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AN INVESTIGATION OF SMALL AND MEDIUM ENTERPRISES PERCEPTIONS TOWARDS SERVICES OFFERED BY COMMERCIAL BANKS IN SOUTH AFRICA

Edwin Kachesa Bbenkele

University of Johannesburg, South Africa.

 

ABSTRACT

This paper reports on findings of a unique study which collected information from the demand side of finance to understand the perceptions of small scale businesses from rural and semi-urban areas towards commercial banks.

The study is an empirical investigation of perceptions and attitudes of Small and Medium Enterprises (SMEs) towards commercial banks and consequently the importance SMEs regard of commercial banks as an important source of funding. The study reveals that SMEs from rural areas have a very poor understanding of the services commercial banks offer and understanding of the bank loan procedures. This leads to their weak bargaining position in terms of interest paid, asset and liability disclosure, misuse of loan funds and generally bad preparedness when applying for business loans.

The study, recommends the importance of building a good relationship between SMEs and the commercial banks as a way to improving access to finance by the SME sector.

Key words: Small and Medium Enterprises, commercial banks, funding

GEL codes: G15 G18 G21 G57