Abstract
Small, Micro and Medium Enterprises (SMMEs) play a signi=icant role in South Africa (SA);
they contribute 66 percent to the country’s Gross Domestic Product (GDP) and
approximately 70 percent of the country’s workforce. This study extensively scrutinises
some obstacles or impediments impeding the growth of SMMEs in South Africa. Some
commonly cited obstacles are stringent funding conditions, high cost of capital, digital
adoption hesitancy by SMMES, access to =inance, and a burdensome regulatory
environment, to name a few.
The central view of this study is that, due to its ability to bring together funding agencies
and SMMEs under a single digital platform, platformisation can easily grant SMMEs
seamless access to a wide array of competitively differentiated funding solutions. In doing
so, platformisation acts as an important mediator or intermediary between SMMEs and
funding agencies. The advent of novel digital technology platforms holds a promise to
transform the current SMME-=inancing landscape by innovatively and optimally
addressing challenges of =inancial accessibility and affordability that impede the growth
of SMMEs.
It is worth noting that although SMMEs across the globe reportedly encounter almost
similar setbacks or barriers when applying for funding, this study used South Africa’s
unique experience and environmental complexities as a point of departure or reference
point. This was due to the realisation that, compared to SMMEs in advanced economies,
which reportedly enjoy unlimited access to a variety of funding options, SMMEs in South
Africa are disproportionately affected by the scourge of =inancial exclusion and, in most
cases, this exclusion manifests in the form of high loan rejection rates.
The study further acknowledges the multifaceted and stringent nature of both the global
and local SMMEs-funding ecosystem. Moreover, the prevailing funding architecture is
compounded by a combination of many factors, which include, adverse effects of =inancial
illiteracy, especially among SMMEs based in rural area;, inept pitching practices, which is
blamed for driving high loan rejection rates; the asymmetric nature of the =inancial
system; and burdensome documentation which has a demoralising effect on loan
applicants. Worse still, the funding architecture is repeatedly criticised for unfairly
characterising the sector as a high-risk portfolio deserving of stringent loan-access
conditions.
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The study argues that South Africa’s SMME funding architecture as we know it today has
signi=icantly metamorphosed. There is suf=icient evidence in literature to show that this
metamorphosis is =irmly driven by three driving forces, i.e., (a) the race by funding
agencies across the globe to reposition their solutions for the Fourth Industrial
Revolution (4th IR), (b) the global surge in smartphone usage rates which has enhanced
global connectivity, and (c) the disruptive nature of digital technologies which constantly
exert pressure on funding agencies to reinvent their solutions to improve their agility and
responsiveness. Also important to note is that this evolution is largely shaped and
catalysed by the emergence of platformisation and its attendant paradigms.
Platformisation refers to a process by which SMMEs virtually access a large pool of
funding agencies on a single digital platform, thus offering them access to a wide range of
competitively differentiated funding options.
In other words, platformisation guarantees seamless and personalised access to
competitively differentiated funding solutions anytime and anywhere. Thus, globally,
digital =inancing platforms have tremendously changed how funding agencies deliver
services or re-engineer their value propositions and have also revolutionised how they
relate and interact with SMMEs. Through digital =inancing platforms, funding agencies are
now in a commanding position to increase their national reach, process large volumes of
loan/grant applications in real-time, disseminate feedback instantaneously, deliver
optimal customer value, and drive ef=iciency. There is growing evidence in the literature
to prove that platformisation is clearly becoming an integral component of today’s SMME
funding framework.
By implication, this study fully recognises the centrality of platformisation in providing a
holistic framework to address the historic challenge of high rejection rates for loans. The
overarching scope of the study is to discuss how platformisation can be used as a powerful
force or tool to catalyse the =inancial-inclusion journeys of historically excluded SMMEs.
In essence, the study addresses three fundamental issues, i.e., (a) what are the most
essential aspects of platformisation that drive the =inancial inclusion of SMMEs, (b) what
are its critical controversies, (c) what are its innovative dimensions and, lastly (d) what
are its main risks, especially within the context of high incidences of cyber security
breaches.
Against this backdrop, this study was sparked by three trigger points, namely: (a) the high
number of SMMEs receiving loan/grant rejection letters due to inept pitching practices,
(b) the discriminatory nature of existing =inancial-access practices, and (c) the alarmingly
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high SMME attrition rate, mainly due to inaccessible funding. The central tenet of this
study is that since SMMEs are widely acknowledged as accelerators of job creation and
transformation, their access to affordable and hassle-free funding must be at the centre
of economic policy.
In light of the above, the Design Science Research (DSR) method was deemed a suitable
methodological framework to guide the conceptualisation, design, and evaluation of a
digital =inancing tool named the Business One Stop Shop (BOSS). This method was
preferred because, unlike conventional research methods that are known to proffer
abstract, fragmented or sometimes far-fetched solutions to real societal challenges, the
DSR method is a widely respected tool that is useful in applied research contexts where
actionable solutions are widely considered a central component of the solution mix.
Furthermore, in order to enrich and solidify the methodological structure and gain a
plausible and comprehensible insight into the problem at hand, the pragmatism paradigm
in mixed method methodology was utilised alongside the DSR. This means that the study
integrated the elements of both the qualitative and quantitative methods, to form a
cohesive and holistic methodological guide. Most importantly, the tool was designed with
local SMME-=inancing conditions in mind to maximise its environmental =it and SMMEcentricity.
The key differentiators of the new BOSS tool were that it maximally harnessed the nexus
or con=luence of three powerful digitally enabled features to enhance its functionality,
dynamism and versatility. For example, the BOSS tool incorporated: (a) a digital =inancial
platform which acted as a convergence zone, intermediary or middleman that linked
funding agencies and SMMEs, (b) a chatbot to drive seamless interactivity and real-time
feedback, (c) text generation to drive a personalised mastery of pitching concepts, and (d)
a quiz game to assess the users’ re=lective knowledge and to keep them captivated and
entertained.
The user-centricity and functionality of the prototype were evaluated by 120 purposively
sampled respondents who took part in the user experience (UX) survey. Purposive
sampling, which is considered an integral element of the non-probability paradigm,
grants the researcher the freedom to select participants with intimate knowledge and a
clear interest in the topic. Out of the 9,360 responses collected from 117 respondents,
(62%) strongly agreed that the features of the platform were user-friendly, 59% strongly
agreed that its content had a positive educational effect, 41% agreed that they would
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recruit new users to the platform, 49% strongly believed it was engaging and interactive,
whilst 71% strongly acknowledged its strategic relevance and multiplier effect.
The study concluded that since SMMEs are an acknowledged force in transforming the
South African economy, there is a strong case for designing a home-grown digital tool that
responds to local conditions and maximises personalised pitching journeys for SMMEs.
Some of the actionable recommendations of the study include policy reform by
government and =inancial institutions to develop SMME-centric =inancial instruments and
the adoption of a BOSS digital toolkit by developmental =inancing institutions (DFIs) to
improve access to both their =inancial and non-=inancial offerings to SMMEs.
Future studies could assess the impact of the digital toolkit on SMME survival in South
Africa, especially if the content of this technology toolkit is translated into vernacular
languages to cater to non-English speakers and to make it user-friendly for SMMEs.