Small Business Performance: Does Access To Finance Matter?

This paper reports on the determinants of small business access to finance (both formal and informal) in 5 countries in the SADC region using data from FinScope surveys. It also reports on the link between access to credit and performance and the following insights have been drawn.

Majority of businesses in the MSME sector are micro-enterprises whose economic contribution is limited: A large proportion of MSMEs in the 5 countries in the SADC region are micro-enterprises with the owner being the only employee. This means that the economic contributions of the MSME sector are limited.

A number of small business owners start their businesses with an entrepreneurial motive: A reasonable proportion of small business owners start their business with an entrepreneurial motive. This provides opportunities for governments to offer targeted business support services as these types of enterprises are likely to succeed with adequate support.

Most small business owners use own capital to finance start-ups: Most small business owners finance start-ups using their own savings. This might lead to underfunded start-ups that remain stagnant or even fail.
Small business participation in the manufacturing sector is marginal: Despite the vitality of the manufacturing sector in transforming countries that heavily rely on agriculture, only a small percentage of small businesses participate in this sector.