: Non-profit organisations (NPOs) contribute to our society by addressing needs through value-creation activities which are normally not addressed by normal for-profit organisations. These NPOs generate their income through donations, fundraising and market activities such as the sale of products or services. However, in the pursuit of organisational sustainability, these NPOs need to ensure that their income meets their expenditure needs over the long run, to allow continuous value creation and to pursue their mission. An organisation’s business model can be visualised through a business model framework (BMF), which have been illustrated to be useful tools for organisations to test new business models, plan and coordinate activities, and to communicate how an organisations business model works to stakeholders. The use of BMFs by NPOs may be useful for similar purposes. However, a key challenge for NPOs and their management is adapting for-profit tools to be more applicable to the NPO environment. Whilst there has been some progress within the literature on adapting these for-profit business model tools to NPOs, this area of research is relatively underrepresented in the literature. The single case study method, exploratory in nature, following a deductive approach with a theoretical framework was used to evaluate the NPO Business model framework for NPOs with multiple income streams (Sanderse, 2014) appropriateness for the Centre for Biological Control (CBC), a mission-driven research organisation located within Rhodes University. The study made use of an interpretivist paradigm through the lens of resource-based theory. The contextual environment of the CBC was similar to other NPOs in that their organisational sustainability was at risk due to uncertainty about the availability of long-term funding. The CBC is actively diversifying their income streams by establishing new partnerships, which increase the capacity and resource base of the organisation to improve its flexibility in meeting current and potential funders’ needs. The NPO Business model framework for NPOs with multiple income streams was found to be a suitable BMF to visualise the holistic operations of the CBC. However, the role of governance-related matters being represented in this BMF was found to be lacking. An amended framework including governance as part of the Business model framework for NPOs with multiple income streams was developed. This improved the BMF, by allowing for further contextual insight into the CBCs business model as governance played a major role in the key activities and income-generating strategies they participate in. The role a BMF has in assisting an organisation with resource management activities was also explored. A suitable BMF, which allows for a holistic and explicit display of an organisation’s business model, would assist in determining how resources could be better managed or orchestrated to pursue different potential income-generating strategies or improve the efficiency of how resources are used in the current business model. This study contributed to business model theory by further testing the Business model framework for NPOs with multiple income streams as a tool to visualise an NPOs business model and identifying that once the governance block was added, this BMF became more suitable within the CBCs context. A minor contribution to resource based theory was the exploration of the potential roles BMFs play in resource management, which should be further investigated in line with additional research questions proposed. , Thesis (MBA) -- Faculty of Commerce, Rhodes Business School, 2023
- Full Text:
- Date Issued: 2023-03-31
- Authors: Thackeray, Sean Robin
- Date: 2023-03-31
- Subjects: Nonprofit organizations South Africa Makhanda , Business model , Sustainable development South Africa Makhanda , Resource-based view , Social responsibility of business South Africa Makhanda
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/419123 , vital:71618
- Description: Non-profit organisations (NPOs) contribute to our society by addressing needs through value-creation activities which are normally not addressed by normal for-profit organisations. These NPOs generate their income through donations, fundraising and market activities such as the sale of products or services. However, in the pursuit of organisational sustainability, these NPOs need to ensure that their income meets their expenditure needs over the long run, to allow continuous value creation and to pursue their mission. An organisation’s business model can be visualised through a business model framework (BMF), which have been illustrated to be useful tools for organisations to test new business models, plan and coordinate activities, and to communicate how an organisations business model works to stakeholders. The use of BMFs by NPOs may be useful for similar purposes. However, a key challenge for NPOs and their management is adapting for-profit tools to be more applicable to the NPO environment. Whilst there has been some progress within the literature on adapting these for-profit business model tools to NPOs, this area of research is relatively underrepresented in the literature. The single case study method, exploratory in nature, following a deductive approach with a theoretical framework was used to evaluate the NPO Business model framework for NPOs with multiple income streams (Sanderse, 2014) appropriateness for the Centre for Biological Control (CBC), a mission-driven research organisation located within Rhodes University. The study made use of an interpretivist paradigm through the lens of resource-based theory. The contextual environment of the CBC was similar to other NPOs in that their organisational sustainability was at risk due to uncertainty about the availability of long-term funding. The CBC is actively diversifying their income streams by establishing new partnerships, which increase the capacity and resource base of the organisation to improve its flexibility in meeting current and potential funders’ needs. The NPO Business model framework for NPOs with multiple income streams was found to be a suitable BMF to visualise the holistic operations of the CBC. However, the role of governance-related matters being represented in this BMF was found to be lacking. An amended framework including governance as part of the Business model framework for NPOs with multiple income streams was developed. This improved the BMF, by allowing for further contextual insight into the CBCs business model as governance played a major role in the key activities and income-generating strategies they participate in. The role a BMF has in assisting an organisation with resource management activities was also explored. A suitable BMF, which allows for a holistic and explicit display of an organisation’s business model, would assist in determining how resources could be better managed or orchestrated to pursue different potential income-generating strategies or improve the efficiency of how resources are used in the current business model. This study contributed to business model theory by further testing the Business model framework for NPOs with multiple income streams as a tool to visualise an NPOs business model and identifying that once the governance block was added, this BMF became more suitable within the CBCs context. A minor contribution to resource based theory was the exploration of the potential roles BMFs play in resource management, which should be further investigated in line with additional research questions proposed. , Thesis (MBA) -- Faculty of Commerce, Rhodes Business School, 2023
- Full Text:
- Date Issued: 2023-03-31
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