Small and Medium Enterprise (SME) Finance in South Africa: Implications for private sector-led development

Abstract

Efficient financing for small and medium enterprises (SMEs) is important so that SMEs can grow and be sustainable. This thesis applies a qualitative approach informed by the concept of private sector-led development (PSD) to examine the problems of SME financing in South Africa, and generates useful insight on the complexity of SME finance in a developing country. Results highlight how private SME finance can be an efficient driver of small business development. At the same time, results reveal a need to develop financing for ‘transitional’ SMEs, and to clearly define the role of private and government financiers, to improve the efficiency of the overall sector. The limits of private finance to widely fund all SMEs show a need to be critical and discerning when it comes to the involvement of the private sector to drive development initiatives. This limit, however, is also a core benefit of the private sector.