Abstract
M.Com.
The informal sector in Southern Africa has in recent years
became a subject of interest, debate and focus to academics,
policy makers and business people alike. This mainly stems
from the sector's job creation potential, its use as a
distribution channel for consumer goods and its role as a
first step in the promotion of entrepreneurship and free
enterprise.
Informal enterprises however are faced with a number of
constraints and problems. These include legal constraints, a
lack of management skills, a limited access to raw materials
and suppliers as well as marketing limitations.
begun to
Notwithstanding the
increasing number of
that have
stated problems, there has been an
development agencies and organizations
provide loan finance to informal
enterprises
evaluate the
in recent years. However, little has been done to
effectiveness of such loan finance. The
objective
informal
of this study is to ascertain the extent to which
enterprises effectively use loan finance to increase
earnings and returns to owners.
The study looks into various approaches of defining the
informal sector and focuses on the dualistic model, its
characteristics and shortcomings. A definition of the informal
sector is then formulated from various other definitions.
The study also defines financial leverage and looks into the
constraints of informal enterprises to employ financial
leverage due to their limited access to formal institutional
finance. Informal sources of funding such as "stokvels",
burial societies, "mashonisas" etc. are also discussed.