External environmental factors impacting on access to debt finance by small and medium enterprises in South Africa

Abstract

Small and medium enterprises (SMEs) are critical to the reduction of the high rates of poverty and unemployment in South Africa. The failure rate of SMEs is very high. Access to debt finance is one of the major constraints to the survival of new SMEs in South Africa. Access to debt finance to by SMEs can be influenced by both borrower-specific (internal factors) and systemic factors (external factors). The objective of the study was to examine the external environmental factors that can impact on access to debt finance by SMEs in South Africa. The study evaluated how external factors such as the macro-economic environment, the legal system, crime and corruption can impact on access to debt finance by SMEs.