Abstract

MUTEZO, Ashley Teedzwi. The determinants of bank credit to SMEs in Gauteng, South Africa. JCMAN [online]. 2024, vol.21, n.1, pp.187-206. ISSN 1815-7440.  https://doi.org/10.35683/jcman1044.250.

BACKGROUND: Despite the availability of external finance, access to bank finance has been identified as the main challenge to SMEs' survival, growth and sustainability in South Africa. PURPOSE OF THE STUDY: The study investigated the factors influencing bank lending to SMEs in the Gauteng province of South Africa. DESIGN/METHODOLOGY/APPROACH: A probability-stratified random sample (N = 188) of commercial bank employees in the Gauteng province was utilised. FINDINGS: A regression analysis indicated that creditworthiness, lending technology, collateral, and innovation strategies make a positive and statistically significant contribution to bank credit supply to SMEs in South Africa. RECOMMENDATIONS/VALUE: The results suggest that SMEs should have collateral and good financial standing to access bank finance. Furthermore, the findings also suggest that banks need to employ lending technologies and innovation strategies that suit the unique financial needs of SMEs. This study was limited to a cross-sectional analysis due to the absence of longitudinal data on bank lending to SMEs. MANAGERIAL IMPLICATIONS: This study extends prior research on SME access to finance by adding insights into the relationship between lending technology, innovation strategies, creditworthiness, and bank credit availability from an emerging market perspective. JEL CLASSIFICATION: M13

Keywords : Bank-SME relationship; collateral; credit supply; creditworthiness; innovative strategies; lending technology; risk management; SME financing.

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