Financial access as a growth constraint for small and medium enterprises: A case study of the Northern Cape Province, South Africa

Abstract

Orientation: Small and medium-sized enterprises (SMEs) are vital for economic growth and innovation, yet limited access to finance remains a critical barrier to their sustainability and expansion in developing economies like South Africa.
Research purpose: This study investigates the accessibility of funding from commercial banks and development finance institutions for SMEs in the Northern Cape, South Africa.
Motivation for the study: The research addresses the specific financial constraints and institutional limitations impacting business growth within the Northern Cape’s unique economic landscape.
Research design, approach and method: Using purposive sampling, data were collected from 100 SMEs via structured surveys and analysed through descriptive statistics, regression analysis, and Chi-square tests.
Main findings: Formal financing significantly predicts turnover growth (OR = 2.45, p = 0.023). Ownership type was also identified as a key determinant of funding access. Conversely, BEE initiatives showed no statistically significant relationship with SME growth metrics, highlighting a gap in intervention effectiveness.
Practical/managerial implications: To bolster SME sustainability, policymakers should prioritise targeted financial support and streamlined formal funding access. Additionally, BEE programs require significant restructuring to effectively meet the financial needs of small businesses.
Contribution/value-add: This study contributes empirical evidence from the Northern Cape province, highlighting how formal financing access, ownership structure, and institutional mechanisms shape SME growth outcomes.