Access to finance : the disconnect between entrepreneurs and financiers

Abstract

The war against poverty, inequality and unemployment is one of South Africa s greatest imperatives. The unemployment rate is one of the highest in the world and GDP is on a steady decline. It is widely accepted that entrepreneurship can be an effective vehicle that stimulates economic growth and reduces unemployment. However, entrepreneurial activity rates have declined by over 30 percent over the last year. South Africa has the available funding to invest, yet aspiring entrepreneurs perceive access to finance to be one of the most pronounced barriers. This study aims to understand the reasons for the disconnect between financiers and entrepreneurs with regard to access to finance. Six financiers and seven entrepreneurs were interviewed in depth to assess their respective perspectives on the challenges they encounter during the funding process. The criteria financiers use were investigated and measured against the obstacles entrepreneurs face. This made it possible to understand the areas of disconnect during the process of applying for or seeking funding. The results highlighted the primary areas of concern as bankable contracts, collateral and the application process. Lack of awareness of resources and products available to support entrepreneurs may be the root cause of many areas of dis-connect. Therefore the study posed some recommendations to improve entrepreneurs access to finance.