Social capital and access to Bank finance: the case of small business owners in a developing nation

Abstract

In this paper, we investigate whether the components of social capital are associated with access to financial capital from gender and race perspectives in the context of South Africa. In many developing economies, Small, Micro, and Medium-sized Enterprises (SMMEs) frequently face difficulties in accessing bank finance due to the weak status of their social capital and limited financial resources in South Africa. A quantitative research design focused on 532 SMME owners in the Western Cape, South Africa. A regression analysis was conducted to determine the relationships between the factors of social capital and their association with accessing financial capital. We revealed that social capital has an influence in securing bank finance, but gender does not. From a race perspective, white business owners are more likely to be successful in applying for bank finance compared to other race groups. The findings should guide policymakers, banking institutions, and the government in addressing the inequality relating to race in bank finance.