Financial Access and SME Size in South Africa

This occasional research paper utilized data from the FinScope Small Business Survey South Africa 2010 covering 5,667 small businesses. The main conclusion of the paper is that access to formal credit by SMEs constituted as sole proprietorships has a positive relationship with firm size as measured by the number of employees. The other factors that have a positive relationship to SME size are turnover and business sophistication. Informal credit is observed not to have any significant effect on SME size, a result that is consistent with prior empirical studies. Generally, access to credit (both formal and informal) has a locational dimension.