Factors influencing the intention of small business owners’ access to microcredit services in Makana Municipality

Abstract

Small, micro, and medium-sized businesses (SMMEs) are known to be crucial to an economy as they play a significant role in economic development, poverty alleviation and employment creation. Yet, they still struggle to obtain debt financing from formal financial institutions such as banks. Banks require collateral as leverage for the risks they take, and small businesses' failure to obtain collateral limits their access to debt financing. As a result, governments have made it easier for microfinance institutions to start and operate, granting microcredit to small businesses. The South African government developed microfinance institutions to give microloans to small businesses through microcredit programs. Despite this, there is low adoption of microcredit services by small enterprises in South Africa. This study investigated the factors influencing the intention of small business owners to access microcredit services in Makana Municipality. The study was supported by the extended theoretical framework of the Theory of Planned Behaviour, which comprised the study's factors: positive affect, perceived benefits, perceived deterrents, subjective norms, perceived behavioural control and knowledge of microcredit services. The study adopted a positivist paradigm and a quantitative research design. Non-probability sampling methods of judgement and snowball sampling were used to select 126 small businesses in Makana Municipality. The study used a self-administered questionnaire to collect the primary data. The study used descriptive statistics to describe the sample factors, exploratory factor analysis and Cronbach's alpha for validity and reliability. Pearson’s product-moment correlation and multiple regression were used to test the study's hypotheses. The study found that most small businesses were owned and managed by one person, and most small businesses would obtain a loan from non-governmental organisations that fund small businesses and microfinance institutions if they needed a business loan. The explanatory factor analysis (EFA) results showed that attitudes, norms, behavioural control and intention were relevant for small businesses in Makana Municipality. The study showed a statistically significant relationship between attitude and intention to access microcredit services. The results also found a statistically significant relationship between subjective norms and intention to access microcredit services. The results further showed no relationship between perceived behavioural control, including knowledge and intention to access microcredit services. The study recommends that small business owners be aware of the benefits of microcredit services to form positive attitudes. Family, friends and people whose opinions are valued should encourage small business owners to apply for microcredit services to understand what microcredit is and the benefits and costs of using the product. The identity of two factors influences the intention of small business owners to access microcredit services, and practically provides recommendations on how small businesses may improve access to microcredit services. The results imply that microcredit and microfinance institutions can be used to understand some of the factors that influence the intention of small business owners to access microcredit services and, therefore, tailor their products to be an attractive package for small business owners. This study suggests that a similar study be conducted in other provinces, including rural areas where more people are adopting the different types of microcredit services, to better understand factors influencing small business owners' intention to access microcredit services.