Abstract
Extant literature identifies the development of small, and medium enterprises (SMEs) as critical in economic development and employment creation. However, there is a high failure rate of SMEs, due to the number of reasons including finance. The literature further identifies banks as the main source of SMEs’ external finance. Literature further indicates that SMEs in developing countries struggle to access finance from banks. Most of the current literature focuses on the demand for and less on the supply of financing for SMEs. The main purpose of this study was to investigate factors that may lead to credit managers declining SMEs’ loan applications. The case study was conducted at one of South Africa’s major banks. The sample consisted of credit managers who were directly involved in the process of decision-making regarding SMEs’ loan applications and were collected by means of 12 semi-structured interviews. The collected data were compared to extant literature, in order to confirm or disconfirm proposals in the literature on the phenomenon under study. The findings of the study confirm that banks are eager to assist SMEs with loans, as they consider SMEs a key factor in the growth of the country’s economy. Internal factors and external factors that may lead to credit managers declining SMEs’ loan applications are: inability to repay the loan, a poor credit record, lack of business experience, unethical conduct, a poor account track record, and an unethical industry. The study makes recommendations for future approaches that could assist in reducing SMEs’ loan application being declined. Recommendation of business practices are provided to both banks and SMEs, as well as for future research.
M.Com. (Business Management)